Second-hand clothes, cheap imports choke Zim retailers
TEXTILE industry experts have bemoaned the demise of Zimbabwe’s clothing sector as a result of serious competition from second-hand wear and cheap imports that have hit hard formal retailers such as Edgars Stores.
Edgars has 25 stores countrywide and also owns 28 Jet Stores outlets and Carousel Garment, a factory based in Bulawayo.
Second-hand clothes are mainly smuggled into the country from Mozambique while cheaper imports from South Africa and Botswana have also become a hit on the market. This is in addition to massive shipments from China and Dubai which are mainly sold from vehicle boots on street pavements.
These have become shoppers’ preferred choice ahead of locally-made brands which the consumers find pricy.
The Zimbabwean government has in the past banned the importation and sale of second-hand clothing to no avail.
Government first banned the practice in 2005 to protect the local textile industry but the restrictions were relaxed two years later following an outcry that thousands of livelihoods depended on the business.
In 2015, then finance minister Patrick Chinamasa torched a storm when he, during the presentation of the Mid-term Fiscal Policy Review Statement, announced another ban on the importation of secondhand clothes.
Edgars posted a 48,2% decline in sales largely driven by fall in volumes during the six month ended July 5 2020. Gross profit and Profit Before Tax were down 62,2% and 45,1% respectively on the back of other gains that failed to offset the higher operation expenditure burden.
The clothing company which is 41% owned by South Africa-based, Edcon was disposed to Mauritius-based company, SSCG Africa Holdings.
“The clothing and apparel industry continues to face significant pressures emanating from roadside business (RSBs) and the emergence of a cheaper second-hand market. We note that the seasonality of the business traditionally warrants stronger earnings performance in the second half, but the erosion of disposable incomes has shifted consumer expenditure to essentials such as food. That said Edgars recently raised $70 million via a rights issue that will be directed towards increasing production capacity and facilitating additional online retail channels,” stockbroking firm Morgan & Co said in its note review.
The selling of used clothes had also become a source of livelihood for thousands of Zimbabweans in all cities and towns with second-hand clothing markets often teeming with customers.
“The situation is quite complex because consumer buying power has been eroded by inflation, low incomes and high levels of unemployment which affects credit sales. The government needs to tighten border controls to limit smuggling of second hand clothing. Further, it is necessary to review downwards import duty on raw materials used in clothing manufacturing. Finished clothes should attract higher customs and import duty than raw materials that are used in manufacturing clothes locally by established retailers,” economist Victor Bhoroma said.
South Africa’s shareholders of retail outlet chain Power Sales announced last year that it was selling its remaining Power Sales outlets in Zimbabwe after a R70 million exchange loss in the year crippled the group. This put the future of the 20 Power Sales stores in the country in jeopardy.
Two former Power Sales directors have since snapped up the firm’s stake at US$3 million.
Finance director Elana Maria Chicksen and general manager Fanuel Mahachi through their newly-formed company Giant Tree have acquired 80% of the issued share capital in At The Ready Wholesalers (ATRW) from sellers Pep stores and Tendril.
Under Pepkor, all Power Sales stock was sourced 100% from South Africa. This is unlike other local formal clothing retailers who have their own manufacturing units.
Power Sales also has a presence in many Sadc countries, including Botswana and Namibia.
At the same time, large textile firms that include David Whitehead Textiles Limited, Modzone, Qualitex and Zimbabwe Spinners, Weavers (ZimSpin), Merlin, Karina have either closed shop or are struggling to stay afloat.
At its prime, the industry employed about 24 000 people, but less than 4 000 are now under its payroll, according to the Zimbabwe Textile Union.
The cotton value chain in Zimbabwe is such after farmers sell seed cotton and ginners separate it into lint and cotton seed. By-products of cotton seed are edible oil and stock-feed. Whereas lint is used locally by textile companies or exported. Over the past years local use of lint has been dwindling due to the collapse of the textile firms.
Following liberalisation in 1994, the cotton sector was run by duopoly of Cottco and Cargill.
Traditionally, cotton was the second largest foreign currency earner after tobacco in the agriculture sector.
Cotton production in Zimbabwe declined to an all-time low of 32 000 tonnes in 2016, from 84 000 tonnes in 2015, and 143 000 tonnes in 2014, after a decade-long spell of perceived lower prices averaging US$0,30 per kg.
Government from 2015 moved to start sponsoring a free inputs scheme to boost cotton production, which has seen nearly 400 000 farmers benefit from free inputs.
According to Bhoroma the clothing sector needs to look at e-commerce strategies to advertise and sell their merchandise while reducing floor space in their shops.
He added that walk-in customer numbers have slumped due to Covid-19 depressed incomes. Bhoroma pointed out that there is also a need to push for protectionist policies with the government through the ministry of Industry.
“The future business looks depressed unless there is a spike in household incomes and sustained stability on inflation to improve consumer confidence. Local clothing companies will continue to implement cost cutting measures such as retrenchments, reducing retail footprint and floor space in current retail units. Foreign investors have already divested most of their local investments,” Bhoroma said.
Research and investment analyst Enock Rukarwa highlighted that Covid-19 and other obtaining circumstances have brought in a new set of challenges for all business players adding that clothing companies need to realise that dynamics have changed and the market now demands appropriate positioning to respond with agility to opportunities and challenges that arise.
“The industry has to be pragmatic through developing strategies that coherently respond to the new normal. Incomes are now at sub-economic levels and disrupting target markets through appealing to emotional spaces of clients is the only way to go,” Rukarwa said.
“The future of the clothing industry is still bright and opportunity pockets remain wide and untapped, what is key is timeous adaptation to changes in the operating environment.
“The major function of the government is to create an enabling environment that fosters business viability. Any form of supply side incentives that reduces cost of production on clothing manufactures will go a long way in restoring competitive advantage?”