Enabling conditions for local manufacturing are “an important pillar of our economic reconstruction and recovery plan”, President Cyril Ramaphosa said in last week’s state of the nation address. But a few hours earlier Stats SA had released local manufacturing production and sales data that illustrated the difficulty of reconciling the ambition of such plans and the cold reality on the factory floor.
The data for the third quarter of 2021, which included the July unrest, revealed the consequences of the burning and looting of manufacturing facilities in apparel-producing parts of KwaZulu-Natal. The buildings that were torched included a combination of large retail players’ distribution facilities and the operations of smaller “cut, make and trim” players in places like Isithebe, eThekwini and Newcastle.
Apparel production between July and September declined to 57.5 index points, compared to 98.9 index points in the same quarter in 2016, with 2015 being the base year with a value of 100. In the same period, employment in the apparel sector declined from 40,452 workers in the third quarter of 2016 to 31,477 jobs in 2021.
According to the latest quarterly employment statistics, this subsector remains the largest employer in the textile, clothing and leather sector. But the July unrest shut down production in affected areas and limited the rebound of employment in the sector. It also enabled unfair competition from imports that in some cases do not pay their full due in taxes.
These factors have certainly contributed to the challenges faced by the sector. Yet as the retail clothing, textile, footwear and leather master plan correctly observes, in a buyer-driven value chain the purchasing decisions of large consumers (retailers and the government) can create the demand and scale that incentivises investment in cost, process and other forms of competitiveness.
Notwithstanding the glum employment and production picture, regional and local advantages remain, which with collaborative work between industry, labour and government can be explored to increase employment and investment in different parts of the value chain.
Take Lesotho and its export of cotton-based denim between 2017 and 2021: the mountain kingdom accounted for 65% of denim imports into SA, according to SA Revenue Service trade data. Much of this denim production, attributed to Taiwanese foreign direct investment into the sector, is destined for the US, where Basotho exports receive preferential access through the African Growth & Opportunity Act. The cotton comes from Malawi, Mozambique and other Southern African nations.
As the recent acquisition by Pepkor of Avenide, a Brazilian value apparel retailer, also shows, apparel production is a game of scale unrestrained by geographic boundaries. Yet there are seemingly novel competitive pressures from e-commerce and the legacy relationships between local retailers and their supply bases, as we saw in the factory list Woolworths released a few weeks ago.
Further, the advent of fast fashion in response to shifting consumer preferences and purchasing behaviour shortens the supply chain from factory to consumer. The popularity of Chinese online fast-fashion retailer Shein places competitive pressure on major budget retail chains by getting low-cost and comparatively similar ranges to consumers via an increasingly popular e-commerce platform.
This suggests that the choices on where SA will dedicate its resources, in value chain materials or design, product development or manufacturing, are critical. Without consideration of these and their interface with capabilities our neighbours on the continent may have or want to develop, we may lose sight of the opportunities our common market can yield.
Ideally we would want to see manufacturers in the East exporting to Southern Africa not only containers filled with apparel, but also capital equipment, machinery and know-how. In the context of the factory and port restrictions that now plague China and therefore global supply chains, Ramaphosa and his African peers will surely welcome seeing more Brazilian consumers wearing Pepkor goods, stitched together here at home, in our region and continent.
• Cawe (@aycawe), a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.
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