Riches to Rags

It is really sad that so many local clothing factories have had to close down over the past few years.  We all say local is lekker but how many of us give a thought as to where our clothing is made? We all complain about the fact that almost every item we purchase is made in China but how many of us are prepared or able to pay more than R100 for a plain t-shirt. Did it ever occur to anyone that clothing prices could be double of what we are paying now if our favourite store didn’t import?

The decline of locally produced goods has been steady especially with retailers placing more of their orders offshore. It’s scary to think that one of the reasons why SA started importing was due to labour costs. To give you some perspective the average machinists in South Africa earns less than R500 per week.  We are in a prime position to create jobs and help alleviate poverty by producing locally yet instead of building up this industry retailers are intent on destroying to pay a few cents cheaper to undercut the competition. How are we gong to level the playing field with China and other overseas suppliers? Do retailers take productivity into account when comparing labour rates and if their labor costs are rising, then they need to bear in mind that their competitors’ labor costs are rising at the same time.

Currently with the rising costs of labour in China as well as an increase in cotton prices SA and the rest of the world is once again looking for factories that can produce even more cheaply. This reminds me of the time the government imposed quotas on the amount of goods that could be imported from China, instead of having goods locally produced retailers started looking at other Asian countries such as Vietnam, Cambodia, Bangladesh, etc. Imports for certain retailers are between 50 – 90% and many local factories being unable to compete are forced to close down. Should there not be a better balance between locally produced goods and imported goods?

All it takes is for an offshore supplier to meet a retailers target price and a domino effect will occur. The retailer will then abandon the local supplier that has been successfully providing quality goods on time season after season and was able to produce additional units when goods were trading well.

Below are extracts from articles I’ve gleaned off the internet and from the Department of Trade and Industry website:

“It is clear that the industry has been unable to adjust adequately to an environment of more liberalised trade and a stronger currency. Over the past decade over US$1-billion has been spent on upgrading and modernising South Africa’s textile, clothing and footwear industry, to make it efficient and ready to compete internationally. Yet we are still unable to compete with the Far East especially manufacturing giant China.”

“In general, in comparison to competitor nations, investment in capital equipment and the level of technological innovation have been very low in this sector. The effect of these weaknesses is that the industry is not dynamic. Particularly problematic is the almost non-existent investment along the value chain. The result is that a significant part of the industry remains concentrated in the less sophisticated CMT sector. New export and investment incentive schemes and policies are required that are designed to encourage greater investment and raise the value addition of production. These would include benefi ciation schemes designed to develop an integrated value chain. It is also imperative that the industry raises investment levels and improves technology independent of whatever incentive schemes may exist.”

“Skills are crucial in modern manufacturing, and increasingly dependent on higher levels of education. The consequences of a systematic failure under colonialism and Apartheid to invest in the education and development of the largely black workforce remains. Investment in the clothing and textile sector has not significantly expanded a pool of highly skilled workers and technicians. The challenge of innovation is closely linked to skills development and investment. Apart from exceptions in a number of sub-sectors, the clothing and textiles industries have performed poorly in innovation and technology enhancement, with the industry perceived as being a follower rather than a leader.”

“It is important to note that the South African clothing industry was built up under isolation with the domestic market driving production. As such, it was never able to achieve scale economies. Furthermore, the industry was protected by an import substitution strategy and now that the economy is exposed to international competition it is comparatively inefficient, lacks capital, technology and innovation, and has high labour and management costs in relation to output. Liberalisation and the restructuring of the industry in the 1990s resulted in large decreases in employment, while productivity has increased through cost-minimisation and downsizing rather than production growth.”

“South Africa is not only competing with countries that have lower wage rates, they also have more flexible labour markets in terms of additional labour costs (such as overtime and shift pay, sick leave and pension contributions). These factors increase costs, decrease flexibility and reduce the ability of firms to compete effectively, particularly when competing in standard, commodity markets.”

“If the sector continues along its current trajectory then it is probable that only a few firms will remain, employing a small number of people and servicing niche markets. In essence, SA will have lost the sector, resulting in the loss of thousands of jobs in an economy that already suffers from high unemployment. This will also impact substantially on other sectors, such as textiles and retail. First, if the clothing sector is lost, then the demand for nearly half of the textiles industry will also be lost which could result in the closure of more textiles firms and the loss of additional jobs. Second, despite the surge in imports, the retail industry still relies heavily on domestic clothing firms. If the domestic clothing industry disappears, retailers would become completely dependent on imports. This would lead to less flexibility, increased costs and greater price volatility due to exchange rate fluctuations, all of which would negatively impact on consumers.”

I strongly believe the government must take drastic action along with all major retailers and local manufacturers to salvage what is left of the rag trade in our country.


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