Provincial government support

Clothing has been identified as a key strategic sector in the Western Cape and KZN. In light of this, both provincial governments have set aside funding to support the industry. In the Western Cape, the primary project at present is the funding of a Cape Clothing Cluster, which has as its objectives (1) the fostering of joint action between clothing firms to achieve economies of scale not possible individually, and (2) the facilitation of knowledge enhancement through the exchange of firm-level expertise. These objectives pertain to four areas, each with two-year business plans - human resource development, manufacturing excellence, supplier development and capital upgrading. The KZN provincial government has followed the example of the Western Cape and is in the process of launching a similar cluster, although its focus encompasses clothing and textiles. Following the successful completion of its pilot over the last five months, the KZN Clothing and Textiles Cluster will be formally launched on the 1 st of August 2005. In addition to these Clusters, both provincial governments have funded a variety of smaller projects and research to obtain a clearer understanding of sector dynamics and policy issues.

Regarding empowerment within the clothing sector, CloTrade recently undertook a survey on the demographics of its members. The preliminary statistics from this survey in which 50% of its members participated reveal that:

1. A full 96% of clothing industry employees are PDIs. In addition, PDIs hold 79.5% of management positions, 93.5% of supervisory positions and 39% of directorships.

2. Males make up 16.7% of total employment and females 83.3%.   White owned private companies account for 59%, BEE companies 12% 14 , and foreign owned companies 3% of CloTrade members. The remaining 26% are either directly listed or wholly owned subsidiaries of JSE listed companies.

3. Although the survey is not representative of the industry, the results reflect the industry’s positive BEE and employment equity profile. However, a lack of confidence in the future of the industry appears to have prevented further employment equity and BEE progress.

It is the general view of the clothing sector that government policy is not providing a macroeconomic environment conducive to industry growth. The current strength of the Rand makes South African clothing exports less competitive in their destination markets with many exporters losing international contracts. The strong Rand also fosters increased domestic market competition through the availability of cheaper imported clothing. Most notably, this emanates from China, which now contributes over 70% of total South African clothing imports。

In addition, the uncertainty surrounding the DCCS’ replacement programme places exporting firms in a difficult position with regards to the viability of securing future export contracts. A second significant threat for the South African clothing sector is illegal imports, through dumping and the under-invoicing of imported garments. The South African clothing industry is currently protected by tariffs of 40%, but a common opinion in the industry is that as a result of the inability of the customs service to effectively police clothing imports, real levels of protection are around half the advertised level. Finally, and perhaps even more importantly, the sale of distressed and over-run goods into the South African market at massively discounted values (primarily from China) is having a devastating impact on local manufacturers, with Customs’ apparently incapable of responding to this threat, due to present WTO rules and regulations.