Import Quotas Beginning to Bear Fruit; the Local Clothing Industry Needs to Become More Competitive, Writes Dominique Herman
ALMOST a year ago, an agreement was signed between Cape Town clothing manufacturing stalwart Rex Trueform and Brimstone Investment Corporation, which owns a neighbouring Salt River clothing manufacturer, House of Monatic (HOM).
Brimstone was to take a five-year lease of Rex Trueform's plant and equipment with the view eventually to re-employ the approximately 900 Rex Trueform staff who were retrenched in the wake of a shrinking clothing and textile manufacturing environment.
Last week, in the same hall where this agreement was signed, at the offices of the SA Clothing and Textile Workers Union (Sactwu), labour, industry and government gathered to announce that the controversial import restrictions on Chinese apparel and textiles were working.
In January 2006, $56.2 million worth of Chinese clothing was imported into South Africa, according to SA Revenue Service trade data. In January 2007, $33.9m worth of Chinese clothing was imported - a 40% drop in dollar terms.
"It's the first time in half a dec-ade that we have seen anything like this," said Sactwu general secretary Ebrahim Patel at the Fashion Imbizo, which launched this year's Cape Town Fashion Festival.
The import limitations on 31 product categories (out of 36) until the end of 2008 were announced in September last year, to a unified uproar from the country's six major retailers.
Labour quoted the rise of cheap Chinese imports and related rising retailer profits as having led to the loss of 67 000 jobs in the clothing manufacturing sector - much of which is located in Salt River.
The retail sector denounced the quotas as being badly researched and poorly consulted, and on top of some of the highest protectionist measures in the world: an existing 40% import tariff, another 10-15% in shipping costs and insurance costs.
The retailers also claimed this was contrary to the spirit of a free market economy and a punishment to consumers who would wind up paying the difference at the department store till.
They added that 70% of what the retailers bought was local, but equipment and skills to make certain garments and popular fabrics were not available locally and, even if they could be sourced locally, they would be significantly more expensive to produce.
But, most importantly, Edcon, Truworths, Woolworths, Foschini, Pepkor and Mr Price said only 25% of all SA Revenue Service-regulated units coming into the country went to the large formal sector retailers.
The rest was absorbed into informal trading markets and government needed rather to police those illegal imports and the under-invoicing of garments. In addition, they said, an uncompetitive local clothing manufacturing industry needed to be made competitive.
Labour and government maintained that the quotas introduced were a short-term shield to allow the industry an opportunity to restructure itself - indeed to become more globally competitive and rebuild the local manufacturing base. They said the quotas were also in keeping with international trends to ward off the threat of China.
It wasn't only about quotas. A memorandum of understanding between the South African and Chinese governments would have China providing technical and human resources assistance to South Africa, financial investment, trade promotion, and customs co-operation.
BEE manufacturing company Brimstone chief executive Mustaq Brey said that, generally, quotas had seen an increase in local orders.
"However, because this new business is, primarily, import replacement, the pricing requirements that local manufacturers have to meet are, quite frankly, unsustainable and these orders will, in all probability, quickly find their way back to the next alternative country or logical source as soon as the logistics are in place. Therefore quotas are not the answer to the problem and are easily circumvented."
Woolworths stakeholder engagement head Tanya Cohen agreed: "The local industry needs to become more competitive. …