Study of Quotas in South African Textile Industry

Round and Round the Needle we go

The current question on most peopleslips within South Africa's clothing industry is will the Department of Tradeand Industry (DTI) extend the quotas on Chinese apparel and textiles that aredue to end this year? However, I feel extension or no extension will make verylittle difference to the economics of this industry sector. Admittedly, if thequotas do end we may see a sudden influx of imports from China as they offer price incentives to our clothing importers in order to recapture marketshare.

The Chinasyndrome that has dominated the discourse of South Africa's apparel sector isno longer as relevant as it was in the past. The bigger threat to South Africa's textile and apparel sector is the industry itself and the South Africangovernment.

China itself is facing majorcompetition from its Asian neighbours such as: Vietnam, Bangladesh, Cambodia and Indonesia. For the most part I doubt South African retailers will hurriedlyrelocate their procurement of apparel from China should the quotas be lifted.The cost of doing business in China has risen; there are stricter labourregulations as China continues to change its global image of being one bigsweatshop.

Withconsumer spending down and an exchange rate that continues to fluctuate I feelthe industry is facing further factory closures and retrenchments. The onepositive scenario is the possibility of SA retailers placing more orders withlocal manufacturers because of the currency fluctuations however; retailers mayinitiate a price conflict between the manufacturers.

What I amconcerned about is the lack or seemingly lack of a coordinated strategy by theDTI for the SA clothing and textile sector. Returning to the Chinese quotas,the DTI has hinted that there may be an extension due to the "massive andsystematic" fraud involving Chinese imports.^[1] The DTI and SARS have been informed ofthese illegal imports before. In 2007 I wrote "Rumours are rife in theclothing and textile industry that retailers, buyers and importers are breakingthe law by continuing to import goods from China." For the DTI to have "raisedthe alarm" now is of concern. But it also indicates a deafness andblindness when such information is reported to them from industry analysts.Recently, someone told me that there are individuals and companies who have "laughedall the way to the bank" importing clothing from China and hiding the origin of such imports through cleaver accounting systems.

In apresentation given in Durban this month by the DTI's Ms. Smith who is theDirector of the Textiles, Clothing, Leather & Footwear Division. TheDirector said in response to a question about the Customised Sector Programme(CSP) "that it had been completed in 2006 but is yet to be published."Why not?

In March2008 I wrote that the "MD of Frame Textiles, a subsidiary of the Seardelgroup called for the implementation of the Customised Sector Programme (CSP)."In the same article I said that the DTI was reported to be "putting thefinishing touches to an action plan that may be ready at the end ofMarch." In the same report I wrote the following "In August 2007,Trade and Industry Minister Mandisi Mphahlwa said that the CSP had beenfinalised." Confused? So am I. But wait there is more.

In August^[2] it was reported that an "action planto recapitalise and upgrade the clothing and textile sector will be launched inNovember." Ms. Smith of the DTI never mentioned this in her presentation.The report went on to say the DTI has an incentive plan for capital upgradingand has "initiated a plan to improve the clothing industry's competitiveness."A year earlier the Minster of Trade and Industry said, "The industry needsto upgrade its capital equipment and the government needs to look for anappropriate incentive mechanism to help the industry." Is this new "actionplan" the result of what the Minister said in 2007 and when can we expectto see this plan and will this "action plan" be the saviour for thisindustry sector that has such potential?

Also Read: Is there a plan for South Africa's apparel sector?