China's new five-year plan for clothing industry

Domestic market expansion, new materials development and the transfer of production bases are all priorities under the 12th five-year plan (2011 to 2015) for the domestic textile industry, released by mainland China's ministry of industry and information technology earlier this month.

According to its details, a potentially lucrative market for clothing and textiles lies in China's vast rural areas, where per capita spending on apparel only accounts for 18% of that in the country's towns and cities.

"As the progress of urbanisation continues to accelerate, there will be more spending on clothing," the plan says.

The Chinese government has been shifting its economic policies to take account of urbanisation since the 1990s. Indeed, the National Bureau of Statistics of China announced on 17 January that the country's urban population had reached 690.7m; accounting for 51% of the total population of 1.3bn. This marked the first time the urban population had surpassed that of China's rural areas.

And with continuing urbanisation in mind, the government's new five-year plan requires Chinese companies to develop new materials and build strong brands to attract more Chinese consumers.

According to the plan, the goal is for China is to have between five and 10 internationally recognised brands and 100 nationally renowned brands by 2015. Meanwhile, at least 1% of annual sales should be invested in research and development - a step up from the current ratio of less than 0.5%, according to the plan.

Currently, the Chinese clothing market is dominated by foreign brands such as Uniqlo, H&M and Zara, but some Chinese domestic brands are now starting to catch up. Among them are Shanghai-based urban casual wear brands MetersBonwe and Mark Fairwhale, which are working with foreign designers to compete with their international rivals.

Production plans
The textiles production element of the new plan focuses on chemical fibres, whose output is expected to account for 70% of all textile materials by 2015. The plan notes heavy investment is underway into the China-based manufacture of high-tech fibres (including carbon fibre), polyphenylene sulfide fibre and p-phenylene terephtalamides fibre (PPTA).

In 2011, for example, Shandong province-based aramid fibre manufacturer Yantai Spandex Co Ltd started a massive PPTA production project, aiming to reach an annual capacity of 1,000 tonnes of PPTA fibre - which China has long been buying from foreign companies such as the US-based DuPont.

The Chinese government's plan is also urging companies to move plants - 85% of which are in the economically advanced east coast areas - to the developing more rural regions to the west. For example, it suggests that Xinjiang province (a major cotton-producing region) should build a production base for manufacturing cotton yarn and clothing.

"The east coastal cities should act as a talent pool and innovative centre, while the rest of China is offering low cost resources, including labour, energy and industrial infrastructure," said the plan.

Export growth
Of course, exports will also continue to be important to the Chinese textile industry, as the global economy slowly recovers its continuing malaise.

While the US, Europe and Japan will remain the target markets for Chinese manufacturers, "the consumption ability in emerging markets will continue to grow," the plan says. It predicts the export value of all textile products will reach US$300m by the end of 2015, with an annual growth of 7.5% from 2011.

In fact, more and more Chinese manufacturers who used to serve foreign clients are now only looking for opportunities in China, such as Shanghai-based clothing manufacturer Sunzone Industrial Co Ltd.

"We started to work with Chinese clients after the financial crisis and this year, we will continue to explore opportunities in the domestic market," sales manager Leon Niu told just-style.

Meanwhile, though, the company has no plan to close the export business. "We have many clients in Germany and France, and we will be happy to get more orders from them if the price is good," he added.

 Ref:  Author: Wang Fangqing | 31 January 2012, JustStyle

New economic zones for South Africa?

The Treasury has made a complete about-turn in its opposition to tax incentives to promote industrial development.

After a tough battle with the Department of Trade and Industry over this form of funding, the Treasury is now fully supportive of a plan to provide incentives to attract investment to proposed special economic zones.

The Treasury has agreed that a special economic zones fund will be established to finance infrastructure and offer dedicated, sector-specific incentives to enterprises there. All nine provinces are expected to have such zones. Department of Trade and Industry director-general Lionel October said yesterday the size of the multibillion-rand fund still had to be negotiated.

"We still might have to fight a battle (with the Treasury) for significant resources," he told Parliament¶s trade and industry portfolio committee during a briefing on the draft Special Economic Zones Bill. Upfront funding would be essential for the long-term planning of such zones.

