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South Africa | Manufacturing| Showing growth Left: Bobby Fairlamb, chairman of the Cape Clothing and Textile Cluster. Right: the K-Way factory, where Fairlamb is general manager.
September 2015

Resurgence in local

clothing manufacturing

While local clothing manufacturers still face many challenges, BOBBY FAIRLAMB, chairman of the Cape Clothing and Textile Cluster is optimistic about the future and the gains the industry has made

At least 4 000 new jobs have been created in the South African clothing industry since 2012, says Bobby Fairlamb, chairman of the Cape Clothing and Textile Cluster (CCTC). “I say at least, because the data collected is for the formal sector and does not include small semi-formal start-ups that are unrecorded.”

There had recently been a 1.5% increase in the number of employees in the clothing, textile, footwear and leather (CTFL) sectors the latest figures from the Stats SA Quarterly Employment Survey (QES) for the March 2015 quarter show. This increase is not only year-on-year for the 1st quarter, but also for the 1st quarter 2015 compared to the 4th quarter 2014. According to the survey there are now 88 657 people formally employed in the sector.

Before 2002, it was estimated that 210 000 people were employed in the industry.

Domestic garment manufacturing remained fairly static in Rand terms between 2002-2013, while imports have risen steadily, says Fairlamb. In 2013 retailers sold approximately R13-bn worth of domestic garments, compared to about R35-bn in imported product.

In the 1st quarter of 2015 the Rand value of clothing imports (R5.5-bn) was 11% higher than the corresponding period the previous year, although the volume of imports (139-m units) was only 0.5% higher, according to The Clothing Trade Statistics Report Jan-March 2015, compiled by the Apparel Manufacturers Association of SA (AMASA) (see table below)).

These figures include imports from the neighbouring BLNS countries — Botswana, Lesotho, Namibia and Swaziland. Swaziland and Lesotho are amongst our biggest imported clothing suppliers.

During the period overall average prices increased by 10.5% to R39.52 per unit.

Fairlamb believes that a resurging interest from retailers in locally supplied product is, however, starting to create a shift towards more domestic garment manufacturing. “Unfortunately, trade statistics only come out two years after the fact and we’ll have to wait to see the actual numbers.”

As an example, he mentions that they had created about 200 additional jobs since 2009 at the K-Way factory, where he is general manager. They did this by expanding their factory size and capabilities substantially and through subcontracting to outsourced CMT’s that work almost exclusively for them.

Hard data on factory closings and start-ups are elusive, says Fairlamb, but the job creation figures suggest that factories are expanding and new ones are opening up — “a different scenario from a few years ago when closures were the only news.”

Assistance for manufacturers

Part of this resurgence can be attributed to the increased assistance government has been giving to local clothing, textile and footwear manufacturers over the past few years. Five years ago the old Duty Credit Certificate (DCC), which probably did more harm than good to industry, was starting to be phased out, explains Fairlamb.

Two forms of assistance have since been introduced, which have been vital to local manufacturers recapturing market share:

  • The Production Incentive: Since 2012 this incentive has allowed manufacturers to plough nearly R3-bn back into their companies in terms of new and upgraded equipment, staff training, facilities and systems, he says.
  • Regional Clusters — the CCTC and KZN CTC (Cape and KwaZulu Natal Clothing and Textile Cluster) — were funded 75% of the total costs of introducing lean manufacturing improvement support to the participating manufacturers, “which has driven major productivity and efficiency improvements in our businesses,” says Fairlamb. “Our success so far at K-Way is evidence of the value of this assistance from the DTI and local government.”

Local manufacturing benefits

The weakening of the exchange rate has certainly added to the local retailer’s urgency to look to local supply to manage those rising costs and risks, so there is some benefit for manufacturers in a weakened exchange rate, he says.

But, it is a double-edged sword: since local manufacturers import the majority of their fabrics for conversion into garments, there is an increase in fabric costs as a result. “Overall, however, the results are currently positive for local clothing manufacturers.”

He also believes that retailers are recognising more and more that local manufacturers can compete effectively if given the opportunity to offer a full-service solution.

“For example, at K-way, we were for a long time only asked to make basic fleeces and other simple garments. At the time we could not make any margin and struggled to compete with mass production from the East.

How clusters assist manufacturers

Both the Cape and KwaZulu Natal Clothing and Textile Clusters have various assistance programmes for members, developed with the help of B&M Analysts, who work closely with the individual factories.

The World Class Manufacturing Programme aims to assist with upgrading of manufacturing processes and skills development — also in SMEs — through management training, peer review and lean manufacturing best practice study tours, and benchmarking firms to ensure that they maintain their competitive level by reporting on their performance of over 30 key measures in areas varying from financial performance, cost control, HR development, value chain, quality, innovation, etc.

With lean manufacturing factories are encouraged to implement the 5S workplace organisation method based on five Japanese words that can roughly be translated into sort, straighten, shine, standardise, and sustain — for example, by improving demarcation of work areas, providing equipment next to machines to promote cleanliness, reducing motion and inventory in the sew line, etc. These methods are all aimed at improving efficiency and competitiveness.

The Clothing and Textiles Competitiveness Improvement Programme (CTCIP), partly funded by the Industrial Development Corporation, is a 4-year support programme offering training and mentoring programmes to participating firms who want to enhance their competitive capabilities.

The Value Chain Alignment Programme aims to assist manufacturers as well as clothing retailers to work together to improve Quick Response (QR) in the supply chain through academic research, pilot programmes and retail study tours to enable the clusters to refine practical tools and techniques for QR and provide a training programme for retailers and manufacturers.

