The strength of the rand has wiped out some of the benefits of the European Union (EU) free-trade agreement, a South African textile federation has said.

The strong rand has turned the local textile and clothing industry on its head, with exports to the US market also down sharply.

There have also been massive job losses due to declining exports and an influx of cheap imports .

The Textile Federation (Texfed), an umbrella body of South African textile associations , said 25000 jobs were lost in the industry last year.

While explaining the slump in SA's clothing and textile exports to the US, James Lennox, CE of the South African Chamber of Business (Sacob), said some exporters might be considering dealing with "more secure markets with which SA already had free-trade agreements, such as the EU".

Despite the US Africa Growth and Opportunity Act which took effect four years ago and gives SA trade privileges the domestic clothing and textile sector has seen a 41% fall in exports to the US of finished garments in January, compared with the year-ago month.

"It is a misconception that the free-trade agreement with the EU constitutes a more secure environment," said Texfed president, Walter Simeoni.

"While we cannot deny that there is nothing wrong with (that agreement), the rand's strength has handicapped our ability to export even to that market."

Simeoni said the strong rand had increased input costs compared with those of competitors in east Asian countries.

He said labour costs in the clothing and textile sector amounted to 500 in September 2003, "whereas our competitors in the East pay between 40 and 100 a month".

He said the decision by most of the Asian economies to link their currencies to the dollar had made it even more difficult for South African companies to compete.

"Our currency is now at the levels last seen in 2002. What has happened in between? Our CPI (consumer price index) has gone up by 23% and electricity costs by about 72%. Our competitors, on the other hand, have not seen such drastic increases," he said.

He said transport costs had also risen, pushing up local companies' production costs.

Simeoni also warned that local wholesalers and retailers were being forced to source their goods outside the country, mainly in the east, due to the unavoidably high prices charged by local manufacturers .

"We are happy now that the country of origin legislation will be before Parliament soon," he said.

For years, the industry has been lobbying the trade and industry department to introduce the country of origin law as a measure to protect the local industry against cheap imports, mainly from east Asia.

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