Industrial Policy Action Plan
Written by The Department of Trade and Industries
Monday, 22 February 2010
The clothing, textiles, footwear and leather industries have been in distress for some time. This is due to a range of factors including: Rand strength and volatility; under-invoicing and illegal imports; Competitiveness challenges; skills deficits and limited economies of scale in parts of textiles.
These industries are labour intensive and are often used by developing countries as a platform for sustained economic growth and job creation. In SA the employment trend has been downward across the sector. The trade balance increased negatively from 2000 to 2008 in all the industries across the sector, with the clothing industry being the worst affected.
Key opportunities
The key opportunity is to recapture domestic market share through improving competitiveness through a range of interventions including a focus on product, process and delivery efficiencies and harnessing proximity to local retailers. Ongoing clampdowns on under-invoicing and other illegal activity will help to level the playing field. The industry needs to seize the opportunity of a coherent and comprehensive set of support instruments in order to fundamentally transform its competitiveness. Going forward, the commercialisation of new technologies should give the textile pipeline an added advantage in the global arena. This will include the beneficiation of new fibres now being grown in South Africa. Traditionally only cotton and wool were grown for export in semi-processed form.
Constraints
The constraints facing the industry are well-documented with the set of support measures aiming to tackle most key constraints. These include:
• Currency strength and volatility.
• The ongoing surge of global imports which has been underway since the expiry of the Multi-fibre Agreement.
• Illegal imports and fraudulent under-invoicing.
• Inadequate policing of 'country of origin' labelling legislation.
• Lack of skilled personnel to take over from ageing industrial executives and senior management, who generally did not have succession plans.
• A historical failure to develop and implement skills development plans, particularly for critical areas of operations and in production,
• Outdated capital equipment and technology resulting from inadequate capital investment and technology upgrading.
• An historical deficit with respect to innovation, research and development.
Key Action Programmes (KAPs)
Clothing and Textiles Production Incentive (PI) and Competitiveness Programme (CTCP)
Nature of the intervention: The programme will enable the sector to compete sustainably and effectively against international competitors in both the domestic and the export markets and the company level competitiveness will be improved substantially.
Economic rationale: The sector lags behind their international competitors in terms of conversion efficiencies and other key indicators of world class manufacturing principles of which quality, cost and delivery are the main drivers.
Outcomes: Stability and competitiveness of the sector. The CTCP will be extended to the leather and leather goods and footwear industries. The Production Incentive will be finalised and implemented.
Key milestones
• 2010/11 Q1 onwards: Rollout of PI and CTCP will be rolled out by IDC.
• 2011/12 Q2: The Leather and Footwear programme will be rolled out by IDC.
Lead agency: IDC
Supporting department/agencies: DTI
Illegal import programme
Nature of the intervention: The programme is designed to clampdown on illegal imports which are flooding the country. The illegal imports are either brought in using documents which under-invoice the consignments or using wrong tariffs. The programme will also scale up the policing of country of origin labelling.
Economic rationale: The cheap imports landing in the country are the main cause of the closure of most of the clothing and textiles companies in the country. The elimination of illegal imports will help level the field of play for the local manufacturers.
Outcomes: Reduction and the elimination of illegal imports over the next three years.
Key milestones
• 2010/11 – 2012/13 Q2: Ongoing and targeted campaigns against under-invoicing and other illegal activities in the sector.
Lead department/agency: NT/SARS
Supporting departments/agencies: DTI and EDD / ITAC
Skills development
Nature of the intervention: The programme is involved with upgrading of skills in the sector. The programme will facilitate the finalisation of the funding arrangements with the National Skills Fund. The skills strategy will be rolled out through the Textiles and Clothing Centre of Excellence established at the CSIR in Port Elizabeth. This will speed up the implementation of programmes instead of establishing another implementing
organisation.
Economic rationale: A lack of succession plans in the sector has resulted in very few young graduates joining the industry. Most of the captains of the industry are beyond retirement age but there are no skilled personnel to take over. Most of the training which has taken place in the sector has been at the operator level.
