Textile opportunities in Africa
Since 1994, about US $1500 million has been spent locally on modernising and upgrading the textile industry in South Africa, making it efficient and internationally competitive, which could be harnessed to make South Africa more of a future force in the world market.
However, the industry faces many challenges both locally and globally. Local enterprises have stated that they are in a difficult position due to the enormous competitive conditions in the sector. Many believe that the worst is over and that the industry is looking forward to a recovery following the 2008 global recession.
The industry has always faced challenges especially of a competitive nature with China and India being the monopoly. Local jobs have been lost but the industry has managed to stabilise recently and continues to contribute significantly to the country's GDP and job creation.
Government's intervention and assistance with grants has enabled the industry to grow, if only marginally, over the last ten years. However, issues such as striking workers and global competition have hampered growth.
With South Africa known for its fast turnaround and good service delivery, many developed nations have opted to invest in the local textile industry. However, South Africa will never be able to compete on the level of industry powerhouses China and India.
South Africa is one of the largest textile manufacturers on the African continent. Nevertheless, minimum wages in South Africa are increasing and continued global competition could hamper competiveness. One positive is the recent depreciation of the Rand but at best, the industry is set to remain constant over the coming years with not much growth projected.
China supports textile industry
A recent World Trade Organisation (WTO) study concluded that China and India would dominate global textile and clothing production, valued in total at more than $340-billion, with China having 50% market share. Government assistance in these countries is large and their governments even go as far as offering scholarships to young individuals.
The US Council on Textile Organisations estimates that 30-million people worldwide could lose their jobs in the sector over the next few years. The American Textile Manufacturers Institute predicts that $42-billion in export trade will shift from Central America, Mexico and sub-Saharan Africa to China in the coming years. Since the start of 2012, several mills have already closed in countries across Africa - including six foreign-owned textile shops in Lesotho alone. As a result, 6650 workers lost their jobs.
South Africa has lost 35 000 jobs in the textile sector in the past years according to the South African Textile Federation and stands to lose thousands more this year.
It is estimated that each worker supports an average of eight people, so 280 000 people have lost their source of support.
China invests in South Africa
Recently a multinational corporation from China has taken a strategic decision to set up a subsidiary in South Africa, which will be involved in the manufacture of footwear and clothing apparel. Although the WTO has mechanisms that member states can invoke to protect their industries against gluts of low-cost imports and several African countries have preferential access to US markets through the African Growth and Opportunity Act, ultimately the best defence in a suddenly more competitive global arena is industrial reform.
The strengths of the South African textiles and clothing manufacturing industry include government assistance and support and still relatively cheap labour costs. South Africa's ability to keep up to date constantly with technological changes is also seen as a positive as is constant global demand.
Opportunities exist for growth in Africa. There are incentives and initiatives that have been put in place to assist businesses to grow, aimed at benefiting small and medium sized entities.
Industry competition has always played a significant role in South Africa with China and India controlling market share. The labour laws in South Africa are one of the strictest in the world and this makes it difficult for the industry because it is largely labour intensive resulting in companies becoming uncompetitive. The current negative economic conditions have also impacted largely on the industry's performance.
About the author
Saijil Singh is lead analyst for Coface.