Source: The ReDressConsultancy-South Africa

As South Africa's clothing andtextile industry enters the post Chinese quota period there seems to moreconfusion and contradictions from every quarter of this vital industry sector. Itis clear that government the industry and the South African Clothing andTextiles Union (SACTWU) are not collaborating in stitching a clear, organisedand unified path to take this industry as a collective forward post January 01,2009 when the quotas are meant to end. A brief synopsis of media reports overthe last few months exposes these inconsistencies.

Trade and Industry Director-GeneralTshediso Mantona said^[1] on the 4^thof this month "There are no new quotas" because interested partieshave not asked for an extension. He indicated however, if an extension isrequested the department would consider it by the end of the month. Is that nota little too late? Both government and SACTWU say the quotas have beensuccessful. Beyond the obvious that imports from China have temporary decreasedduring the quota period can they provide evidence such as sustainable jobincreases and industry growth. They need to and should be backing thesestatements with evidence. Providing evidence of the success of the quotas givesthem a legitimised platform to advocate for an extension of the quotas.

A further indication of theinconsistency of this industry sector is the case of Clotrade. It was reported^[2]that Jack Kipling, the Executive Director of Clotrade,said his organisation's lack of support for the quotas was not "inprinciple, but in the detail", and the timing of the quotas had been thegovernments most crucial error. However it was not only SACTWU but alsoClotrade whose complaints about cheap clothing imports led to the InternationalTrade Administration Commission (Itac) "[imposing] a general safeguardagainst cheap clothing imports.^[3]"I agree that the way the quotas were implemented with China gaining the upper hand in the negotiations was fundamentally flawed. The point is an industryrepresentative body called for measures to be taken to curb cheap imports. Theinclusion of textiles has been disastrous for the industry.

A report published in1962 said: "To have a fair chance of survival, South African clothingmanufacturers need at least the opportunity of access, on an equal footing, tomaterial similar to those freely utilised by their foreign competitors and notmanufactured in South Africa. Here, however, one encounters the position thatthe South Africa textile industry is itself unable to develop or even hold itsown without the assistance of customs duties." The same report cited a1950 Board of Trade and Industries investigation into the textile industrysaying, "The volume and variety, of both cotton and wool fabrics requiredfor clothing manufacture [locally] available [to compete with foreign garmentimports found] an insignificant proportion was being made locally,^[4]"provides evidence that not much has changed in the textile sector over the pastforty to fifty years. The lack of variety and access to textiles is a commoncomplaint that emerges from the fashion sector.

A further question that comes tomind is if the quotas have been so successful for the industry why then hasthere been besides SACTWU's support for an extension of the quotas no requestsfrom industry itself? I understand and support SACTWU's reasons for the quotas-protectingjobs- it is the way the quotas were implemented and the way decisions are nowbeing made in a very exclusive manner that is perturbing.

In August^[5]it was reported that an "action plan to recapitalise and upgrade theclothing and textile sector [would] be launched in November...[bringing] thelong-awaited Customised Sector Programme for the industry to implementationlevel." However at the December media briefing the Department of TradeIndustry said nothing about this report. When will the CSP be published forscrutiny and implemented? Maybe this impasse is due to the upcoming electionsand the uncertainty of the next regimes' policy direction.

Contrary to government and SACTWUclaims that the quotas have helped the industry, the Clothing Trade Council ofSA (Clotrade) said in February^[6] none of itsmembers "had increase[d] production capacity" and thereby extensionsignificant employment increases had not occurred.

Within the textile sector the Textile Federation of South Africa said in the same report there had not been much investment. Some companies like Celrose which is the manufacturing arm of Edgars have invested nearly R1 million in new equipment during the past year and have restructured their production line to be more flexible, however most companies having to tender and compete for orders have not used capital to upgrade as the market and orders from the retailers is sporadic.

The evidence of poor communication or a lack of trust between the industry and government is evident in the "uncertainty on whether an 11^th hour extension will be made through [an] agreement with the Chinese government." This statement made by industry was reported on the same day^[1] that DTI said there would be no extension on the quotas makes me doubt Matona's statements. Could it be that government has a hidden agenda? The past president of CloTrade said in the same report that the sentiment within the trade was that it was "virtually certain" the quotas would be extended.

