TRALAC - Trade Law Centre

Frame invests R80m to take advantage of Agoa

Friday, 03 August 2001

Source: Financial Mail

Durban - Frame Textiles, the country's largest textile manufacturer, had invested R80 million in the past year to take advantage of the Africa Growth and Opportunities Act (Agoa), Walter Simeoni, the managing director, said yesterday.

The group planned to invest a further R200 million over the next two years to improve productivity, cost effectiveness and capacity.

"Although the textile industry cannot benefit directly from duty- and quota-free exports to the US, increased demand for made-up apparel from clothing manufacturers is expected to significantly boost textile sales volumes," Simeoni said.

The anticipated increase in business was also expected to help stabilise job losses within the group, which downsized its workforce from 5 600 in June last year to 5 300 in June this year.

Frame became a wholly owned subsidiary of Seardel in

December but operates independently. It had already begun making a contribution to Seardel's profit and expected turnover of R1,6 billion in the year to June next year.

Simeoni said the R80 million upgrade projects would come on stream by the end of next year, when there would be greater certainty about how many other countries in sub-Saharan Africa had had their Agoa visa systems accredited.

African countries, even those declared eligible, cannot begin to reap the benefits of Agoa until they have assured the US authorities that they have the necessary systems and procedures to prevent the transshipment of goods from non-accredited countries.

Simeoni said the improvements initiated by Frame would set the group up to take advantage of Agoa. The US law's 2004 deadline for least developed countries requires them to replace imported textiles from third countries in the East with materials from the US or sub-Saharan Africa.

Responding to government criticism that little had been done in South Africa to climb aboard the Agoa bandwagon, Simeoni said planning in the textile industry could not have started before Agoa was promulgated and South Africa's visa system accredited.

Clothing manufacturers such as Nova, Amica and Kingsgate (previously the AM Moolla Group) had been quick to take advantage of Agoa, while others had started more slowly.

"While the local textile industry may not yet have sufficient capacity to supply all the South African Customs Union's needs, apparel manufacturers could import fabric from the US or other accredited countries in sub-Saharan Africa," he said.

Simeoni believed the local textile industry was "very resilient" and would recover from the lack of investment over the past 15 years.