This survey was undertaken during May-June 2007 on behalf of the Durban Fashion Council, which is an initiative of the Durban Chamber of Commerce and Industry.

Acknowledgements

This telephonic survey was conducted from the premises of Durban-based Lucy Clothing by Mrs. Judy Morrison and Mr. Renato Palmi, who developed the conceptual framework for the study, designed the questionnaire and analysis tools, and synthesised the information provided in this report.

Parameters of the survey

The KwaZulu-Natal National Bargaining Council for the Clothing Manufacturing Industry list, as at May 2007, cites a total of 347 registered clothing companies as employing 26 785 persons. For the purpose of this study, a sample of companies employing a staff complement of over 50 was identified. Of these 90 companies, a total of 25 (30%) were interviewed. This equates to 7% of the overall number of registered companies in the province. Although the sample base is small, the outcomes of the survey can be regarded as a fairly representative profile of the KwaZulu-Natal clothing industry.

The telephonic interviews were based on a questionnaire with either owners or senior managers of the sampled companies. The survey consisted of 23 questions divided in three sections. The first section (Questions 1 to 9) relates to employment, production and equipment. The second section (Questions 10.1 to 10.9) relates mostly to union issues. The third section (Questions 11.1 to 11.5) relates to the issues of import quotas and pricing. The questionnaire was constructed to minimize time spent on the telephone with the respondents, and as such opens the ground for a comprehensive follow-up investigation to excavate the reasoning behind some of the answers given in this exploratory survey.

Background

The clothing and textile industries in South Africa contribute approximately 3.6% to the national GDP, generating 2.2% of sales, and generate 14.5% of employment in the national manufacturing sector. Research statistics indicate that, on average, five individuals are dependent on every person employed in this sector. Further research indicates that approximately 83% of those employed in this sector are women.

The KwaZulu-Natal National Bargaining Council for the Clothing Manufacturing Industry's July 2006 list reported 379 registered companies, employing 32 060 people, with 99 companies employing more than 50 workers. Comparing this to the May 2007 list, the following statistics can be extrapolated:

Between July 2006 and May 2007, there is a drop of 5 275 (-120%) in employment figures.
Thirty-two companies either closed or moved into the unregistered informal sector during this period.
Nine fewer companies currently employ over 50 people.

From these figures, it is fair to say that there has been a downtrend in employment and in the number of registered companies in KwaZulu-Natal over a ten-month period. A 2005 report ¹indicated that there were approximately 300 CMT operations in Durban, with only 18 being registered with the KwaZulu-Natal Bargaining Council. According to owners, the large number of unregistered CMT operations is due to price demands dictated by retailers, the cost of labor and various costs associated with operating a registered company. The owners of these unregistered companies argue that to remain viable in an environment where orders are erratic and prices are being driven down, they are compelled to operate outside the ambit of the Bargaining Council. These owners claim that compliance with all the regulations dictated by the Bargaining Council and the Unions would result in closure of their operations, thereby contributing to further loss of employment in the clothing sector.

Review of the survey results

Section One: Questions 1-9:

Even though there has been a reduction in employment within KwaZulu-Natal, 40% of the respondents in this sample base indicated that they have employed more people over the last six months. This suggests that there has been some migration of personnel either from companies that have closed down over the same period, or from the many skilled and semi-skilled individuals who have been unemployed in these sectors.

A high percentage of respondents (68%) did not foresee employing more people in the next six months, which gives a vivid indication of the precariousness of the industry, in that substantial growth in production, is not expected. In parallel, 44% said they had bought new equipment during the past six months. Although this might seem to contradict the latter assumption, in essence this answer correlates to the 40% of respondents who said that they had employed more people over the same period.

This is a promising result, indicating that some companies augmented both staff and equipment, which is related to growth in production. It would be useful to target these companies for further research, so as to determine their strategies for facilitating such growth. With 80% of respondents noting that they did not foresee purchasing any new equipment in the forthcoming six months, it is possible that there may be some stagnation in the industry, or that the owners are choosing to bide their time while gauging market dynamics relating to Chinese import quotas, as this policy had been in place for only five months.

The responses to Questions 8 and 9 respectively, where 84% replied that they are not producing any new lines, and 76% saying they did not anticipate doing so, indicate that KwaZulu-Natal's clothing manufacturers have yet to see the benefit of the quota restrictions through retailers purchasing from local suppliers.

Alternatively, these figures could indicate that these KZN companies are not geared to service an agile value chain. Fashion consumers expect rapid innovation in designs, and unless producers can meet such demands, buyers who require prompt, quality production and delivery will miss any opportunities afforded to them, even if they are in closer proximity to the buyers and the market.

Section Two: Questions 10.1 to 10.9:

Eighty percent of the sample responded in the affirmative that the exchange rate has affected their operations. This high level of concurrence is understandable, given that this is related to the purchase of equipment, supplies and textiles. It also affects exports. The 80% response to chain store policies negatively affecting business referred largely to difficult dealings with buyers from the retail sector. This correlates with answers to question 11.3 about retailers driving down prices on orders - 96% of the respondents reported immense competition and pressure relating to pricing dictated by the retail chains in the process of procuring orders from these clients.

The answers to questions 10.3 to 10.6, which were all higher than 80%, clearly indicate that there are labor issues in this industrial sector that require investigation. Labor issues are commonplace in any industrial sector, and these concerns need to be addressed by all role-players, as recent developments have shown that matters concerning labor can spiral out of control and adversely affect both employers and employees in the industry.

