Constraints and challenges in African Countries

From a national perspective, the broader regulatory environment does not directly affect the manufacture of clothing, as it is a non-intrusive manufacturing process. However, the highly regulated labour market has a marked impact given the industry’s labour-intensiveness. In this regard wage rates, as well as the oft-cited ‘inflexibility’ of the labour market, appear to have a constraining effect on the sector. Many clothing firms are relocating to non-metro and decentralised areas (particularly in KwaZulu-Natal) where they are able to pay lower wages. This relocation has occurred in an attempt to compete with cheaper imports as a result of global trade liberalisation and lower wage rates in competitor countries. As Table 4 shows, South Africa has high labour rates when compared to competitor countries 15 . Furthermore, South Africa is not only competing with countries that have lower wage rates, they also have more flexible labour markets in terms of additional labour costs (such as overtime and shift pay, sick leave and pension contributions). These factors increase costs, decrease flexibility and reduce the ability of firms to compete effectively, particularly when competing in standard, commodity markets.

Other constraining elements include the South African textiles industry’s lack of competitiveness (with clothing firms forced to source from them due to high tariffs on imported fabric and AGOA’s three-stage conversion rule), the apparent indifference to local sourcing amongst major domestic retailers, the failure of clothing manufacturers to adhere to world class manufacturing standards, the failure of the industry to employ state of the art technologies; and skills deficiencies created by the perception of many professionals that clothing is a ‘sunset industry’ and hence a sector to be avoided when entering the corporate arena.



Industry opportunities 

Although the clothing industry has not performed well recently, it is important to reiterate its labour-intensiveness and the fact that it employs over 150,000 people. It is thus essential that policies and interventions be put in place to secure the sector’s growth and development, or that at least limit the losses that are likely to occur over the next few years. In this regard policy needs to be directed at first stabilising the industry, second re-establishing its foundations, and third providing an enabling environment for its future growth. The recent completion of a Customised Sector Programme (CSP) for the South African clothing and textiles industries holds significant promise in this regard, with the sector development strategy developed through the process identifying 26 Key Action Programmes (KAPs) capable of crisis managing the clothing and textiles industries’ present tenuous positions, re-establishing their foundations and then maximising the numerous opportunities that still exist. These KAPs are presented in Table 5, under each of the levels (critical, foundational and developmental) outlined above, as well as the seven strategic themes that capture their particular intent. For example, the two critical (or crisis management) strategic themes are recapturing domestic market share and maintaining exports. These two strategic themes then have seven and four KAPs respectively. The seven domestic market share KAPs encompass:

(a)Government engagements with multilateral forums to secure appropriate developing economy responses to the importing of distressed and under-invoiced goods, the implementation of customs’ regulations to eliminate under-invoiced and illegal imports, firm-level support for customs in respect of identifying under-invoiced and/or illegal imports, the establishment of a partnership between SACU member states to ensure policy and monitoring consistency, the maintenance of tariffs at existing levels, the aggressive implementation of already enacted country of origin labelling legislation and the associated establishment of a buy South African clothing campaign, and finally the close monitoring of duty credit certificate use through the lifespan of the Interim Clothing and Textiles Scheme. In terms of the maintenance (and even future growth) of exports, the four KAPs are the confirmation and then replacement in September 2006 of the Interim Clothing and Textiles Scheme, the pursuit of new and the expansion of existing Preferential Trade Agreements with key trading partners, the establishment of a project that fully explores African export opportunities, and securing greater levels of EMIA support for the clothing and textiles sectors, particularly when endeavouring to access non-traditional markets.

Not only will the realisation of this vision salvage the clothing and textiles industries, along with the 50,000 to 75,000 jobs that are likely to be lost if present trends continue, there is a real opportunity for the two industries to create jobs once their foundations have been re-established. Based on the industries’ increasing their employment by 25,000 over the period 2005 to 2014 (which is a conservative estimate), this would secure 75,000 to 100,000 clothing and textiles jobs (the majority – 50,000 to 70,000 - of which would be in the clothing industry). Given the estimated R1,411 million cost of the KAPs proposed, and for which we have been able to calculate likely expenses over a five year period beginning 2005, the total employment return on investment from the implementation of the CSP would be exceptional. Based on the lower estimate of 75,000 jobs being secured (50,000 in the clothing sector alone), each job secured would cost a total of only R18,817 over the five year period.