The South African Clothing, Footwear And Textiles Industry

Sample essay topic, essay writing: The South African Clothing, Footwear And Textiles Industry - 2801 words

.. he same period. ("The Shopsteward" Special Edition, 2005)The allegations levelled are intuitive. Large business is profiting while local industry and jobs are lost. COSATU continued it's stated intention of mass action with a general strike in June, protesting the loss of employment in South Africa.4.2.

National Retailers ResponseThe retailers' response has been supportive of the principles yet none, not even Woolworths, whose current local procurement tops 75%, have been prepared to sign the Declaration of the Retailers and SACTWU on the Apparel Industry. The reasons stated have been that doing so would restrict the signatories to the benefit of non-signatories, impacting relative competitiveness. Michael Mark, CEO of Truworths, submitted the retailers view point in the eloquent article, We fight as Asian giants profit published in Business Day on 10 June 2005.The article presents the case on behalf of all national retailers and contends the following:That the current situation will not be 'solved overnight' and is a result of increased and the flawed local business models, which operated on the premise of continued Rand weakness relative to international currencies. That contrary to perception that each of the big four retailers, Edcon, Woolworths, Truworths and Foschini have in fact seen unit increases of local product over the past few years, but that consumers have become more discerning in their choices and that retailers are by definition merely conduits to satisfy this demand. The imposition of increased protectionism would no doubt increase local production but at the expense of sales and ultimately reversing the current retail boom. Highlights that the big four retailers targeted by the unions in fact import relatively far less proportionately and that the real issue is the illegal or under invoiced imports, which are finding their way into the market. That the imposition of fixed import targets will in fact limit retailers' competitiveness by limiting them to local procurement irrespective of capacity, technology or price, with expected adverse impact on the current consumer boom. In conclusion it is offered that the big four retailers are prepared to work closely with national interest groups to address the situation, but that the current conflict provides no benefit as it does not address the real threat presented by China, but rather divides the industry. Source: Michael Mark. (2005, 10 June). We fight as Asian giants profit.4.3. Governments ResponseThe South African Government has been criticised for doing top little, specifically not invoking safeguard clause in the WTO regulations to utilise selected protectionism to protect the local industry. According to Iqbal Sharma, the Chief Director of International Trade and Economic Development at the Department of Trade and Industry (DTI) this is not the case. The affected companies have not utilised the avenues available, in application to the government and WTO for safeguards required

Sharma argues that the application fee (R100,000.00) is not unrealistic given the severity of the situation and that rather than working with SACTWU, companies affected have been hesitant to reveal the necessary company information. It is held that unlike their European Union counterparts who have invoked protection on 50 lines, the South African sector wants protection "from everything".The real issue lies, it is argued, in that the sector aware of the liberalisation of trade from 1993, has been "taken by surprise" this year and is restricted by having outdated processes and products. The government does however accede that given the scale of the problem intervention is necessary and has committed to assist in the developing a competitive regional system and utilising the opportunities presented through the African Growth and Opportunity Act (AGOA).Source: Dasnois, Alide. (2005, May 10). DTI throws ball back in clothing and textile industry's court.4.4. China's ResponseAs would be expected the response from the Chinese is defensive. China's Economic and Commercial advisor to South Africa, Ling Guiru, states that any move to restrict trade by the South African government would violate the WTO free trade agreements. He points out that should China be targeted it would merely be replaced by other countries such as India and Pakistan. The Chinese sentiment can be best expressed in quoting Guiru: "The success of the Chinese textile and clothing industry can be attributed to its positive response and readjustment in the face of difficulties, instead of flinching and resorting to self-protection."It is clear that China will continue to pursue its current strategy and that any response needs to be internal and systemic if the challenge is to be met. Source: No author specified (2005, June 30).

Chinese imports affects SA clothing industry.5. POLICY SUGGESTIONSIt must be accepted that the current globalisation trend impacting the sector is not only set to continue but will no doubt accelerate in future. Hence in addressing the current issues faced by the Clothing, Footwear and Textiles Industries measures aimed at stalling international trade alone are not sustainable and will under best case scenarios only create short-term breathing space. The suggestions that follow consider short-term measures only in the context of enabling the industry the time necessary to address the systemic realities posed by the global market it now operates in.5.1. Short Term Measures5.1.1. Consensus must be achieved! In order for anything constructive to emerge from the suggestions to follow it is critical that the various stakeholders, Government, Labour Representations, Industry Bodies and Retailers present a unified and congruent position.

