TRALAC - Trade Law Centre

South Africa: "Textile Industry Lacks Leadership" - Govt.

Wednesday, 19 October 2005

Source: Independent Online

An alarming lack of creativity, entrepreneurship, vision and leadership was a major reason for the sorry state of South Africa's clothing, textile and footwear sector, MPs heard on Wednesday.

Briefing Parliament's trade and industry portfolio committee, department of trade and industry deputy director-general Iqbal Sharma accused industry leaders of allowing opportunities to benefit from South Africa's market-access arrangements to "fly over their heads".

He also noted the sector's elaborate management structures, which paid themselves high wages while maintaining "apartheid-mentality relationships" with workers.

Sharma was speaking at the start of hearings by the committee into the clothing, textile and footwear sector, battered in recent years by tens of thousands of retrenchments and hundreds of closures around the country.

"With recent shortcomings of large companies, it would be prudent to assess whether part of their demise was as the result of poor management. Why do we always assume that the management is the best?" he asked.

The industry had to take some responsibility for the predicament in which it found itself, and the predicament in which it placed workers.

"When competitive pressures appear, the pain is passed on to the factory floor. A recent World Bank survey found that wages in South Africa were among the highest in emerging markets; but this did not relate to workers on the factory floor, this related to management."

South African clothing and textile industry management paid themselves "very handsomely" compared to other emerging markets.

"The lack of creativity, entrepreneurship, vision and leadership in this industry is alarming. Opportunities to benefit from South Africa's market access arrangements continue to fly over the heads of established, so-called industry leaders," Sharma said.

He also questioned whether the surge in clothing imports from China, local industry has been calling for limits to be placed on these, was really the reason for sector's woes.

"Is China really the problem? If we block China, will India or Pakistan or Bangladesh become the new problems? Could there be something besides China causing the current crisis? Should consumers and taxpayers bail out uncompetitive or unsustainable sectors?"

Sharma said employment appeared to have been dropping in the sector well before Chinese imports began increasing significantly.

"It is also valuable to note that while employment has either been declining or stagnating in the textiles sector, sales have grown consistently in the last 10 years.

"It could therefore be argued that competitive pressures were already at play in the sector, and the current effects being attributed to imports from China could be continuing evidence of global competition."

Sharma noted that while most sectors of South African industry had had to adjust to tariff liberalisation and changing international trade dynamics over the past 12 years, the textile sector had remained "mostly immune from these developments".

A negotiated tariff phase-down had allowed to remain in place for an extended period, while they were being lowered in other areas of the economy.

"In the domestic market the sector has enjoyed the benefit of elevated tariffs, over 40 percent on some products today... at a time when duties above 20 percent are viewed as high in the World Trade Organisation.

"Government also extended support measures several times to assist industry to restructure... these were introduced and extended with the clear understanding that they were to be used for a limited period to afford industry to adapt to changing conditions.

"... the clothing and textile sector has had the advantage of extensive and sustained protection... and more than sufficient notice and support to restructure and prepare for the benefits and challenges of global integration.

"The question remains whether the industry utilised these measures for its intended purpose. How were the last 12 years spent in terms of investment, restructuring, research and development, and technology and skills development?" he asked.

On China, he said government's approach was to "foster a strategic and long-term relationship, based on shared values and common approaches to broader global and geopolitical issues".

A long-term partnership on economic co-operation with the world's fastest-growing economy best served the strategic interests of the South African economy, he said.

Reply to the above article by Dr Aaron Searll, Chief Executive Seardel Investment Corporation (published in Business Report, 21 October 2005)

Textile criticism provokes outrage

I am outraged at the remarks made by Mr Iqbal Sharma, the acting deputy director-general of the department of trade and industry ("Clothing sector accused of lacking innovation", October 20). He is totally out of touch with real-world economic factors.

My company is the largest clothing and textile manufacturing group in southern Africa, employing 15 000 people. We have established a world-class operation, employing high standards of design and manufacture.

The flood of cheap Chinese products is not the responsibility of the industry or, as Mr Sharma claims, the lack of creativity and entrepreneurship. The hard facts are that South Africa's labour rates are five times what they are in China. Our working week is 42.5 hours, in China it is 57. Annual leave is 21 days versus five days.

What is required is for government to place a curb on import growth of 7.5 percent above the 2002 figure. This is an issue that Mr Sharma should be particularly concerned about, not fancy jargon.

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