Textiles turn the tide
It has been teaching small and medium-sized businesses how world markets work to help them remain current and relevant, and now the Industrial Development Corporation (IDC) is slowly reviving the country’s textile sector, and growing the obstinate chemical and pharmaceuticals industries. Shakeel Meer, the IDC’s divisional executive for chemicals and textiles, says he is “cautiously optimistic” about these industries because they have turned the tide.
“We may not be another Bangladesh or China in terms of production of goods such as clothing, but we have carefully worked with local business to identify certain unique niches where South Africa is beginning to be competitive within the country and internationally. In those niche areas, opportunities are beginning to bloom for the South African clothing and textile sector,” Meer says.
“Potential entrepreneurs need to identify where the gaps are in the sector and deliver to satisfy the retailers, and blow away the end user with unique fashion products,” he says.
Meer says that the IDC may not be able to keep the textile sector’s entire value chain “vibrant, but we are certainly succeeding in building and tailoring some segments to revive it”.
He and his team are now identifying entrepreneurs who are eager to roll up their sleeves and participate. For those who are interested in getting involved, Meer says gaps exist throughout the value chain from farming raw materials to spinning yarn, as well as in finishing and dying fabric, and producing end products like clothing.
The value chain stretches from the farmer to the processor, and from the manufacturer to the retailer. The IDC is targeting local partners to take advantage of opportunities on offer and gets them to upscale, buy new equipment or improve and redesign their production lines to help them become more competitive and cost-effective.
He says entrepreneurs need to track fashion trends and identify, for example, the season’s hottest colours and styles to enable the value chain to quickly adopt them. The IDC is encouraging and funding companies willing to venture into the so-called fast fashion business – a contemporary term used by fashion retailers who buy products from designers and order clothing that moves quickly from the catwalk to the retail floor.
Fast fashion clothing collections are based on the most recent fashion trends often presented at trendy events around the world twice a year. It is not restricted to clothing only, but includes accessories as well.
“The clothing sector has proven to be very competitive, not just locally but particularly on the international front, which puts a lot of pressure on the margins. Unless you have identified a good niche for your business, it is very hard to compete,” Meer says.
Although the textiles sector may be a tough one, some parts of the chemicals sector can be tougher to crack, because of high barriers to entry.
The sector is divided into two units at the IDC. The first is the basic and speciality sector, which involves the bulk supply of unprocessed products, which are beneficiated downstream, such as ethanol and acids in their raw form. The second unit involves processed chemicals and pharmaceuticals. Although the basic and speciality sector is difficult to enter, entrepreneurs choose to join sections of the value chain by focusing on end-user products, such as plastics, households cleaning products and cosmetics. This is where most entrepreneurs jump in, and the IDC finds ways to fund or partner with them.
The chemical sector often contains highly specialised skills and is dominated by larger companies that focus on providing huge volumes of product. A number of these are multinationals targeted by the IDC and the department of trade and industry to come into South Africa to invest and create jobs.
The IDC has established that there is room in this complex and wellestablished industry for highly specialised smaller companies – either stand-alone firms or locally based subsidiaries of large multinationals – to produce niche or speciality products.
On the pharmaceutical front, Meer says the sector needs a lot of technical expertise because the products are often medicinal and the business environment is fraught with regulation – for good reason.
The industry has high safety standards and many products require specialised licences that detail strict specifications, technical requirements and skills, as well as the ability to handle, package and transport the products.
However, in the area of chemical products used by households, there are many that can be manufactured in a garage – which is how entrepreneur Herman Mashaba established Black Like Me.
While this is not typically what the IDC would fund, says Meer, he acknowledges that it has been a starting point for some entrepreneurs who have grown into formidable businesses.
Meer says that if an entrepreneur starts with just a single piece of equipment to produce a single product for a particular customer, they should do their utmost to be consistent, and ensure quality and a reliable supply to customers.
“Compared with the basic and speciality chemicals sector, consumer products are fairly easy to enter, but they are very difficult to sustain,” he says.