TRALAC - Trade Law Centre

Despite AGOA, Clothing Industry Still in Crisis

Friday, 02 May 2003

Source: Agencia de Informacao de Mocambique (Maputo)

Mozambican companies exported 500,000 dollars worth of clothing to the United States in 2002, using the duty-free provisions of the African Growth and Opportunity Act (AGOA), reports Friday's issue of the Maputo daily "Noticias".

Despite this, the Mozambican clothing industry remains in deep crisis. In the closing years of the colonial period, there were over 50 clothing factories in Maputo. Now there are just three (Sabrina, Ninita and Umar Textiles), employing about 1,000 people, mostly women. A fourth company, Belita, operates in Beira.

All these companies, except Ninita, are exporting to the United States under AGOA. Bureaucratic obstacles ensured that Mozambique caught the AGOA train late, in February 2002. Over the two preceding years, the government was drawing up diplomas on the products to be exported under AGOA.

According to a source in the Ministry of Industry and Trade, the documents were written in Portuguese, and then submitted to the US embassy for translation into English. They were then sent to the US, and returned with amendments.

Only after February could the clothing companies prepare to take advantage of AGOA, and only in the final quarter of 2002 did the first shipments take place.

The government had hoped that much more than half a million dollars worth could be exported. The Ministry source blamed this relative failure on the obsolete equipment in the factories, which leads to poor productivity.

Sabrina is currently exporting its entire production to the US market. It makes 1,500 shirts a day - but Abdul Azziz, of the Sabrina board of directors, thinks that, with about 400 workers, the company should be making at least 3,500 shirts a day.

He complains of strong competition from Asian clothing companies, of the "lack of a culture of work" among the Sabrina workforce, and of the prohibitive interest rates charged by Mozambican banks.

"For us to work and to compete, we need to modernise our factories", he said, "but that requires money, and the interest charged by the banks is very high".

A further problem is the import duties on cloth. Azziz complained that the raw material his company needs to operate is taxed at the same rate as finished clothing. "In other countries, including South Africa, the government always gives some incentive", he protested. "But here you don't get as much as one per cent".

Last July (before the exports to the US started), Sabrina signed a contract to supply a South African company with 70,000 shirts a month. But the company has proved quite unable to produce that amount.

The newest clothing company in Maputo is Umar Textiles. This is a Pakistani company, which opened a Maputo branch in November, and its production is exported exclusively to the US. This is a case of AGOA attracting a foreign concern to set up operations in Mozambique.

But (like the other clothing companies) the raw material used at Umar is not Mozambican. The cloth used comes from Pakistan and Hong Kong. The clothes leave the factory every 20 days, shipped to the US via the South African port of Durban.

Umar is in a much better position than Sabrina: according to its managing director, Abu Bacar Arune, the company can produce a million pieces of clothing a month.

The third company, Ninita, exports to South Africa. Its general director, Ahmed Rashid, says Ninita is not yet benefitting from AGOA, because it has not identified partners in the United States who would be willing to buy its goods. Ninita's 280 workers produce between 50,000 and 60,000 pieces of clothing a month.

Rashid complains that the state offers no incentives to exporters of clothing. Furthermore, the domestic market is largely closed to local producers, first because clothes are smuggled into Mozambique without paying any duty or tax, and secondly because of the thriving trade in second hand European clothes.

The import of second hand clothes was supposed to help destitute rural families, but nowadays most of this clothing is on sale in urban markets.

Neither Azziz nor Rashid advocate a ban on the import of second hand clothing, recognising that poor households cannot afford to buy new clothes. Instead Azziz suggests that the government should ensure that Mozambican companies produce state clothing, such as school uniforms.

Asked about this possibility, the anonymous spokesman for the Ministry of Industry and Trade declared "I don't know if this demand is legitimate, since the country has opted for a free market. Our task as a government is to provide information so that the companies are able to compete in a free market".

He advised the Mozambican companies to prove the quality of their goods, so that they would be able to win public tenders for school uniforms.

In other words, the government has no intention of protecting the clothing industry.