In order to provide the appropriate platform, the repositioning of NEDLAC as an effective dialogue and negotiation vehicle is key! In this regard considerable effort and commitment is required to re-elevate the profile of the forum to previous levels of significance.5.1.2. Short-Term Protectionism is keyBy necessity the initial focus of short-term measures must be on providing temporary protection from the rampant increase in imports from especially China. The WTO regulations, under the China protocol, enable countries where Chinese imports threaten the survival of local industry to invoke safeguards. These safeguards take the form of capped year on year growth rates limited to 7.5% and have been utilised by several countries such as Turkey, to enable local industry additional time to adjust. The capped increase of 7.5% valid until 2008, is significant when contrasted against the current growth trends topping 100%, although some will argue that given the past two years growth the base is already to high. Whilst these measures appear intuitive, WTO regulations make the application process complex and expensive. In order for applications to stand up to WTO regulations at least 25% of companies (not representative bodies) manufacturing a particular line must submit individual applications. Given the current lack of consensus, logistically a tri-partheid alliance represented through NEDLAC would be required to provide significant support in removing bureaucratical bottlenecks. This is especially relevant in that the measures given the nature of the process take between 6 and 9 months to implement.

Urgency is thus critical if the current import base is to be prevented from escalating to a point where the restrictions lose their relevance as imports normalise.5.1.3. Stem illegal and under-invoiced importsThe imposition of trade restrictions is meaningless if the current inflow of illegal and under-invoiced imports continues. As such the government must improve current custom controls to enable the measures pursued in temporary restriction of trade to be successful. 5.1.4 Outcome of Short Term MeasuresIn the event that the three preceding measures are implemented successfully, a sound base is created to address the long-term structural changes required. As stated at the outset these measures will only influence the industry in the short term, as they do not address the fundamental reality that in order to survive the local industry must become more competitive.5.2. Longer Term InterventionsWhilst the short-term interventions are critical in creating room for the industry to readjust, permanent structural changes must be effected in order to position the sector competitively once the temporary measures come to an end. In this regard the following measures are suggested:5.2.1.

Industry assistanceThe increased competition of the past few years has negatively impacted the financial position of many firms in the sector. In contrast many of the adjustments required by companies relate to improving processes and technology. As such there is a requirement that monetary assistance be made available to the organisations to enable them to retool where necessary. Given the financial realities, which currently exist the sector, it is unlikely that private financial institutions would provide such funding. In the event that funding is provided it is likely to be prohibitive as banks adjust rates to risk.

It follows that support should be provided by the state and conceivably should take the form of low or nil interest loans to those companies identified. Encouraging longer-term investment is a little more complex. It would not be prudent in the medium term to, in addition to the financial assistance detailed above, encourage large-scale expansion as the short-term measures must by definition end, once again putting pressure on the industry as a whole. Rather investment should only be encouraged in only certain circumstances where benefits such as scale are expected to position the initiatives positively in the future.5.2.2. Reduce raw material pricesThe current commitment to the Southern African Development Community (SADC) trade agreement on the import of cotton is restrictive. Whilst regional co-operation is critical as is the case with the industry in question, the agricultural sector must itself be competitive internationally. Access to cheaper more competitive /p>

This has been the focus of significant debate of late. The ANC has released a discussion document, which proposes actively pursuing a dualistic labour market characterised by relaxing labour restrictions on a segmented approach. This is based on analysis of Europe's Marshall plan, the East Asian development plan and the EU integration plan. Measures such as this are key in addressing not only the broader employment issues but certainly in reducing the cost of labour /p>

Where possible companies should be enabled through information dissemination and assistance to pursue these markets in an attempt to gain critical mass and economies of scale necessary to be globally competitive. Given the favourable sentiment, especially evident in the commitments from the recent G8 Conference, further favourable trade agreements should be actively pursued by South Africa. In addition to negotiating external trade agreements the expansion of current EPZ's such as COEGA would provide further opportunities to improve especially cost competitiveness.5.2.5. Repositioning of the industry modelThe Chinese model is based on volume, volume and more volume. Competing with the model directly may all other measures aside, remains difficult. The reaction should perhaps be more of a flanking strategy with local industry pursuing lower volume more niche-oriented markets where flexibility is key. Ultimately this appears to be the only sustainable positioning strategy, as out competing the Chinese given their government support and questionable labour standards does not appear likely.5.2.6. Skills, technology and process improvementsIn support of all the above initiatives it is key that the industry must be supported by assistance in upliftment of skills, the better utilisation of technology and revising processes to increase productivity. In this regard the government and representative bodies have a key role to play. Individual companies are often of a scale, which cannot support the cost of the initiatives required to effect repositioning of the above dimensions. The introduction of public programmes to assist is thus vital. This would extend beyond the boundaries of the sector itself into the provision of adequate supply chain logistics, promoting sourcing of government procurement locally and developing consumer awareness around Proudly South African country of origin.5.2.7.

Outcome of longer-term initiativesThe key measure of the longer-term success is ultimately the ability of the industry to compete with global players. This does, as discussed above, not imply that local industry will necessarily be cost competitive on a volume basis with global player such as China but that discrete markets will be serviced in which the companies can compete. The creation of said markets is however not enough. The industry must adjust (and quickly at that) to become more productive in all aspects. 6.

