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Worsted Mill’s Currency Concern

Published date:
Tuesday, 01 October 2002

While the African Growth and Opportunity Act (AGOA) was very beneficial for the local industry, it had had mixed benefits for South African Fine Worsteds, of Cape Town, chief executive officer Mr. Dieter Mielke told the Wool Record.

The company's sales in the United States, in dollars, have increased over the past year by 60% but it has not been possible to gain the full benefit of the decline in the rand against the US dollar since December 2001.

Mr. Mielke explained that while South African garment-makers were selling into the American market in dollars, they liked to buy their cloth from South African Fine Worsteds in rands. At the same time, greasy-wool prices, based on dollars, have shown substantial increases this year. Mr. Mielke said efforts were being made to reach a compromise with the local garment-manufacturers to adopt a long-term exchange-rate formula.

Under AGOA, sub-Saharan countries can export apparel to the United States free of duty and quota. The garment trade is estimated to be worth US$4.2 billion by the end of the AGOA programme in 2008.

South African Fine Worsteds, a vertically-integrated spinner and manufacturer, prefers to source the bulk of its wool from the South African market. The decline in production by a further 3.1% to 47.1 million kg. in the 2001/2002 season was of great concern, said Mr Mielke.

The total availability of South African Merino wool of 18.5 microns only meets South African Fine Worsteds' requirements for a month. The rest has to be imported. The same applies to the 20-micron range, the local supply of which lasts the company only 3-4 months.

Mr. Mielke said that fabric colours for the American market varied according to geographical regions. In the south and west, bright colours prevailed while in the north-east, the English Look was favoured. For the younger, upwardly-mobile businessmen black and anthracite were popular - colours that complemented an Audi TT were the "in thing", Mr. Mielke observed.

He said that for the German market, bright and shiny colours sold well while Italian and British tastes were more conservative.

Natural-fibre blends continue to be popular, the company for instance using 5-15% cashmere with wool for trouserings and suitings. For summer 2003 wool with 20% silk and wool/silk/linen blends are in demand for the USA and Europe.

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