Local is now lekker for retailers
IMPORTS: REDUCED DEPENDENCY ON CHINA
Government eager to find ways to revive economy and jobs.
South African retailers including The Foschini Group (TFG) and Woolworths are increasing investment in local clothing manufacturers – both to reduce a dependency on Chinese imports and secure a supply chain thrown into disarray by Covid-19 restrictions.
The companies have signed up to an industry plan that includes a target to source 65% of their goods from local manufacturers within the next decade. While progress toward the goal varies per chain, the spread of the coronavirus has sharpened their collective focus.
The pandemic caused “such disruptions to the supply chain that everyone’s sitting back and saying do we ever really want to be that reliant on China ever again?” TFG chief executive officer Anthony Thunström said in an interview.
“I think the penny’s dropped and retailers are looking more and more to buy locally.”
The initiative comes as President Cyril Ramaphosa looks to revive a manufacturing industry that’s deteriorated since the lifting of apartheid-era sanctions two decades ago, which enabled companies to seek cheaper alternatives from overseas suppliers. Re-establishing the sector would help achieve a goal of creating jobs, easing an official unemployment rate that’s at a 17-year high.
“As South Africa opened to trade in the late 1990s, China came in and decimated the market as cost was the only dictating factor,” said Lawrence Pillay, head of sourcing at Woolworths. “But the world has changed radically and there is now so much more than just the cost. Sustainability, carbon footprints, challenges of logistics – all of these factors are going to force a rethink.”
Yet opening new factories during a pandemic won’t be easy. The industry’s decline has led to a shortage of skills, training and raw materials, meaning significant up-front investment will be required to eventually wring savings from shorter lead times and cheaper transport costs. That’s at a time where consumer confidence is low, putting retailers on the back foot.
“There are certain products, like heavy winter jackets, that we just don’t have the materials and skills in South Africa to yet produce,” Thunström said.
South Africa won’t manage to revive the industry in full because local retailers “can’t replace all the product ranges”, added Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.
TFG, which sources about 22% of its apparel locally, has hired 550 more workers across two South African factories this year and sees the potential to add several thousand more, according to the CEO.
While South Africa works to revive its clothes-making industry, nearby countries such as Mauritius and Madagascar are also adding to their capabilities. The steps taken by those island nations are good examples of how self-sufficiency in the industry can be achieved, according to Woolworths’s Pillay.
“We have to look at a broad scope of product categories,” he said. –
I think the penny’s dropped