South Africa’s textile industry will need more than price competitiveness to withstand imports and global market swings, says Localisation Support Fund (LSF) CEO Irshaad Kathrada.
He told Business Times that the local textile and clothing sector learnt many lessons from the past, such as contending with dumping by Chinese exporters.
“The China issue is important and nuanced. We have been able to see that the gap will narrow over time. There does seem to be a rising of wages in the East, and that is leading to a narrowing of the price gap.
“We have a blueprint of how to be competitive, but we are also hearing from retailers that price isn’t everything. There are also issues like lead times that need to be considered.”
According to an LSF report on the feasibility of garment localisation under a government plan, South African retailers want to buy more locally made clothing — potentially up to 80-million additional garments a year by 2030, worth about R7.9bn in manufacturing sales.
To reach this target, Kathrada said, narrowing lead times was just as important as lowering the price — and sometimes even more important.
“The average South African manufacturer is too small. We find that you need a big enough production that you are able to absorb investment and that will lead to scaled economics.
“Demand is not as seasonal as we thought it was. Initially, there was an idea that there was a higher demand for basic knit T-shirts in summer, but that capability can be repurposed to produce garments like sweaters for the winter.
The vast majority of clothes consumed in South Africa are still from China
— Irshaad Kathrada, CEO of the Localisation Support Fund
“We need an industry-wide export council. There is a lot of hard work that goes into opening export markets. Putting all that work on manufacturers is difficult. We want to work with the government to bolster capabilities to export,” Kathrada said.
The Cape Chamber of Commerce and Industry was looking for municipal land around the Cape metro to work with manufacturers to build a factory, he said.
“That is a massive opportunity. We are not saying that all of this can be done immediately. We have to align a partnership that will make it work.
“The vast majority of clothes consumed in South Africa are still from China. There are a few problems. We see the growth of Shein and Temu, and by the end of 2024 they got 3.5% market share — bigger than Zara.”
Brian Brink, executive director of the Textile Federation, said the South African clothing and textile industries could play a significant role in helping reindustrialise the economy.
“To do so, they need to localise and expand their manufacturing capabilities into non-retail sectors such as workwear, uniforms, technical textiles, traditional textiles and protective clothing. These sectors offer significant prospects for job creation, skills development and regional economic development.”
TFG, formerly known as The Foschini Group, invested R52m to build a clothing factory in Caledon, Western Cape, which trains and employs about 900 people.
Sean Kirby, head of TFG manufacturing and prestige clothing, told Business Times during a recent visit to the Caledon factory that the group had long studied global best practice and noted the shift from the traditional long lead-time retail model towards “quick response”, which relied on local or nearby sourcing.
He said a clothing retailer needed a capable local supply chain that was able to act on retail and design information and quickly produce what was needed.
The LSF report said a core structural constraint facing the South African supply base was the lack of scale at the company level, which limited the ability to absorb fixed overheads, justify specialist skills and invest in productivity-enhancing technology.
“While individual firm growth remains important and should be strived for, there may be alternative means to achieve the same outcome through system-level scale, for example, through industry and geographic clustering of manufacturers, even where firms remain independently owned and relatively small.”
It said achieving competitive pricing required scale, yet domestic demand alone presented challenges in using the capacity available, particularly given the seasonal nature of retail demand.
“One demand avenue that provides some relief in this regard is export markets, largely untapped by South African suppliers, which should be treated as a core industrial strategy to unlock localisation rather than a peripheral opportunity,” the report said.
Business Times
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