Further Assistance: The Cape cluster assists members to gain access to government incentives and grants, including the CTCIP, MIP, a Working Capital Facility, and the Production Incentive (PI). In KwaZulu Natal, CMTs in the Durban area can join the CMT SPV /Project Management to enjoy some of the skills training offered to bigger manufacturers. See more at: www.capeclothingcluster.org.za and www.kznctc.org.za.

“With support from retail, the DTI and Western Cape government, we upgraded our equipment, adopted lean manufacturing, trained our staff and improved our design capabilities. We now have a state-of-the-art factory, making high value technical products, in small runs and short lead times. Now the East has no chance of competing with us!”

Competing with the East

Cheap imports from the Asian continent remains a challenge, but Fairlamb believes that the local industry can compete, provided that they keep on improving — and keep in mind that the East is also constantly improving.

“We are differentiating our service in a way that the East will struggle to compete with us on certain garments,” says Fairlamb. “We don’t really want the cheap, easy to make stuff, as that is only about price. We want to contribute on design, shorten lead times, enhance quality and ensure that our customer is always in stock of in-demand product.”

He nevertheless believes that import duties on clothing remains necessary in order to allow local manufacturers to compete fairly. “Fundamentally, South Africa needs to revitalise its manufacturing sector if the economy is going to grow and create jobs. But, we also need decent work as we don’t want to become a nation of exploited workers, working in unsafe environments, as we so often see overseas.”

It is therefore necessary to protect the manufacturing industries, as any other country does globally, he maintains, but the import quotas introduced on Chinese products as a temporary measure some years ago were scrapped because they had no visible positive impact.

“Significantly, we are still having to pay high 22% duty on fabric we import, even though the fabric we use is not, and cannot be, manufactured, in South Africa,” says Fairlamb.

“This also negates duties charged for finished products and we are struggling with the DTI to come up with a plan to solve this problem.”

Various role players in the clothing industry — AMASA, Texfed, the clusters, unions and retailers — have put forward a solid duty rebate mechanism, giving an import rebate to manufacturers who use local fabrics, that will start to sort out the fabric supply issue, says Fairlamb. “In this regard we really need the DTI to step up and adopt the proposal.”

Exports negligible

While small pockets of industry benefitted from the African Growth and Opportunity Act (AGOA), which gives African manufacturers preferential access to US markets, South Africa’s exports to America are too negligible to have an impact and the agreement has done little for the clothing industry itself, believes Fairlamb.

Lesotho, Swaziland and Mauritius did benefit due to the single conversion rule (they can use fabric and yarn sourced from abroad and still qualify for local origin status), but in South Africa the two-stage conversion rule applies, requiring that garments have to be made from local fabric in order to qualify as Made in South Africa.

“One could argue that keeping people gainfully employed in these land-locked states reduced the influx of work seekers to South Africa, so maybe there was some indirect benefit that way,” he adds.


South Africa | Manufacturing| Showing growth


Challenges faced

Therefore, while the clothing manufacturing industry faces several challenges, Fairlamb believes none of them are insurmountable.

  • The import duties on fabric is the biggest challenged faced by local clothing manufacturing industry, but this can be addressed by the implementation of the duty rebate mechanism proposed by the industry.
  • An untrained labour force is frustrating as the institutions that used to supply training for machinists have diminshed to a large extent. “Our response has been to do the training in-house,” says Fairlamb. “The bigger frustration is the lack of a skilled workforce — mechanics, electrical technicians, tool makers, etc. The educational environment is just not producing adequate numbers of skilled people in these fields.”
  • Cost of labour is less of an issue than the productivity of labour. “K-Way has made massive strides and we are very proud of how productive our workforce has become. If we are productive and quick, with limted waste in our production process, then the cost of labour per unit produced can be reduced. That’s the ideal — to get the combination of decent work, while still being competitive.”
  • Unions regulating the industry is not a healthy situation in any country, but, the reality is that unions are our partners in manufacturing and we both want the same thing: decent work and more employment, he says. I believe the methods of achieving the above are aligning as the unions better understand the need for productivity and competitiveness, and business better understand how to engage and communicate with the unions and workforce.
  • Labour legislation can create impediments to factories who want to introduce flexible working hours and adapt to seasonal fluctuations. “The current process of having to negotiate specific terms when a flex is needed, even if it means workers earn more in the long run, is difficult,” says Fairlamb.

Other challenges clothing manufacturers are facing, are:
  • Counterfeiters remain a challenge for the brands, and will be there as long as the brands can command a premium price. “As with under-invoicing of product, which is probably a bigger challenge for our local manufacturers, this is something only customers and SARS can resolve.”
  • Cost of raw materials is probably a lesser issue than the availability of domestically produced raw materials. “I am confident that if we could get more local supply, we could also work on better pricing that would be in everyone’s interests. The availability of fabrics and trims is probably the biggest current challenge and has to be a big focus area for the DTI,” says Fairlamb.
  • Lack of trust from retailers in local manufacturers is a challenge for many, “but given where we have come from, a degree of risk management from all parties is to be expected. There is increasing recognition that we need each other and no one party can really succeed and thrive without the other. Trust can onloy be earned, so really the challenge for industry is to respond to the opportunities becoming available and delight our customers.”

Further ways in which the local clothing manufacturing industry can be aided is for the Production Incentive to be extended in a more focussed form for the next five years and proper support for the CCTC and KZNCT and vertical clusters, suggests Fairlamb. “This is the responsibility of national government and industry has clearly articulated this need.”

From the retail industry, manufacturers need the opportunity to engage meaningfully, and for retail to recognise that there is a massive opportunity in quick response supply right on their doorstep, he says. “As manufacturers we have to be more agile and flexible, use the PI wisely to invest in our core competencies and engage in clusters to increase learning and knowledge sharing. We can only succeed if we work together,” he concludes.




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