REVIVING INDUSTRY
Local textile industry needs more support to survive
IN THE PAST seven years, the South African textile, clothing, leather and footwear (TCLF) sector has experienced a resurgence, after almost being brought to its knees by an influx of cheap Chinese imports. The revival of the TCLF sector is directly linked to the introduction of the government’s Clothing & Textiles Competitiveness Programme (CTCP) in 2010, which has given local industry players a much-needed shot in the arm and laid out a platform from which to launch a competitive sector.
This is assisted by the creation of an investor-friendly environment at local level, with supportive provincial and local governments. The concern, however, is that black investors (particularly women) continue to struggle for various reasons, primarily prejudiced by the view of an investor as foreign or white. For historical reasons a black player can mainly participate as a 100 percent-owned start-up, or empowerment partner in a non-blackowned enterprise.
Participating in the TLCF sector requires not just capital, but requisite skills and research capability. This makes the entry level difficult and as such the uptake by black and women-owned companies remains low or insignificant.
According to the Department of Trade and Industry (dti), which oversees the CTCP, local manufacturers have received funding and grants aid amounting to R3.5 billion, saving more than 67 000 jobs and creating an estimated 7 000 new jobs.
These funds have been spent on stabilising and modernising the TCLF sector, helping local players across the value chain to bring out new product designs, hardware and capital equipment that have enabled them to be competitive and profitable.
The local industry is far from regaining its pre-1994 peak powers, and a mountain of work still needs to be done if we are to reclaim some of the 101 000 jobs that were lost by the TCLF sector between 2002 and 2013.
As a newcomer in the industry, I have seen through our efforts the massive potential when it comes to job creation, not only at factory level, but also downstream the value chain, where small-scale farmers can provide for their families by supplying input materials such as cashmere (from indigenous goat wool), sheep wool, wild silk and cotton for textiles and fabrics processing.
Our company Ivili Loboya, a start-up, has not been fortunate enough to benefit from the dti schemes. However, we have been able to enter the market supplying wool for insoles to an established local footwear manufacturer, as well as blended natural fabrics for the clothing and homeware buyers locally, with increasing interest globally.
Of importance is that we are implementing the localisation strategy by replacing imports in our start-up phase.
Many of my colleagues in the TCLF sector applaud the financial support that the industry is currently getting from the government, but they also say that, in hindsight, the sector should have been afforded the same state-sponsored aid that the automotive sector received from 1995, when South Africa opened up its industries to international competition.
The automotive sector, thanks to the government’s Motor Industry Development Programme, rose to be globally competitive, while the TCLF industry was left to fend for itself against an onslaught from cheap Chinese imports until 2010, when the government aid finally came to TCLF’s rescue.
Even though the support came 15 years later than it should have, the sector is now one of the key focus areas of dti’s Industrial Policy Action Plan from 2017 to 2019.
We are hoping that the government will utilise the legislation at its disposal to increase the participation of black people in the TCLF sector, dominated by established local manufacturers and importers.
The Black Industrialists Programme (BIP), officially launched by the government in 2015, is a policy instrument that can have a major impact in driving black economic empowerment in our sector.
Start-ups We sincerely appeal to the dti to make BIP funds available to black entrepreneurs in the TCLF industry to establish startups and expand existing businesses and brands. In order for the BIP to have a deep developmental impact, the government will have to ensure that the programme is adequately resourced, so that funds are released to applicants within a reasonable turnaround time.
Having access to funding reduces the odds of failure for emerging businesses and start-ups, but it is not enough to safeguard their growth and sustainability. They also require access to markets to generate revenue to cover their operating expenses and debt obligations.
Trade agreements like the African Growth and Opportunity Act have been helpful in enabling South African textile manufacturers to tap into the US market. The growing African consumer and middle-class market also provides opportunities for exporting South African fashion brands and fabric products across the length and breadth of our vast continent.
The government can also play a big role in facilitating market access to TCLF manufacturers by giving them preferential access to state apparel contracts, while at the same time implementing programmes to protect the local sector from illegal imports.
South African clothing retailers must also come to the party by supporting efforts to substitute imports with locally produced fashion brands. By placing more local brands on their shelves, retailers can push up the quantity of domestically manufactured clothes sold to South African shoppers.
At the moment, about 30 percent of locally sold clothing is manufactured by domestic players, implying that 70 percent of the demand is taken up by imports. Some of these imports are smuggled into the country illegally.
The government must do everything in its power to manage uncompetitive behaviour locally, and the threat posed by illegal imports, so that our companies can compete on an equal footing.
Unfair business practices are not only the preserve of illicit importers. Large domestic companies also play fast and loose with competition laws by engaging in unfair market practices against smaller players. The Competition Commission has to step in to stamp out the problem, in order to level the playing field for all industry participants.
Eliminating illegal imports and unfair competition will stimulate growth and encourage localisation. The sector also needs to look from within for strength. To be globally competitive, money and resources will have to be spent on training, research and development, and innovation.
Our bright young minds in the sector must be taken through rigorous internships and apprenticeships to equip them with experience and confidence.
Participating in the TLCF sector requires not just capital, but requisite skills and research capability. This makes the entry level difficult.