On the 20^th November the Department of Trade and Industry held a meeting to discuss the quotas without including retailers or the broader industry. Why is government reluctant to include smaller/medium sized clothing manufacturers in policy discussions?

Instead the meeting was held between the South African Clothing and Textile Workers Union (SATWU), the South African Revenue Services, the International Trade and Administration Commission and Seardel South Africa's largest clothing and textile manufacturer which had to be bailed out with a R250 million rights offer by Hosken Consolidated Investments earlier in the year. To only include Seardel a company clearly in trouble but increased remuneration for its non-executive directors by 65 percent indicates that there are bilateral agreements and decisions being taken by an "inner club" of players at the determent of the entire industry.

The link with Seardel in policy negotiations on behalf of the industry is disturbing. Johnny Copelyn a non-executive director of the company who represents SACTWU which holds 25.6 percents of the company's low-voting N shares has dismissed speculations that the company will be asset-stripped - how many of the 15000 Seardel employees (SACTWU members) got pay increases? Analysing the share holding of Seardel one cannot but help deduce there is more to these bilateral discussions by this "inner sanctum" of industry players.

The exclusion of the retailers on discussions about the quotas may just be infantile spite because retailers did not sanction the implementation of the quotas and simply relocated their procurement to alternative suppliers. The Daily Dispatch^[2] reported Matona the Trade and Industry Minster saying, retailers who at first did not support the quotas were now showing signs "[that] they were now ready to come back on board." Does he mean that retailers want an extension of the quotas and why then were they excluded from the meeting held in November? Matona needs to clarify what he means. And the retailers need to communicate their position in light of Montana's statement.

Another but very important sector of the clothing and textile industry is the fashion sector. South Africa has an unprecedented number of fashion weeks and we continually hear from event companies and fashion council representatives that host these fashion weeks how important fashion is to the welfare of the larger South African clothing and textile sector yet they are continually silent on policy development that invariably affects them. Fashion designers continually bemoan that they cannot compete with cheap imports, that the lack of textile varieties is detrimental to their growth but where is the voice of fashion at this crucial juncture? Is fashion so superficial that interaction and debate around the economics of the clothing and textile industry is so incomprehensible that it prefers to hide under the allure of fantasy?

Only a few weeks back the Department of Trade and Industry hinted that the quotas may be extended due to the "massive and systemic" fraud involving clothing imports from China^[3] the following month the same department said quotas would not be extended and say nothing about measures they have put in place or will be putting in place to stem the illegal imports of which they were told last year was already occurring within the industry. A February 2008 report^[4] contradicts what the Department of Trade and Industry said about illegal imports in when acting DTI head

Iqbal Sharma claimed that illegal imports and under-invoicing had "been eliminated." Having said this the seizure of 60 tons of clothing illegally imported from China through Botswana^[1] dismantles Sharma's claim.

The industry cannot expect government to take sole responsibility for stemming the tide of illegal imports when individuals when the industry are themselves responsible for this criminal behaviour. If, as the industry says the under-invoicing and illegal imports is having such a destructive impact on this economic sector then it needs to weed-out these culprits and not shift the blame and responsibility onto government. The latest seizure places a spotlight on both listed and smaller retailers. A SARS spokesperson said that the goods were "destined for the shelves of three big retailers," who it is believed to be listed companies. It is important to name these companies and fine them. This latest positive development confirms the DTI stance that a lot of the inherent problems facing this industry sector stem from within and I hope that together DTI, SARS, SACTWU and industry manufacturers will exert pressure on the retail sector to both disclose the names of these companies and deal with rogue elements within their sector. The retailers in question will conjure a response to shift accountability for this illicit behaviour onto their suppliers. Such behaviour from the retail sector cannot and should not be accepted by the clothing and textile sector. The onus of a responsible and ethical value-chain is the retailers not their suppliers.

The state of play in our industry is extremely perplexing and unless all the players are prepared to forge ahead in an inclusive equable manner South Africa's apparel and textile sector will enter 2009 in a state of continual flux.

About the Author:

Renato Palmi

The ReDress Consultancy-SA

Web: www.redressconsultancy.com