Newsletter No 25 / 9 July 2021
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SA’s clothing industry trying to stitch itself together following worst decline to date
By Carin Smith
South Africa’s clothing industry has not escaped the impact of the Covid-19 pandemic on heavily burdened consumers, with retail sales in the SA clothing and textile industry reaching the worst decline ever recorded in 2020.
But, say local manufacturers, they are pulling out all the stops to snatch back market share from imports, as they continue to face supply chain disruptions brought on by the pandemic.
Graham Choice, managing director of merchandise supply chain at clothing retailer TFG (formerly The Foschini Group), says some of the country’s leading apparel retailers have tried to tackle the problem by localising and shortening lead times.
But, he says, there has been little on offer from the local manufacturing sector, which he describes as “decimated”.
“Overall, the local CTFL (clothing, textile, footwear and leather) value chain in SA has come under extreme pressure as the Covid-19 pandemic significantly constrained demand for retail goods,” says Choice.
“Retail sales in the SA clothing and textile industry fell 6.9% overall during 2020. This is the worst decline ever recorded and the only year of contraction apart from 2009 at the height of the global financial crisis when sales declined 3.2%, according to StatsSA.”
There have long been calls to revitalise garment manufacturing in South Africa, which has battled to compete with China and other cheap importers. The Retail Clothing, Textile, Footwear and Leather Master Plan, which was signed by government and local retailers in 2019, is also expected to give local manufacturers a leg up.
But the CTFL sector has seen several plant closures and associated job losses in the past year, reducing local capacity to produce.
And, in the meantime, retailers continue to face logistical hurdles.
“Retailers continue to face a range of operational challenges, most notably supply chain disruptions causing huge delays and further losses due to shipping challenges, port congestion and rising logistical costs.
“This pressure on local retail demand has had a trickle-down effect on local suppliers where contracting order books placed significant strain on cash flow and financial sustainability of many businesses in the local supply chain,” says Choice.
According to Choice, TFG responded with a “quick response” retail model that would allow for popular clothing items to be made or adjusted quickly, in-season.
But that doesn’t solve the problem of local manufacturing capacity.
This is where the Retail CTFL masterplan comes in. Its implementation kicked off in 2020, and it aims to increase the proportion of locally manufactured products sold in-store from 44% (in 2018) to 65% by 2030.
The plan also aims to create jobs.
Thandi Phele, acting deputy director-general of the division for industrial competitiveness and growth of the Department of Trade, Industry and Competition (dtic) says the masterplan was based on extensive consultation with stakeholders including including government, representative associations, large retailers, manufacturers and the organised labour.
According to Phele, manufacturers have committed to ramp up productivity and invest in production, while organised labour has agreed to adaptable working hours.
“Even though the industry was under pressure, clothing imports took bigger hit than locally manufactured clothing as retailers are buying goods more locally and local manufacturers are benefiting from this.
“It is important to keep working on this to make sure factories are ready and tooled when demand increases again,” explains Etienne Vlok, national industrial policy officer of the Southern African Clothing and Textile Workers’ Union (SACTWU).
“Government has also committed to creating an enabling environment for investment in the South African clothing, textile, footwear and leather industry, through strategic tariff support, appropriate manufacturing incentives, and clamping down on illegal imports,” Phele adds.
Meanwhile, the SA Revenue Service – which has vowed to crack down on illicit trade – has its hands full levelling the playing field as part of the masterplan.
Phele explains: “Often CTFL goods imported to South Africa are declared at a much lower value than their production value at source. This has the impact of reducing tax receipts for the fiscus and unfairly pricing imported goods below the local production cost, thereby driving out the local industry.”
It is estimated that in 2019, clothing with an export value of R35.9 billion was imported into South Africa at a declared cost of R27.8 billion – an under-declaration of 23%. Fin24
ZITF to offer Bulawayo firms in Zimbabwe to exploit regional markets
With a few weeks left for the annual Zimbabwe International Trade Fair (ZITF) to begin in Bulawayo, the second-largest city in the country is under spotlight, not only as a host to the prime trade showcase, but as the nation’s industrial hub. Eleven nations have confirmed their participation at this year’s event, which was suspended last year due to COVID-19.
This year’s edition will be held under tight Covid-19 mitigation protocols between 20 to 23 July, according to the ZITF Company.
This year’s theme is ‘Showcasing the New Normal for Business & Industry: Realities and Opportunities’.
The global interest in Zimbabwe as an investment destination, source of key raw materials for various industrial processes and key trading partner should entice local businesses, especially Bulawayo industries, to position themselves well during ZITF and beyond, according to a newspaper report in the country.
Unlike in recent years when Bulawayo industries have played second fiddle in terms of ZITF participation following the demise of established companies since the turn of the millennium, the rising opportunities demand that the city’s productive sector players present themselves in large numbers.
Bulawayo has a vibrant small and medium enterprises (SMEs) sector that has over the past few years made an impact in industrial manufacturing, covering sectors like leather, agro-processing, mining supplies, tourism, textile and clothing, furniture, construction, engineering and a variety of commercial service operations, and has great export potential in the African region.