Outcomes: The programme outcomes will include the graduation of technicians, technologists, engineers, managers and scientists for the textiles, clothing, leather and footwear industries.
Key milestones
• 2010/11 Q1 onwards: Rollout of skills development programme by NSF and Clothing, Textiles, Leather and Footwear (CTFL) SETA
• 2010/11 Q2: Inputs into annual skills plan by DTI.
• 2010/11 Q2: A revised curriculum for the garment manufacturing industry will be developed in collaboration with the DHE&T.
Lead department: NSF, CTFL SETA
Supporting departments / agencies: DOHE&T DST and / Clothing, Textiles, Leather and Footwear SETA.
Audit of textiles capabilities
Nature of the intervention: The programme will cover the audit of the capacity and the technology currently in the textile industry. Through the intelligence gathered the programme will then explore the possibility of consolidating the textile industry where companies will focus in different products thereby assisting them into the mindset which looks at specialisation instead of the shot-gun approach current being followed by some
companies.
Economic rationale: The textiles industry will build a culture of specialisation which will develop them into experts in their fields. This will make them more sustainable and they will diversify into products which the garment manufacturers and retailers are in need of and are currently being imported.
Outcomes: The industry will be transformed into a 21st century textile industry and become a global trend setter instead of being a follower as it is at present.
Key milestones
• 2010/11 Q1: Commission textiles capacity audit in conjunction with industry stakeholders
• 2010/11 Q2: Review findings and make recommendations on industry consolidation
• 2010/11 Q3: ITAC to initiative review of textile tariff structure in the light of these findings
Lead department/agency: DTI / IDC
Supporting departments / agencies: Competition Commission
Innovation and technology
Nature of the intervention: Distinct technologies will be identified and where commercialisation is possible this will be undertaken with relevant partners. The technologies to be pursued will include the establishment of the South African garment sizing data base utilising 3-D body scanner technology, computer-aided design using 3-D scanner data, processing of new natural fibres like flax, wild silk, cashmere, and Kenaf. New technologies like nonwoven products and fibre reinforced composites will be commercialised in South Africa. Technologies in garment designing and servicing the fashion industries will be pursued as well.
Economic rationale: South Africa cannot compete globally in commodity textiles with countries like Bangladesh, India and China and has to focus on niche markets and those sectors of the textile pipeline which developing economies are better positioned to compete due to cheap labour and cheap raw materials.
Outcomes: The main outcome of the programme will be a transformed textiles pipeline industry which will be in a position to compete globally with home-grown garment technologies.
Key milestones
• 2010/11: DTI to establish the South African sizing database.
• 2010/11 – 2013/14: DTI to oversee the commercialisation of the fibres like flax, hemp, wild silk and cashmere.
• 2010/11 – 2013/14: DTI to oversee the migration of part of the industry to technical and smart textiles.
Lead department: DTI
Supporting departments / agencies: DST / CSIR and IDC.
B-BBEE
Nature of the intervention: Explore leveraging B-BBEE obligations at retail level to promote domestic manufacturing and sustainable black ownership. The promotion of succession plans which favour the promotion of black management will also be encouraged.
Economic rationale: The programme will go a long way to transforming the informal sector into a formal sector, rendering the employment statistics more robust. The sector has not transformed 15 years into the new dispensation.
Outcomes: More local production on the retailers' shelves and more people of colour in management positions in the sector.
Key milestones
• 2010/11: DTI to secure buy-in from industry.
Lead department: DTI
Supporting departments / agencies: EDD / IDC and Industry Associations.
Economic impact
It is anticipated that the tide of closure of companies and job losses will be stemmed, as the industry will be transformed and become sustainable. New sustainable creation of decent jobs at the rate of 2,000 per annum from 2010 will become possible. These jobs will initially come from the formalisation of the informal sector and the enterprises becoming Bargaining Council compliant. As the sector becomes more competitive, companies will be able to satisfy local retailers' needs more adequately, who in turn will reduce imports, improving the trade balance and contributing positively to GDP.
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