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South Africa: China Remains a Threat to Textile Sector

Published date:
Sunday, 29 January 2006

China was not the root cause of the problem facing the clothing and textile industries as retailers would simply buy from other low-cost Asian countries if imports from China were curbed, Hoosen Rasool, the chief executive of the clothing, textile, footwear and leather sector education and training authority said this week.

The real problem, he said, was that the industries were stuck in market segments dominated by low-cost Asian manufacturers.

"Any possible reduction of imports from China will likely provide only fleeting relief to the beleaguered local clothing and textile industry," he said. "If China is the problem today, we can be sure that India, Pakistan, Bangladesh, Indonesia or Cambodia will be tomorrow's problem. China itself is not immune to cut-price competition. Wage rates in Vietnam are about 35 percent lower than in China."

On January 19, China's ambassador to South Africa, Liu Guijin, announced that his country would voluntarily curb the exports of its textiles and clothing to South Africa.

Rasool said: "It is therefore very difficult for our industries to compete at the low end of the market as they will never win the race to the bottom. But the structure, or key characteristic, of our industry is designed to keep it in the low-cost, deflationary segment of the market.

"The solution is to shift our thinking towards a strategy that will embrace improving the skills of the workforce, upgrading equipment and targeting the value-added market segment. China does not offer low-cost unskilled labour - it offers low-cost skilled labour."

The industries should be moving up the value chain to speciality products that could hold the intellectual proprietary and sustain the business because of technical superiority and product and process leadership, Rasool said.

Andre Kriel, the deputy general secretary of the Southern African Clothing and Textiles Workers' Union, said the surge of cheap imports from China, both legal and illegal, was one of the biggest problems facing the industry and that restricting imports would definitely help.

"We therefore don't agree with the implication that nothing should be done about the imports but we do agree that the industries should be moving up the value chain," Kriel said.

Gert van Zyl, the executive director of the Cape Clothing Association, strongly disagreed with Rasool's stand and was adamant that the industry's woes were caused by the flood of cheap imports from China and the country's trade policies, which gave it an unfair advantage over local manufacturers.

China's policies include a severely underpriced currency, government subsidies for exporters and government investment in new equipment for the industry to make it globally competitive. Total labour costs in China are also only about one-third of what they are in South Africa.

Rasool said the future had never been brighter for textiles because of technological advancements that were resulting in textiles being used to replace wood, metals and plastics.

"Textiles are increasingly being used for a whole range of non-conventional applications in industries such as aeronautics, agriculture, biotechnology and healthcare.

"The future of the industry must move to these non-conventional market segments where the barriers to entry are very high, rather than remaining in apparel fabrics where price cutting happens on a daily basis."

In the clothing industry, Rasool said the future lay in branding, fashion and mass customisation, rather than in cut make and trim (CMT) operations. The focus of local manufacturers should be on cutting costs without compromising quality.

However, Van Zyl pointed out that in the Cape a number of value-added companies were struggling as much as T-shirt companies.

"The line that companies will become successful by moving up the value-chain is a myth."

He cited Rex Trueform and Polo as examples of companies at the upper end of the value chain that had faced difficulties and had to impose large-scale retrenchments.

"Polo, which five years ago employed 400 workers, is down to 50 despite manufacturing a branded, fashion product."

Rex Trueform, which made high-quality men's suits, last year had to close its Salt River division, which cost about 1 000 workers their jobs. Recently, House of Monatic, a subsidiary of empowerment company, Brimstone, reached an agreement with Rex Trueform to lease the Salt River facilities for five years. Under the Rex Trueform label, House of Monatic rehired 175 workers.

Van Zyl said the quality imported from China was not as inferior as it was four or five years ago, which made it increasingly difficult for local manufacturers to compete.

"Recently I saw tailored suits from China with the same fashion, style and quality you'd get from South African companies at 30 percent of the price.

"It is therefore simply not true that the future lies in branding. If anything, it lies with the CMTs, most of which are able to charge very competitive prices compared with China," Van Zyl said.

He maintained that to remain competitive with China, it was absolutely essential that manufacturers, retailers, the trade union, suppliers and the government joined forces to oppose the opposition.

"China is undergoing a scientific and skills revolution as well as an economic revolution on a scale that is unprecedented in modern history. It is imperative for firms to invest in skills development," Rasool said.

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