TRALAC - Trade Law Centre

SA Textile Sector Pleads With Government For Help

Thursday, 04 September 2003

Source: Business Day

Up to 12000 jobs could be cut this year as sales are expected to drop 10% due to cheap imports and the strong rand

FACING its worst hour yet, mainly as a result of the rand's strong gains and cheap imports, the domestic textile sector plans to propose an emergency plan to government to help it recover .

South African Textile Federation executive director Brian Brink said sales were expected to drop 10% to R12bn and more than 12 000 jobs in the sector could be cut this year.

The industry's pleas are unlikely to be met with enthusiasm from government. The sector already enjoys a high level of protection and support. In fact, there is a strong possibility that government will reduce its protection of the sector.

Brink suggested yesterday that if an agreement was reached on agriculture the stumbling block in the Doha round of world trade talks government would take the lead in opening up its market further. It could do this by reducing high tariffs.

SA, meanwhile, completed its tariff phase-down in terms of its Uruguay round commitments last year five years ahead of the 12-year schedule.

This puts SA ahead of its World Trade Organisation requirements for tariff protection.

The industry said it would propose several short-term remedies to government. Among these would be a request to reinstate the original 12-year tariffs phase down, in effect raising tariffs.

The proposal would also contain the possible extension of the duty credit certificate scheme, which allows exporters to use export credits to offset the cost of imported input materials.

Arguing the case for support of the sector, federation president Walter Simeoni said the industry worldwide was highly sensitive. He also illustrated the difference in labour costs between SA and its main competitors.

Labour wages were about 450 a month in SA at present up to 90% more expensive than some of SA's largest competitors in the East, he said. Labour costs in Eastern countries ranged between $20 and $60, while the average cost in countries north of SA were about $30 a month.

While the US's African Growth and Opportunity Act (Agoa) had brought benefits for SA and neighbouring countries, Simeoni suggested that the legislation had also gone a long way in strengthening competition from the East. He said 60% of all jobs created through Agoa were in the East. This was because least developed countries were allowed to import raw materials from any source .

Simeoni, meanwhile, said illegal imports were aggravating the sector's "perilous position". These imports had surged.

Imports had exceeded 50% of total consumption in SA for the first time in years a situation which Brink says is a recipe for disaster in the long term.

Brink acknowledged improvements, such as increased resources in the South African Revenue Services, but suggested that under-declaration of the value of imports still appeared to be the chief vehicle for introducing lowpriced imports into SA.

He said the South African fiscus had lost about R30m in duties and value added tax on acrylic fabrics alone.

The federation, government and labour, meanwhile, have produced an industry growth strategy . The objectives are to grow sales 80%, employment 20% and for exports to represent 30% of sales by 2010. The Textile Industry Development Council, formed to implement the strategy, met for the first time this month.