import quotas hit clothing factories 
08 April 2008

It has been 15 months since the quotas were instituted.

Research by economists Ron Sandrey and Taku Fundira of the Trade Law Centre of Southern Africa shows Chinese imports in textile and clothing quota lines have declined by 48% to R3,7bn in the first year of the quotas.

While retailers have moved to import from alternative countries, such as Indonesia, Bangladesh and Vietnam, Chinese imports have not been entirely replaced.

With SA’s total clothing and textile imports down 22% to R7,1bn for the year, local clothing manufacturers could have been expected to benefit.

Leading fashion retailer Foschini, which obtains up to 40% of its fashion from CMTs, estimated this portion of its business had declined by between 30% and 40%. Local manufacturer Celrose, part owned by Edcon, had seen about 15% of its business sacrificed, Celrose chairman John Comley said.

In a blanket move to protect local manufacturers, quotas were also slapped on textiles that cannot be readily or competitively obtained in SA. As a result, local manufacturers, already struggling with rising costs, electricity cuts and a drop in consumer spending, now have the added burdens of inferior quality, high price and product not delivered on time. The situation was “a terrible tragedy”, academic and industry veteran Mike Morris said.

In an ironic twist, Foschini, an exemplary practitioner of the type of industrial policy the government wants to stabilise the clothing and textile industry, is feeling the pain. Foschini obtains large volumes of product from local CMTs. In a bid to integrate the local supply chain, it supplies these manufacturers with fabric and trim, and then buys the finished product from them.

The trade and industry department has indicated it was considering an extension of the quotas. But Eagle has urged the department to reconsider, warning that an extension will set up more CMTs for failure.

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Mathabo le Roux,  www.businessday.co.za