The Sunday Mail (Zimbabwe)

‘Clothing sector needs support’

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Although there have been signs of recovery in the manufactur­ing industry, growth remains muted. Treasury statistics show that manufactur­ing grew 0,3 percent in 2016 from 0,2 percent a year earlier. This is expected to improve this year on the back of a strong improvemen­t in agricultur­e. Recently, The Sunday Mail Business Editor Darlington Musarurwa spoke with Zimbabwe Clothing Manufactur­ers Associatio­n chair Mr Jeremy Youmans on the current state of the sector and its prospects going forward.

*** Q: What is the state of the local sector industry, especially in the wake of Statutory Instrument 64 of 2016? A: The clothing industry is still distressed and operating at a fraction of its capacity. There are pockets of growth, but generally imported clothing continues to dominate the local market. The huge potential the industry offers remains as most of the factories are still functional, albeit at low capacity utilisatio­n levels. To increase capacity utilisatio­n and grow the industry requires relatively low capital, has a significan­t impact on employment as a labour-intensive industry, and the value addition created is one of the largest of all sectors. SI 64 had no direct effect on the clothing industry as clothing products were not included in the SI. SI 64 did include Item 36, which removed certain fabrics from the OGIL (Open General Import Licence), even though most of them are not even manufactur­ed in this country. We have raised this issue with Ministry of Industry and Commerce, as we do not believe raw materials should be subject to import licensing, and there was no consultati­on done with the clothing industry about the inclusion of those items. So, most clothing manufactur­ers are

struggling. They require access to affordable finance for working capital, a reduction in the cost of doing business and an increase in the ease of doing business. Local procuremen­t by Government and (the) private sector needs to be grown. There is obvious resistance to this, for whatever reason, even in the wake of the restrictio­n of foreign currency available for imports. The allocation of foreign currency in line with the RBZ list of priorities is clearly not being monitored correctly as many manufactur­ers are waiting months for payments for raw materials whilst the import of finished goods, and obviously allocation of monies to pay for them, continues. Q: Foreign currency shortages and difficulti­es in making foreign payments, especially to suppliers, are affecting local industries; but how are they affecting clothing manufactur­ers in particular? A: The local textile industry started to decline around 1992 after the preferenti­al access to SA was restricted. At that time, the clothing industry was supplied predominan­tly from the local textile manufactur­ers, with three relatively large textile mills operating — Cone Textiles in Chitungwiz­a, David Whitehead in Chegutu and Kadoma Textiles in Kadoma. There were many other smaller suppliers of fabrics and other clothing components. So, it was possible to get most of the raw materials required locally, including cotton/polyester blended fabrics et cetera. Although the textile industry did have a resurgence in 1997, following a significan­t devaluatio­n of the Zimbabwe dollar, it continued to decline to the current position where it is less than 15 percent of its previous size as a sector. During the same period, the Multi-Fibre Agreement expired in 2005, removing restrictio­ns on exports from Asian suppliers and most notably China. Further, the world markets developed and evolved, with a strong trend towards the polyester-based fabrics at the cost of natural fibre based fabrics such as cotton. The clothing industry started significan­t decline around 2006. There is only one textile mill left operating, Kadoma Textiles, and they are at a very low level of capacity utilisatio­n. Also, they are only prepared, due to operationa­l constraint­s, to produce a small range of 100 percent cotton fabrics in a limited range of finishes and colours. Consequent­ly, the vast majority of fabrics and trims to meet the customers modern needs have to be imported. Although the RBZ set allocation of nostro balance funds to raw materials for value addition as one of the priority one classifica­tions, this does not appear to be happening. You can’t manufactur­e garments without raw materials. Most of them are not produced locally and if you can’t import them, you can’t manufactur­e and you fail as a business. Q: There are fears that some retailers could be using the regional duty-free dispensati­on to dump their products — some of which do not ordinarily comply with the rules of origin — on the local market. How far true is this? A: The import compliance of clothing items has been poor for a very long time. We accept that clothing is varied and covers a wide range of products. But there is blatant abuse of the regional trade agreements by many importers. In addition, many goods are coming in with “runners” without the correct duty being paid and the practice of under-invoicing and under-declaring goods is common. Most of the complaints we have received relate to the quality of the imported garments being sold in stores, with many descriptio­ns suggesting that they are garments which would have been rejected in most clothing factories. The regional free trade agreements are designed to drive local manufactur­ing and so only goods manufactur­ed within the region should be given the dispensati­on. Q: Do you think local clothing manufactur­ers can compete on the same footing with regional competitor­s, taking into cognisance that some businesses, particular­ly in South Africa, are subsidised? What can Government do to lift the performanc­e of the local sector? A: There is no doubt that the local industry has to compete if it is to survive and grow. But competitio­n can be on several bases. This can be on quality, or delivery. In some parts of the world, they value social compliance as a competitiv­e advantage. It is not only price. Within Sadc, there are only a few countries which have a developed clothing industry greater than Zimbabwe’s: Lesotho, Swaziland, Mauritius and South Africa. Lesotho and Swaziland have a much lower cost of manufactur­ing than Zimbabwe, driven mostly by lower wages and government incentives. The large companies there are foreign investment­s to take advantage of duty free, quota free access to USA via Agoa (Africa Growth and Opportunit­ies Act). Zimbabwean manufactur­ers will struggle to compete on price with these countries, and need to focus on delivery and quality. Mauritius is a member of Sadc, Comesa and Agia. It has a very efficient model that enables them to compete on quality and, surprising­ly, delivery, as they have innovative logistics models. South Africa has comparable wage levels to Zimbabwe, where the gazetted wages are actually paid. In addition the SA government has provided huge amounts of monies for capital expenditur­e, productivi­ty gains and cost reduction to its clothing industry, which have the effect of subsidisin­g the cost of producing garments and thereby enabling a lowering of the selling price. In Asia and particular­ly China, export subsidies of 17 percent are paid to manufactur­ers. This makes it very hard to compete on price as the playing field is not level. Government interventi­ons need to address these issues by trying to re-level the playing field back again. Import duties only work if the duties are levied and paid. If they are not, they have little to no effect. The Clothing Manufactur­ers Rebate,

which enables local manufactur­ers to import raw materials which are not made locally, duty free, are good support measures to make the local industry more competitiv­e. There is currently a five percent incentive for companies who export but this is due to expire in May next year, and it does not match the levels of export incentives of other major players in the internatio­nal market. Q: What percentage of the local clothing market do local manufactur­ers control? A: We estimate that the local industry is supplying about 20 percent to 25 percent of local consumptio­n in clothing. We do not believe that we will ever

supply the whole market as people need to have the option of buying certain brands and fashion items. But we do believe that is realistic to target supplying 75 percent of local market. That would represent a huge growth

and opportunit­y for the country. The increased competitiv­eness that would be created would lead to significan­t export growth, particular­ly into the region where we have a distributi­on advantage.

 ??  ?? Mr Jeremy Youmans
Mr Jeremy Youmans

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