Nevertheless, Mr October said, things were now much more in the department¶s favour. After a "long

debate" there was "absolute consensus" between the Treasury and trade and industry on the need

for the zones as a tool for long-term industrial development.

This consensus would provide a strong foundation for the zones which, unlike industrial development

zones, will neither be tied to exports nor located near a port or international airport.

"In a sense the industrial policy debate has been won now," Mr October said. The government was

committed to acting "boldly" now to promote economic growth and industrial development. 

This approach was also evident in Finance Minister Pravin Gordhan¶s indication in the medium-term budget policy statement in October that about R10bn would be spent on investment promotion over

the next three years. He recently extended section 12i of the Income Tax Act to include industrial

development zones.

Mr October said the shift in the government¶s view towards incentives was in line with a worldwide
trend after the global recession.


The downturn had revealed that the western approach of not giving special incentives to the private
sector had failed and that the Asian model of targeted financial support had been successful.


During the crisis many countries lost significant chunks of their manufacturing capacity because they
did not give companies any support.


Mr October said he believed the Treasury is confidence in the use of incentives had also been strengthened by the success of schemes in SA"s clothing and automotive industries.


Opposition MPs argued for aggressive tax incentive packages and the relaxation of labour laws in
the economic zones to make them internationally competitive, but Mr October stressed that it was
not sustainable for them to rely on cheap labour. The labour movement need have no fear of these zones.


Ref: Business Day, 26 Jan 2012

Minister probed into clothing workers' missing money resigns

South Africa
Godongwana denies quitting over R100m pension scandal

Enoch Godongwana insists his resignation as deputy minister of economic development is due to his ANC commitments in the year ahead, and has nothing to do with the probe into the misappropriation of R100-million of clothing workers' pension money.

The R100-million went up in smoke after it was sunk into Canyon Springs, a company -- currently the subject of a liquidation inquiry -- half-owned by a family trust belonging to Godongwana, and his wife Thandiwe.

The money belonged to more than 20 000 members of the South African Clothing and Textile Workers' Union (Sactwu), who earn on average R700 a week and contribute 6.5% of their salary to the provident funds. 

"People can have their own opinions about my resignation," Godongwana told The Times newspaper, in a report published on Monday. "In my discussion with the ANC leadership and the presidency, I did not talk about my business interests ... It was out of my own assessment that I decided to resign." 

He told the newspaper that he would be tied up with "party work this year", but declined to elaborate on what this would involve.

Salary questions

In October last year, Godongwana told a closed liquidation inquiry in Cape Town that he had expected to earn an annual salary of R1.5-million when he chaired Canyon Springs, but had been paid only when the company had money.

The company's books reveal that he received only R600 000 from Canyon Springs but, according to sources who attended the hearing, he said the company did not keep proper records. 

From the records Canyon Springs did keep, it was apparently shown that Godongwana's salary was drawn from the clothing workers' pension money.

When it is finally established what he earned, Godongwana -- who says the loan had been arranged before he and his wife came on board -- could be forced to repay the money. 

Godongwana's wife Thandiwe, a director of Canyon Springs, is accused of borrowing as much as R93-million from the company which manages Sactwu's provident funds, Trilinear Capital.

Arrests made

The liquidation inquiry has already led to the arrest in December of union consultant Richard Kawie and Trilinear asset manager director, Sam Buthelezi, who allegedly used money embezzled from the loan deal to finance lavish lifestyles. They could not raise the R500 000 bail imposed and spent Chrstmas in jail, although Kawie last week was released on bail after putting up properties in Goodwood, Cape Town and Noordhoek as guarantees.

Canyon Springs's financial records show that vast sums of money were paid out to Kawie, as well as to the minister of economic development, Ebrahim Patel, who was general secretary of Sactwu at the time the investments were made. 

Patel, however, has told the M&G he knows nothing about the movements of the provident funds, which were managed by trustees and were not his responsibility.

Spokesperson Mac Maharaj said Godongwana had tendered his resignation in December, but President Zuma had asked him to stay on until the new year.

