SOUTHERN AFRICA: Clothing and textile industries need a rethink, say economists
Challenging times for textile and clothing plants in the region
Johannesburg, 2 February 2005 (IRIN) - Southern African clothing and textile industries need to restrategise if they are to compete in a quota-free global market after the Multi-Fibre Agreement (MFA) expired last month, economists told IRIN.
"They should market their products regionally, availing the benefits from tariff-free zones created by the Southern African Customs Union, and those being negotiated by the Southern African Development Community," said Eckart Naumann, an economist and associate of the non-profit Trade Law Centre for Southern Africa.
Helena Claassens, an economist with the South African Textile Federation, suggested the creation of niche products focusing on African designs, and technical and industrial textiles, such as parachute fabrics, tyre cords, converter belting, filter cloth, coated fabrics, bulletproof vests, life jackets and the protective garments used in mining.IMPACT ALREADY FELT
Countries like Lesotho and Swaziland have already been affected by the expiry of quotas under the MFA, which kept away competition from low-cost producers in the key US and European markets. Six clothing factories in Lesotho failed to reopen after the December 2004 holidays, and at least 7,000 workers are expected to lose their jobs.
The Swazi government estimates that a third of all garment industry jobs - about 15,000 - will be lost by mid-year, "because the firms have not received any order beyond that period", Naumann explained.
The MFA, introduced 30 years ago, provided protection to the textile industries of developed countries by imposing quotas on low-cost producers such as China, Korea and India. However, manufacturers in the developed world were unable to cope with the high domestic demand and began sourcing textiles from other quota-free countries in the third world.
In its study, 'Rags to Riches to Rags', the international development agency Christian Aid describes the move as "an unforeseen consequence" that allowed "poorer countries to step into the exporting breach, with the result that they could use the de facto protection of the quota system to develop their own garment trade. For some, it was the first major step towards developing a true industrial trade".
Among these beneficiary countries were Lesotho and Swaziland, whose trade with the US increased substantially after they gained preferential access to its domestic market via the African Growth and Opportunity Act (AGOA). Asian producers facing quotas shifted their operations to these African countries to take advantage of the opening, in the process creating much-needed local employment.
"From providing 15,000 jobs two or three years ago, the Asian-owned clothing industry in Lesotho has grown to become the biggest employer, employing 55,000 people," said Naumann. Lesotho is now the largest garment exporter to the US in sub-Saharan Africa.
AGOA also stimulated the economies of Namibia, Botswana, Mauritius, South Africa and Madagascar.
According to a US International Trade Commission (ITC) report, these countries' share of US apparel imports are likely to decline with the expiry of the MFA. Most southern African countries will have difficulty competing with Asia in global markets, either because their wages are high - as in South Africa and Mauritius - or because of low productivity, combined with the cost of raw materials.
Lesotho had "no domestic yarn or fabric supply", while political unrest in 2001 and 2002 in Madagascar had resulted in large disinvestments in the textile industry: "The government is trying to restart the industry, but future prospects are uncertain," the report noted.STRONG RAND HURTS REGION
A 50 percent rise in the value of the South African rand against the US dollar had also impacted on the trade prospects of countries in the region linked to the currency, pointed out Naumann.
David Hsia, chairman of the Swaziland Textile Exporters Association, said the industry "faced a bleak future - largely because of the value of the rand, we will not be able to compete."
Countries like Lesotho and Swaziland, which depend on "third party" fabrics, will be allowed to import raw materials from non-AGOA countries for another two years. But they had not given much thought to a long-term strategy to keep the industry running, commented Naumann. "Swaziland has a sugar industry to fall back on, but Lesotho's future is quite bleak. It is too late for vertical integration [developing the capacity to produce all requirements, from the yarn to the finished garment]."
Naumann cited Namibia and Botswana as two countries in the region which had benefited from vertical integration. Starting from a single company, Namibia's textile exports expanded steadily from US $6 million in 2002 to $80 million last year. But both countries' exports would be affected by the value of the rand, he added.
The UK-based development agency, Oxfam, suggested in a paper entitled 'Stitched Up' that the "rules of origin" needed to be renegotiated.
Lessons are also to be learnt from the South African textile industry, which markets 70 percent of its production to the domestic market, setting aside only 30 percent for export. "With the development of a regional market, smaller economies like Lesotho and Swaziland could benefit."
Claassens said the federation believed that although apparel and household textiles would suffer, "technical and industrial textile manufacturing still has a bright future because of our design and invention capabilities."
In terms of design costs, South Africa was "still quite competitive", Naumann commented. The country is the leading manufacturer of parachute fabric and has even penetrated the Chinese market.
Oxfam said the developed world should provide urgent technical and financial assistance to the affected countries, whose governments in turn should provide retraining, and help retrenched workers seek alternate employment.