Europeans, Asians eye local clothing opportunities
Several European and Asian companies are actively seeking investment opportunities in South Africa's textile and clothing industry, which now enjoys preferential access to the European and US markets.
Under the US's unilateral Africa Growth and Opportunity Act (Agoa), signed into law in 2000 by former President Bill Clinton, certain imports – including textiles and clothing – from qualifying sub-Saharan African countries are exempt from import duties and quotas until at least 2008.
Under the European Union/South Africa (EU/SA) free-trade agreement, concluded in 1999, textile and clothing products emanating from South Africa now have preferential access to any member country of the union.
Shareen Osman, the textile and clothing sector manager at Trade and Investment South Africa (Tisa), says it is too early to name the Asian and European companies which have expressed an interest in investing in South Africa, due to confidentiality requirements.
But she says that Tisa, a division of the Department of Trade and Industry (DTI), has assisted two foreign companies to invest in the local textile and clothing industry. These are Herdmans, of Ireland, which is establishing a linen-yarn manufacturing plant in the Western Cape, and a Taiwanese firm called Richfin, which has built a jersey factory in Kwazulu-Natal. Osman says that would-be foreign investors are attracted to South Africa's textile and clothing industry by a number of factors, including a large and reasonably-skilled labour force, reasonably-priced utilities and a well-developed transport infrastructure which allows easy access to major world markets.
"The industry has the capacity to increase its manufacturing output due to its market access to the EU and the US, and there is availability of natural-fibre raw materials to assist us to do so," she comments. Thanks to Agoa, South African textile and clothing exports to the US have grown by 150% during the past two years.
"Exports to the US are growing at a faster rate than those to Europe, where import duties are being phased out gradually. The US and Europe have, historically, each absorbed 40% of South African clothing exports, but the US's share has grown to 60%," says Osman.
She adds that the EU/SA free-trade agreement and Agoa have given the South African textile and clothing industry "a window of opportunity to establish itself as a major player in the global industry".
Osman says that, recently, Trade and Industry Minister Alec Erwin met with representatives of local textile, clothing and retail associations to discuss the future competitiveness of the industry.