"The president has accepted the resignation and thanked the deputy minister for his dedicated service and duty to his portfolio and to the National Executive in general", he said.

Godongwana is a member of the ANC's Economic Transformation Committee. Godongwana is widely regarded in economics, with a Master of Science degree in financial economics from the University of London.

He is also a former deputy minister of public enterprises and continues to be a member of the ruling party's Economic Transformation Committee.

Ref: Source: Mail & Guardian Online, 16 Jan, 2012

Counterfeit clothing found in Durban

South Africa:
Durban police have seized falsely branded clothing worth R60 million at Durban harbour, bringing the value of counterfeit goods found at the port last year to about R10 billion. The harbour’s operational response services unit swooped last week on a container packed with fake Nike, Adidas, Puma, Daniel Hechter, Levis and Uzzi shoes and T-shirts.

Police spokesman Colonel Vincent Mdunge said the 40-foot container arrived from China on December 16. Its contents were destined for a shop in the Springfield Park area. He said the shipment had been monitored by the national crime intelligence unit for several weeks.

Members of the police anti-smuggling unit and SA Revenue Service officials examined the goods, which were found to be fake. Once the investigation was finalised, the goods would be destroyed, and arrests were imminent, Mdunge said.

Earlier last year, counterfeit goods worth more than R100m were intercepted at the harbour by police during Operation Duty Calls, and goods worth a further R15 million were seized in July. Police attribute the R10 billion total in seized goods last year to regular, even more sizeable, finds of fake goods – two or three a month.

“Our operations ensure that the number of counterfeit goods that infiltrate the market is minimal,” said Mdunge. “Those that do slip through the system are often sold on the black market. But several reputable stores are also being investigated for selling these illegal goods. Unfortunately, the customer only finds out a few weeks or months down the line when the garment shows wear and tear.

“By then it is too late. These garments do not carry any guarantees. Also, in some instances the customer ends up paying the same price for the fake item as the genuine one.” He said counterfeit goods harmed the economy, with criminals evading Sars and other costs associated with importing goods.

Brigadier Anthony Gopaul, the section head of the harbour’s operational response services unit, said last week’s bust was part of Operation Nortje, launched in memory of Warrant Officer Johan Nortje, who was shot dead outside his home. He was an officer in the police’s protection security service, and was responsible for investigating smuggling of goods and drugs through Durban harbour. A hit was allegedly ordered on his life after he made a R100m counterfeit bust at the harbour.

Members linked to the unit said their job was extremely dangerous as the counterfeit market was controlled by a mafia-like empire. Nationally, police had had several successes against counterfeit goods and apparel in the past three months at various ports of entry, said police spokesman, Colonel Vish Naidoo.

“From October to date, the South African Police Service and our counterparts from other government departments have prevented a variety of counterfeit goods valued at over R2.5bn from entering South Africa. At least five suspects (have been arrested) in connection with some of these goods.” He said the grabs were made at various ports of entry – land, sea and air.

Among the goods seized were: perfume valued at R1 052 168 245, cigarettes (R8 052 478), Lion matches (R2 830 000), branded clothing (R1 488 554 804), toys and clothes (R300 000), CDs and DVDs (R156 500), toothbrushes (R7 308 000), wallets and bag (R264 000), shoes (R2 981 600), cellphones (R2 550 000), accessories (R2 243 450), Doom coils (R40 960), light bulbs (R279 650), bags (R200 000), electronics (R129 900) and rugby jerseys (R700 000).

Naidoo said operations at ports of entry formed part of festive season operations focused on the proliferation of counterfeit goods. During this period the demand for counterfeit goods was high, he said.

Ref: IOL News, 2 Jan 2012

SA manufacturing sector can create jobs

South Africa
Big jobs potential in reviving SA manufacturing, report argues

Reversing the secular decline in the manufacturing sector’s relative contribution to South Africa’s gross domestic product (GDP) would offer material employment, growth and tax revenue benefits, a new report commissioned by an industry lobby group asserts.