In a media report², Martin Deall, the merchandise logistics executive at Edgars Consolidated, said that the Customized Sector Program (CSP) "contained Bargaining Council issues that belonged with the Department of Labor, not in a strategy document." He felt that the CSP's recommendation for those retailers to subscribe to the Proudly South Africa initiative by buying at least 70% of their stock from local suppliers did not belong in an industrial strategy. This is a peculiar statement, as any strategy that aims to revitalize a business sector should explore and address every aspect with the potential to stimulate growth in the sector, from labor relations to buying procedures.

According to Bargaining Council regulations, currently, the wage rates in KwaZulu-Natal are as follows: a top machinist earns approximately R630 a week and a sweeper earns R383 per week. It is estimated that unregistered workers or contract workers earn R550 per week for a top machinist and a sweeper R250 per week.

It is useful to compare these with wage structures in the same industrial sectors in other countries. A 2005 report indicates that workers in the garment industry in Cambodia earn on average $70 per month³ . In Bangladesh, the average salary in the garment sector equates to 17 a month, according to a 2006 report⁴. In the Bulgarian textile and clothing industry, wages are lower than any European Union country and are lower than Sri Lanka, Indonesia and Russia⁵ . In a recent survey of wages in the clothing and textile sectors across the globe, it is estimated that Latin American countries - in terms of US$ - are at about the same level as Turkey, Morocco, Tunisia and South Africa⁶.

We cite these countries because South African retailers have indicated that they will begin to buy from countries like Bangladesh and Eastern Europe due to the implementation of quota restrictions on Chinese imports. Yet it has to be asked: are wages the only variable that contributes to the poor performance of specific companies? It is imperative that every variable, including management performance, production systems, labor skills and customer service, is taken into consideration when analyzing the performance of an individual company or the industry as a whole.

A disturbing finding in this study is that 80% of respondents confirmed HIV/AIDS as having an ongoing impact on productivity. The high level of absenteeism (96%) can be linked to the extremely high prevalence of HIV/AIDS in this research sample. In her study on the private sector response to HIV/AIDS, King (2005) says there are still "lacunae in awareness and engagement [from the private sector] in relation to the pandemic"⁷. King says that HIV/AIDS will not only have a detrimental affect on individual companies, but will affect their entire value chain. In 1998, the South African Clothing and Textile Workers Union (SACTWU) initiated its AIDS Project, which aims to educate and provide facilities for workers in the clothing and textile sectors. Unfortunately, SACTWU's website does not provide current statistics relating to HIV/AIDS in this industrial sector or the progress of their AIDS Project.

Section Three: Questions: 11.1 to 11.5:

The 32% of the respondents who confirmed that they had seen an increase in orders since the implementation of quota restrictions on Chinese imports implemented in January 2007 correlates to the answers of Questions 1 and 6. The same number of respondents (32%) confirmed in replies to Question 11.2 that the increase in orders originating from local retailers is a pleasing outcome.

The 96% who responded that price demand is a critical factor governing the procurement of orders from retailers can be linked to responses to Question 10.2, where 80% said that chain store policies did have an adverse effect on the growth of orders. Among those companies that have seen an increase in orders, only 24% said they saw such growth as sustainable. Seventy-six percent of the respondents said that they did not think the growth could be sustained once the quotas ceased, or once retailers begin to source merchandise from other countries. The latter response endorses that for Question 7, where 80% of the respondents said that for the foreseeable future, they would not invest capital in purchasing new equipment.

In response to support for the imposition of the quota restrictions on 200 clothing and textile items, 56% said they did not support these measures, and felt that the policy would not alleviate job losses or contribute to the growth, development and sustainability of the industry.

Conclusion

Some of the respondents alluded to "corrupt systems": this comment relates to illegal imports and under-invoicing. Many of the respondents said that imports from China were still entering the country through the "B Route"; (for a detailed analysis of these statements please go to http://redressconsultancy.blogspot.com/ - see Research Reports on SA Clothing and Fashion Sector).

This survey shows that some companies in KwaZulu-Natal ( /- 40% of the respondents) are doing fairly well. They have expanded their labor force, invested in machinery and have seen a growth in orders. The notable degree of concern relating to labor and Union activity is a disturbing outcome. The negative response towards the quota restrictions is something that SACTWU and the Department of Trade and Industry must take seriously. Even though the imposition of quota restrictions is at an early stage in its implementation and its wisdom is therefore difficult to assess, there is concern that price will still be one of the fundamental variables in the procurement of apparel from local manufacturers.

A major force in South Africa's economy that could positively influence the viability and endurance of the clothing sector, not only in KwaZulu-Natal but also nationally, is the consumer base. Consumer activism could place pressure on South African chain stores to increase stocks of locally designed and manufactured merchandise. By creating such demand, those companies that have adaptive and responsive production and customer service systems in place to meet the quality requirements determined by the retailers and consumers would become drivers of growth in locally designed and manufactured content.

About the author:

RENATO PALMI MdevStud
ReDress
Research, Business Development, Writer:
Clothing, Textile, Fashion and NGO Sector
PO Box 52006, Berea Road 4007
KwaZulu-Natal, South Africa
Tel: 031 -2616096. Cell: 083 943 0235
Email: http://redressconsultancy.blogspot.com

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