For example, increasing trade with Rwanda would not only enhance Zimbabwe’s access to markets in the East African Community, but also scale up export capacity to the region, which has a combined gross domestic product of more than $177 billion, according to ZimTrade.
“We are trying to make sure that we not only just do trade with Rwanda but also Rwanda is a platform for Zimbabwe to take its services and goods to other countries in the East African region,” according to ZimTrade chief executive officer Allan Majuru.
“We might be called land-locked but we call ourselves land-linked and the same applies for Rwanda. We are hoping to open warehouses in Rwanda that can then feed into that region. We want to go beyond Rwanda with regards to opportunities that are there,” he was quoted as saying.
In April, a ZimTrade delegation was in Kigali, Rwanda to identify products and services with potential for exports. This followed a resolution to intensify cooperation between the two countries that saw several memoranda of understanding being signed in March this year to cement bilateral relations at the inaugural virtual session of the Joint Permanent Commission on Cooperation (JPCC).
It is high time that Bulawayo companies considered setting up distribution warehouses in Rwanda and other key markets in and outside the region where they can stock supplies, as well as set up retail shops for Zimbabwean products, ZimTrade feels.
Additional export market surveys focusing on Botswana, Zambia, Namibia, Democratic Republic of Congo, Angola, Tanzania, Mozambique, South Sudan and Kenya have also been conducted.
Nigeria’s NEPZA gets land to set up textile garment park in Katsina
The Katsina state government has offered the Nigeria Export Processing Zones Authority (NEPZA) over 270 hectares of land to set up a textile and garments park in Funtua. NEPZA managing director Adesoji Adesugba said the Federal Executive Council recently approved N2 billion for projects in the park, out of which about N500 million has been spent on the site.
Alhaji Ibrahim Tukur, director general of Katsina state’s investment promotion agency, handed over the certificate of occupancy of the proposed site of the park to Adesugba in Abuja.
The project, projected to generate 10,000 direct jobs and 60,000 indirect ones, will be completed in the next 18 months, according to Nigerian media reports.
Truworths – executive and management appointments
The board of directors of the company confirms, as announced on 19 April 2021 in compliance with paragraph 3.59 of the Listings Requirements of the JSE, the assumption of duties by Mr Emanuel Cristaudo on 1 July 2021 as an executive director of the company and as Chief Financial Officer of the Truworths International Ltd. Group (“the Group”).
The board of directors of the company (“board”) further, in compliance with paragraph 3.59 of the Listings Requirements of the JSE, announced the appointments of the following directors to committees of the board with effect from 1 July 2021:
*Ms Dawn Earp, who was appointed as an independent non-executive director of the company on 20 May 2021, has been appointed as a member of the audit committee, thus giving effect to the board’s succession plan for its committee members.
*Mr Emanuel Cristaudo, an executive director of the company, has been appointed as a member of the Social and Ethics Committee, thereby filling a vacancy in its membership.
The board announced that it has appointed Mr Jon Richens as Designate managing director of Office Holdings Ltd. (“Office”), the Group’s sneaker and shoe retailing subsidiary based in the United Kingdom, with effect from 6 July 2021.
Mr Richens succeeds Ms Kerry van der Merwe who is leaving Office in the next few months to pursue another career opportunity.
TFG – retirement of independent director
Shareholders are advised that Samuel Ellis Abrahams will be retiring from the board of TFG with effect from 2 September 2021, following the conclusion of the Company’s annual general meeting. Sam, who was due to retire by rotation at the annual general meeting, will accordingly not offer himself up for re-election
Mr Price – change in director designation
Steve Ellis, an alternate executive director to the CEO, has given notice of his intention to retire from his executive role in the Group effective 31 December 2021. As a result, and at that date, he will relinquish his designation as alternate director.
On the recommendation of the Group’s remuneration and nominations committee and to retain his extensive retail skills and experience, the Board has approved and confirmed Steve’s transition and change in designation from alternate executive director to non-executive director from 1 January 2022.
Did you know…….. Sustainable textile innovations that will change the fashion industry
One of the most versatile natural fibers can be obtained from hemp – hemp fibers, which are antibacterial, durable and resilient, and work as a natural air-conditioning system. In addition, hemp is a fast-growing plant that consumes very little water and does not require herbicides, pesticides, synthetic fertilizers or GMO seeds. ‘What’s not to love?’ one could ask, and also why this super plant has not already become the standard in textile processing.The reason is the connection of the Cannabis Sativa plant with recreational drugs. Even though the only high that the production and use of industrial hemp generates is the knowledge of doing something for the environment, cultivation has been severely hampered, especially in the western world. The situation is different in China, where the industrial use of the cannabis plant was never prohibited. Thus, China currently accounts for more than 50 percent of the global hemp production and holds more than half of the more than 600 international patents on hemp fibers and textile production. This needs to change.
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