But it also argues that any large-scale reindustrialisation of Africa’s largest economy would have to be premised on a “meaningful accord” between business, government and labour and be supported by macroeconomic and foreign exchange policies that improve conditions for industrial competitiveness. A revival will also depend heavily on initiatives and incentives to deal with the country’s current infrastructure and skills backlogs, as well as to moderate the rate at which administered prices are being allowed to increase.

The sector’s relative GDP contribution peaked at nearly 22% in 1981, but it has been in steady retreat since that date and currently only contributes about 14% to GDP. In addition, employment in the sector has fallen sharply to around 1.73-million.

Entitled ‘Assessing the Manufacturing Sector and its Multiplier Effects on the South African Economy’, the report has been prepared for the Manufacturing Circle – a multisector body currently comprising 48 large and small manufacturing enterprises operating in areas as diverse as food and beverages, to pharmaceuticals and capital equipment. Economists from Pan-African Investment & Research Services (PAIRS), which also produce the Manufacturing Circle’s quarterly ‘Manufacturing Bulletin’, authored the document.

The report comes at a time when South Africa’s policymakers are also emphasising the importance of the manufacturing sector as part of plans to improve the resilience of the South Africa economy to economic cycles and to creating and sustaining growth and employment. This policy emphasis has been highlighting in the New Growth Path (NGP), which views manufacturing’s recovery as central to the overall aim of facilitating the creation of five-million new jobs by 2020. Reindustrialisaiton is also the core objective of the second industrial policy action plan, or Ipap2.

The thrust has received further practical support from the recent changes introduced to the regulations associated with the Preferential Procurement Policy Framework Act, of the PPPFA, which empowers the Department of Trade and Industry (DTI) to designate sectors and products that government departments and State-owned companies should procure from local producers.

The initial DTI designations, which became effective on December 7, cover power pylons, railways rolling stock, buses, canned vegetables, clothing, textiles, footwear and leather products and set-top boxes. Further designations will be made in 2012.

The reindustrialisation ambition implied by the PPPFA changes, together with the NGP and Ipap2, has also been integrated into various social compacts that have been concluded between government, business and labour over the past few months, including a ‘Local Procurement Accord’, which sets an aspirational target for government and large firms to buy 75% of the goods and services they use from local industry.

But PAIRS CEO Dr Iraj Abedian argues that these interventions need to be coupled with a larger macroeconomic package that is explicitly designed to bolster the role of the manufacturing sector in the economy. Such a package should give particular attention to the debilitating effects of surging administered prices, as well as the volatility and overvaluation of the rand.

A peer group assessment of South Africa’s administered-price trends against those in the other ‘Brics’ economies of Brazil, Russia, India and China, shows that local manufacturing competitiveness has been seriously depleted by the country’s relatively high administered price increases. The rapid electricity price increases are of particular concern.

“To put it into perspective, over the ten-yer period between 2000 and 2010, the growth in administered prices (mainly electricity) amongst all of South Africa’s [Brics] peer emerging economies has fallen. In contrast, over the same period South Africa has recorded a massive increase . . . of over 170%,” PAIRS says in its report.

The relative volatility and strength of the rand is also unfavourable to creating conditions supportive of manufacturing competitiveness and PAIRS, thus, calls for a review of South Africa’s foreign exchange policies.

The report emphasises the positive employment, growth, tax and export-earnings multipliers of manufacturing and includes a model of the relative value of yearly manufacturing growth of 10%, relative to the current anticipated level of 3.4%.

Should a growth rate of 10% be sustained over ten years, the cumulative output would be R537-billion, in contrast to R184-billion at 3.4%. The employment gain would be 454 000 jobs, as against 158 000, investment would be R339-billion (R116-billion) and the real wage increase would be R177-billion relative to the R61-billion that could be achieved at a 3.4% rate of expansion.

The report argues that, besides moving to foster a favourable exchange rate policy, South Africa should also consider differential electricity pricing for key sectors, extending government incentives to bolster key industry sectors, accelerating beneficiation plans, encouraging skills development and moves to fast-track efforts to deal with the infrastructural backlogs.

“We need to, as a nation, deal with what it takes to reindustrialize. It is not one policy – it’s a package of policies,” Abedian asserts.

Reference:  Creamer Media (Pty) Ltd
9 December 2011