CONCLUSIONIn considering the evidence above a picture emerges of a sheltered industry, which through years of protection has progressively become less and less competitive - only to be thrust harshly into the direct path of growing international trade and competition. The reaction of stakeholders has been without exception vociferous but continues to lack the focus and congruency necessary to adapt to and meet the challenges necessary to survive. Where to from here? The question resurfaces repeatedly and certainly the call for increased protection and similar defensive measures has merits. However it is clear that to survive the industry will need not only to improve its current model but also adjust its focus fundamentally. The alternative is extinction, a possibility, which at this point certainly does not seem remote. The time has come for a unified effort by all stakeholders if the situation is to be salvaged, question remains given the fragmented state of the industry, is this possible? REFERENCES1.

Carbaugh, R. (2004). International Economics. USA. South Western2. No author specified.

(2005, June 30). Chinese imports affects SA clothing industry. http://www. businessinafrica. net/news/southern africa/456577.htm3. Inggs, Margie. (2005, July 14). Draft paper offers remedies for clothing and textile industries.

Business Report. http://www. tralac. org/scripts/content. php? i d=38354. Pela, Mokgadi, Wray, Quentin. (2005, May 13). To vie with China, Africa must find a competitive advantage. Business Report. http://www. tralac. org/scripts/content. php? id=36275 .

Dasnois, Alide. (2005, May 10). DTI throws ball back in clothing and textile industry's court. Business Report. http://www. tralac. org/scripts/content. php? id=36176 . Andile Ntingi (2005, June 27). SA needs sober plan on textiles.

Business Report. http://www. busrep. co. za/index. php? fSectionI d=561&fArticleId=26010327. Sapa-AP, Business Report. (2005, March 22). The facts behind the African textile disaster. http://www. tralac. org/scripts/content. php? id=35038 . Nicky Smith.

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Welcome to ghost town. Pursuit. http://www. pursuit. co. za/archive/aprmay05 ghosttown. htm10. Declaration of the retailers and SACTWU on the apparel industry. http://www. nedlac. org. za/docs/section77/s actwu02.html11. Margie Inggs. (2005, May 25). Retailers get set to comply with country-of-origin label regulations.

Business Report. http://www. busrep. co. za/index. php? fSectionId=561&f ArticleId=253260412. Alide Dasnoi (2005, January 31). Clothing workers should sock it to the lot. Business Report. http://www. mywealth. co. za/index. php? fArticl eId=2392162&fSectionId=556&fSetId=30413. No author specified. (2005, June).

Job crisis in the clothing, textile, footwear and leather industry. The Shopsteward" Special Edition. http://www. naledi. org. za/docs/sactwu jobsstrike. pdf.14. Benita van Eyssen. (2005, May 20). Southern Africa helpless as China aims to clothe the world. Business Report. http://www. busrep. co. za/index. php? fSectionI d=561&fArticleId=252731815.

No author specified. (2005, May 20). SA prepares to defend its industry. Business Report. http://www. busrep. co. za/index. php? fSectionId=561&f ArticleId=252733116. Jack Kipling. (2005, May 19). Strategy needed in globalised apparel sector. Business Report. http://www. busrep. co. za/index. php? fSectionI d=553&fArticleId=252562217.

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(2005, May 4). Realities of textile sector not unique to SA. Business Report. http://www. busrep. co. za/index. php? fSectionId=553&f ArticleId=250670419. Margie Inggs. (2005, May 3). State waits for textile, clothing industries to devise rescue plan. Business Report. http://www. busrep. co. za/index. php? fSectionId=552&f ArticleId=250526920.

Margie Inggs. (2005, April 13). Strong case made for textile measures. Business Report. http://www. busrep. co. za/index. php? fSectionI d=561&fArticleId=247971221. Tom Maliti. (2005, March 15).

Rise and fall of African textile industry provides cautionary tale. Business Report. http://www. busrep. co. za/index. php? fSectionI d=552&fArticleId=244744222. Carli Lourens. (2005, 27 June). New trade regime will cost jobs, says Cosatu.

Business Day. http://www. businessday. co. za/articles/article. aspx? ID=BD4A6098123. Bill Foreman. (2005, 14 June). WTO head defends lifting of textile quotas. Business Day. http://www. businessday. co. za/articles/article. aspx? ID=BD4A5637624. Michael Mark.

(2005, 10 June). We fight as Asian giants profit. Business Day. http://www. businessday. co. za/articles/article. aspx? ID=BD4A5459725. No author specified. (No date specified).

Overview of the SA textiles industry. http://www. mbendi. co. za/indy/txtl/af/sa/p 0005.htm26. No author specified. (No date specified). Hanging by a Thread - Textiles sector in crisis. http://www. da. org. za/da/Site/Eng/campaigns/ DOCS/DA%20textile%20industry%20study. doc.

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