State support of local producers paying off

08 March 2016

By Minister Rob Davies

When colourful fabrics such as silks, satins and velvet are strewn across a factory floor it can be a sight to behold. It is a view relished by South Africa’s 90 100 workers who are employed in the local clothing, textiles, leather and footwear (CTLF) sector.

It a sign of a factory at work. It means permanent jobs and wages at the end of a week so that factory workers can provide for their families.

This labour-intensive sector has a long and illustrious history. More importantly, it provides a critical source of employment for mostly women in poorer communities.

However, at the start of the century local manufacturers began to grapple with competition from cheap imports and struggled to compete domestically. The industry had poorly trained staff, out-dated equipment and a lack of fresh investment. In the process, numerous factories in the Western Cape and KwaZulu-Natal faced closure with thousands of jobs on the line.

The government became greatly concerned at the precarious situation the industry faced. The Department of Trade and Industry stepped in to help this sector to become more competitive. As part of this, the Clothing and Textile Competitiveness Programme was introduced in 2010. It is funded by government and administered by the Industrial Development Corporation.

This programme has a range of structured interventions to improve global competitiveness. It covers all aspects of business operations, from specific technical skills to generic business skills. The programme also provides funding assistance for compliant manufacturers as well as those in other areas of the apparel value chain so they can effectively supply customers and compete on a global scale.

By March last year the Clothing and Textiles Competitiveness Programme had approved 1 076 applications to the value of R3.7 billion under the Production Incentive Programme. Most importantly, the programme saved 68 380 jobs and created 6 900 new ones.

Another success was the leather and footwear industry where 22 new manufacturers invested R371 million in machinery and factories in the Western Cape and KwaZulu-Natal. These investments created more than 2 000 jobs.

We applaud local companies that took advantage of our incentives under the Clothing and Textile Competitiveness Programme. One of the first companies to embrace this programme was Prestige Clothing which belongs to the Foschini Group. 

Through our incentives Prestige Clothing build a world-class manufacturing facility.  Today 65  per cent of the products in Foschini stores are made locally.

Another local business that took advantage of our programmes was the K-Way factory of Cape Union Mart. Through the Production Incentive Programme and Competitiveness Improvement Programme it purchased new state of-the-art machines which transformed their operations.

This resulted in a 102 per cent surge in revenue and 20 per cent increase in operational profit. Importantly, expenses as a percentage of revenue decreased from 10.1 per cent to 9.7 per cent. Machine downtime declined from 2.1 per cent to 1.6 per cent while absenteeism decreased from 4 per cent to 3 per cent.

Another intervention government introduced was the new Preferential Procurement Policy Framework Act. This policy ensured that all government tenders for the sector stipulated local content - that manufacturing of textiles, clothing, leather and footwear be sourced locally. If not, the Department of Trade and Industry is required to provide supporting letters confirming the non-availability of those raw materials locally before a company can source abroad.

In response to the flood of cheap clothing imports government increased the import duty on clothing to 45 per cent in line with World Trade Organisation regulations. In tandem we improved our monitoring of imports to ensure compliance to reduce unfair and illegal imports.

All our efforts have paid off with the clothing, textiles, leather and footwear sector now on firm footing. The last Quarterly Labour Force Survey (3rd Quarter 2015) shows that employment in this sector rose by 1.8 per cent over a 12-month period to September 2015. This meant 676 new jobs in the clothing sector, 1 197 in the textile sector and 268 in the leather sector.

Our CTFL interventions fit well with the Nine-Point Plan as announced by President Jacob Zuma last year. This plan aims to ignite economic growth and create jobs with industrialisation playing an important role.

The government remains committed to working with local manufactures in clothing, textiles, leather and footwear sector to ensure their market share locally and internationally. Let us all support our domestic manufactures by buying local products.

Rob Davies is Minister of Trade and Industry