Newsletter No. 3 12 February 2016
Many responses have came in for Jackie’s letter which was published last week.! I have passed each one on to Jackie.
IDC Celebrating 20years of Democracy
Clothing and textiles: stabilising a challenging sector
The clothing and textiles sector has been one of the hardest hit as the country has been more affected by globalisation. But since 1994, the government and the IDC have come up with several strategies to counter this.
South Africa has a mature clothing and textiles sector dating back to a few small companies that started out in Johannesburg and Cape Town in the 1920s. And ever since South Africa became a democratic country 20 years ago, the Industrial Development Corporation has played a leading role in supporting and stabilising the industry.
Its products range from inexpensive and mass-produced basic goods to the higher value add fashion tailored garments.
In recent years, however, the sector has struggled to hold its own against legal and illegal cheap imports from China, India and Pakistan. It has also had to deal with insufficient investment, the slow adoption of new technologies, low productivity, labour-related challenges, skills shortages, inadequate firm level competitiveness, and limited access to credit. It is expected to continue facing serious challenges in the coming years, with its future performance and sustainability highly reliant on a package of support to enhance sub-sectoral competitiveness, among other measures.
The industry was initially hit with import duties being phased down to World Trade Organization levels over the period 1995 to 2002. It was further negatively affected in 2001 when China joined the World Trade Organization and started to flood world markets with cheap textiles and apparel into South Africa and its other export destinations. Additionally, a relatively strong rand from 2003 onwards further exacerbated the industry’s decline. The advent of illegal importation practices has had the most serious effect on the industry and can today easily be blamed for the continued demise of an industry which is approximately 30% of what it could be.
As a result, the number of jobs decreased – says Enrique Crouse, the chief executive of Prilla 2000, a textile mill in Pietermaritzburg owned by the Industrial Development Corporation. He adds that in 2002, 181 000 people were employed in the local textile industry; in 2013 there were only 80 000.
Kingsgate Clothing Group’s chief executive, Yusuf Vahed, says the drop in demand for locally made clothing, along with other factors, has resulted in price increases of up to 25% in the last two years.
But the government’s rescue plan, outlined in 2009, has done well in helping the industry recover, and is in the best position it has been in a decade. In 2013, textiles and clothing accounted for about 14% of manufacturing employment and represented South Africa’s second largest source of tax revenue. The textiles, clothing and footwear industry is the most cost-effective way of creating jobs.
Paul Geldenhuys, general manager of Mozimax, a textile company in Tongaat, KwaZulu-Natal funded by the IDC, is certain the local industry is on the mend. And Pat Moodley, the IDC’s co-regional manager in the coastal province, agrees, saying the chain stores’ latest buying trends indicate that they prefer locally made goods. “With the depreciation of the rand to the dollar, imports are becoming more expensive.”
Such challenges have forced companies like Mozimax to become more creative in the way they do business. When the IDC approved R14-million for the company in 2013, it finally had the capacity and freedom to broaden its product line. It acquired retail giants Mr Price and Sheet Street as clients, supplying them with linen, drapery and tablecloths. It also plans to create a recognisable brand as Whiteheads and sell its products online.
Kingsgate has had to bring its business back to Southern Africa, where Vahed says the company can “take control of our destiny and manage the whole process more effectively and efficiently”. It has forged relationships with major chain stores, semi-chains, hawker wholesalers, independent retailers and the government, which acquired uniforms for the South African Police Service and the army.
The IDC has been involved for the past two decades, following the lead of the national government in focusing on job creation and retention. In the mid-1990s, the IDC introduced a low-interest rate World Player Scheme aimed at improving industry competitiveness through modernisation. This was meant to counteract international competition resulting from lower tariff protection. The scheme financed some 30% of the estimated R3-billion invested by the textile and clothing industry between 1996 and 1998, and contributed to the increase in its exports from a combined R2.5-billion in 1996 to R3.37-billion in 1997. The scheme was phased out in 1998.
In 2000, when the US Congress agreed to the African Growth and Opportunity Act (Agoa), textile manufacturers were expected to benefit the most. Though it is not the case 14 years on – the motor industry is the greatest beneficiary – textile exports to the US increased by 62%. Agoa is set to be renewed in 2015, and industry insiders believe that it will continue to benefit local manufacturers.
Also since the turn of the millennium, the textile industry has benefited from its Free Trade Agreement with the European Union.
In 2009, the Clothing, Textiles, Footwear and Leather Competitiveness Scheme was launched to encourage the upgrading and modernisation of factories. In the same year, the IDC co-launched the Production Incentive Programme with the Department of Trade and Industry, and it administered the launch of the department’s Clothing and Textiles Competitiveness Programme in 2010.
The IDC, together with the dti’s Production Incentives Programme, has been involved in the expansion and stabilisation of more than 300 clothing and textiles companies countrywide. One of the more noteworthy investments was made into Prilla 2000, which IDC had bought out to save. Because of this backing, the company was able make the mill more efficient, and replace old equipment with the latest spinning technology, which has increased its volume from 6 500 tons a year to 11 000 tons.
Online retail results for The Foschini Group
Online retail results for The Foschini Group (TFG) for the six-week festive trade period, from late November to the first week of January 2016, contributed 25% of the group’s projected annual online revenue. On Black Friday more than 350,000 unique visitors clocked in at www.tfg.co.za.
The online sales were evenly balanced between cash and accounts, with 45% of online purchases in cash. A unique feature to TFG online, store account holders are able to shop online using their account cards at checkout. Top sellers for the festive period across TFG brands online were towels, selfie sticks, and tote bags, as well as children’s and men’s sneakers; @home, which launched its e-commerce site in late November 2014, saw a 256% increase in sales when compared with the same sale period in 2015.
“We’re delighted with the results for the festive season sale period,” says Robyn Cooke, head of TFG e-commerce. “It’s encouraging to see our customers favouring online shopping over braving the masses in shopping malls.”
TFG will be adding more brands to the online mall throughout 2016, with the aim to have all 18 brands online by the end of 2018. Customers can currently cross-shop @home, Duesouth, Duesouth Escapes, hi, Sportscene and Totalsports, and conveniently check out in one bag.
SACTWU BURSARY SCHEME
SACTWU manages South Africa ‘s biggest trade union bursary fund. The scheme offers members and their dependents financial support to study at universities, technikons and certain other higher education institutions. The fund was started in 1975 with a small solidarity contribution by trade union members to help support each other to meet the education expenditure of their children.
Today the fund is made up of contributions from workers and companies and through funds generated by SACTWU’s investment company. Since the beginning, millions of rands have been paid out in bursaries to thousands of young South Africans whose parents work in the clothing, textile, leather and related industries.
The Bursary Scheme has the following features:
If you have any questions regarding bursary applications, you can contact
Sactwu Bursary Department
·PO Box, 18359, Dalbridge, 4014
Tel: (031) 301-1351 Fax: (031) 305-1039 E-mail: firstname.lastname@example.org
Did you know……
During the industrial revolution, fabric production was mechanised with machines powered by waterwheels and steam-engines. Production shifted from small cottage based production to mass production based on assembly line organisation. Clothing production, on the other hand, continued to be made by hand.
Sewing machines emerged in the 19th century streamlining clothing production
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