South Africa: Strong Rand Erodes AGOA Benefits
The textile industry had invested R3 billion in new equipment, plant and expansion since the US's African Growth and Opportunity Act (Agoa) was launched in 2000, Walter Simeoni, the president of the Textile Federation of SA, said yesterday.
But the anticipated boom in exports had not materialised because of the strength of the rand, and Agoa and other trade agreements such as the one with the EU had little value at the current exchange rate, he said.
Some of the investments had been funded by loans raised on the open market at high interest rates and others through the Industrial Development Corporation, but many companies had financed the investments through their own cash reserves, Simeoni said.
"The equipment and expansions are now operating at between 60 percent and 75 percent capacity, which is a liability for the industry, as plants have to run for 24 hours, 7 days a week, 365 days a year to be competitive," he said.
The industry went on an investment drive in response to calls from former trade and industry minister Alec Erwin to become more export orientated.
"That was the right decision at the time," said Simeoni. "But now that the currency has swung the other way, policies must be put in place to help the industry maintain its productive capacity and, with it, job levels."
The clothing and textile industries have shed 30 000 jobs over the past two years and Simeoni said they would continue to shed jobs until there was tailor-made government intervention.
To stem the bleeding, the government last year created the textile and clothing development council. But Simeoni said it was "unfortunate to note the lack of commitment by government to make the council a success".
"Every meeting is chaired by someone different and government departments that should attend to appraise the industry of various government policies are not attending meetings. If government officials do attend, they hold very junior positions."
Simeoni said he still had hope that a new process - the customised sector programme - that was being put in place by the government would be more successful than other committees.
Department of trade and industry spokespersons could not be reached for comment yesterday.
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