TRALAC - Trade Law Centre

South Africa: Clothing Crisis Jeopardises Jobs

Tuesday, 22 March 2005

Source: Business Report (South Africa)

A crisis had been reached in the clothing industry in Durban where, by June, 8 000 jobs would have been lost in 18 months, representing 40 percent of the industry's employment in the metro area, Len Smart, the executive director of the Natal Clothing Manufacturers' Association (NCMA), said at the weekend.

Five thousand jobs have already been lost in the clothing industry in Durban over the past 15 months.

Gert van Zyl, the executive director of the Cape Clothing Association (CCA), said the commercial viability of Western Cape clothing manufacturers was also being severely prejudiced by cheap imports from the Far East, uncompetitive input costs, the strength of the rand, illegal low labour cost production elsewhere in South Africa and inappropriate industrial trade and policy.

"The CCA is extremely concerned about the extent of company closures, liquidations and job losses, more notably the possible closure of ... Rex Trueform, which could cost 1 000 jobs.

During the past 12 months 26 employers, providing 2 287 jobs in the Western Cape, have permanently closed their doors," Van Zyl said.

Thys Loubser, the managing director of Sans Fibres, said the financial difficulties facing Rex Trueform were having a psychological effect on the whole industry and the community in the Western Cape.

"First and foremost there are the staff, many of whom have a long family tradition in the clothing industry," he said. "The possibility of closure is also affecting support industries that supply Rex Trueform and is having an effect at the political level."

Smart has made several recommendations for a national rescue plan.

"Firstly, the surge of textile and garment imports, which make it impossible for the clothing industry to withstand price pressures in the short term, must be addressed," he said.

Clothing imports from January to September 2004 were valued at R2.5 billion, 54 percent higher than for the same period in 2003.

"Other statistics mirror the situation. Imports in 2001 were 133 million garments. In 2004, 400 million were imported."

The solution, Smart said, was for the department of trade and industry to immediately impose minimum specific duties, which are legally permissible and acceptable to the World Trade Organisation, to slow down the surge from specified countries.

"Imports can then be quantitatively limited, as they have been in Brazil, Nigeria and Turkey. Customs should also apply minimum indicative values."

The Southern African Clothing and Textile Workers' Union (Sactwu) called on retailers to boycott sweatshop-produced goods and buy at least 75 percent from local manufacturers.

"They should also sign a code at Nedlac committing themselves to 75 percent local procurement," said Wayne Van Der Rheede, the union's national organising secretary.

Sactwu also called on the government to immediately implement safeguards to defend the clothing and textile industries from unfair competition.

The union encouraged community organisations to join the Save Jobs Coalition and urged people to support the Save Rex Rally tomorrow.

Smart said a flexible wage model would allow the clothing industry to compete and be compliant. The bargaining council should also allow exemptions from agreements on good cause.

He also recommended the use of compliance certificates, which he said would help retailers and wholesalers buy only from compliant employers.

Van Zyl said clothing manufacturers required all levels of government to implement measures to allow the industry to trade fairly within a free trade environment.

"The CCA also calls on the bargaining council for the clothing manufacturing industry to implement all steps necessary to enforce national compliance with bargaining council agreements," he said.

"A different approach to work and the creation of a more flexible environment to accommodate the needs of all complying companies in the Western Cape needs to be put into operation as a matter of urgency."

Timeline

1997: A phase-down of import tariffs begins. The government implements a phase-down to 20 percent on textiles and 40 percent on clothing over five years instead of over 12 years as required by the World Trade Organisation (WTO).

2000: Weight-based minimum specific duties are removed, benefiting undervalued imports. Ad valorem duties on clothing are phased down from 60 percent in 2000 to 40 percent in 2002, ahead of WTO requirements.

The EU/South Africa free trade agreement comes into effect.

May 2000: The Africa Growth and Opportunity Act (Agoa) is promulgated in the US, giving eligible African countries duty- and quota-free access to US markets for specified categories of goods.

March 2001: Agoa takes effect in South Africa. This may have raised concerns among local retailers that domestic clothing manufacturers would focus on export markets, leading them to increase their interest in imports.

2001: The weak rand cushions the effect of the tariff adjustments.

2002: As the rand rebounds, the combined effect of a strong currency and a reduction in levels of protection favours a move to imports.

2003: Duty rebates on a number of fabrics not available in South Africa are removed, effectively pushing up the cost of certain locally produced apparel.

August 2003: The anti-dumping duty imposed on imports of underwear from China is dropped.

From January 2006: The duty on imports of apparel from Southern African Development Community countries, which currently stands at 10 percent, is due to be removed altogether.



“AGOA Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of South Africa’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.