South Africa’s clothing and textile manufacturing industry has suffered a serious downturn over the last 10 to 15 years, with many companies driven out of business. This has been partly due to challenging manufacturing conditions and costs, with the local industry unable to compete with the influx of cheaper clothing from China and other garment-producing countries, notably India and Bangladesh. This left local clothing manufacturers in a vulnerable position, with retailers importing cheaper, Chinese-made merchandise and inevitably leading to a degree of tension in the industry.
This tension, however, has not deterred Chinese clothing exporters from entering the market – at least judging by the number of Chinese companies exhibiting at Apparel, Textile and Footwear (ATF) 2014.
According to manufacturers and buyers at the event, clear opportunities remain for those Chinese clothing suppliers targetting South Africa. This is largely down to the fact that the domestic textile industry is burdened with high labour costs, low productivity and faces crippling tariffs of 22% on imported fabrics. The South African industry has also failed to keep pace with the technological developments seen in its Chinese counterparts, resulting in comparatively poor efficiency.
These issues have seriously affected South Africa’s ability to dominate the domestic clothing market, while Chinese firms have been able to exploit many of these inherent industry weaknesses.
Chinese products are also seen as a good choice for consumers, especially South Africa’s large number of low-income earners. According to the Cape Clothing Association, a local industry association, China’s share of clothing imports in South Africa was 67% by value and 81% by volume in 2013. Putting this into perspective, the next largest source of imported clothing in South Africa was Mauritius, whose share of clothing goods was just 9% by value. (The tables below show the top 10 sources and destination clothing markets for South Africa.)
Commenting on the advantage that Chinese clothing manufacturers enjoy in South Africa, William Scalco, a Partner in LTE, the organiser of the annual ATF expo, said: “The Chinese clothing manufacturing sector is dominant in South Africa. There are only a handful of major domestic manufacturers left in South Africa, leaving local retailers with choice other than to source from abroad, especially from China.”
In 2014, there were signs, however, that the South African clothing industry was starting to stabilise. Local manufacturing had been picking up again, partly because local suppliers can achieve quicker turnaround times in the supply chain – a major marketing advantage over imported goods.
Ajit Valjee, one of the founders of South Africa’s JMV Textiles, a leading producer of yarns, fabrics and finished garments, said: “We can beat Asian suppliers on speed to market.” This is reference to the growing number of South African retailers who are now looking to buy from regional African manufacturers so that they can achieve shorter lead times.
There is also growing consumer support in South Africa for the concept that “local is best”.
Glen Mitchell, a Senior Buyer for clothing, footwear and luggage for South Africa’s Shoprite Checkers, one of Africa’s largest retail groups, agrees that there is now a movement away from imported clothing – at least to an extent. He said: “While, it is true that the local clothing market is bouncing back, it does go in cycles. These are largely determined by the rand’s volatility. When the rand is weak, as it is now, it favours local merchandise, which can then compete on price. More generally, though, we are genuinely seeing a renewed appetite for locally-produced goods.”
Driven by the challenges faced by South African clothing manufacturers, South Africa’s Department of Trade and Industry embarked on an extensive incentive programme in 2009. This was designed to make the domestic textile and clothing industry more competitive. It is only now beginning to bear fruit.
According to exhibitors at ATF 2014, South African clothing retailers are now sourcing more merchandise from the southern African region. This is largely because they are looking for a quicker route to market and the freedom to order smaller quantities of merchandise, which saves on inventory costs and offers greater flexibility.
The upmarket high-street retail brand Foschini, for instance, started to produce its own merchandise locally in order to provide it with it greater integration within the value chain, one of the biggest stores in South Africa, is also sourcing more clothing locally for similar reasons, proving there is definitely a “buy-local” trend emerging, at least according to Scalco.
This then is South Africa’s clothing conundrum – whether to source locally made merchandise, which has a faster route to market and offer retailers agility, or to import Chinese-made garments, which are popular and more competitively-priced.
Yusuf Mehtar, a Director of Maytex, a South African soft goods company, who has been involved in the South African textile industry for 30 years, thinks the local industry still has a long way to go, though, before it recovers. He blames this largely on the high tariffs levied on imported cotton, the volatile rand, the inefficient local labour market and illegal traders. He said “These are the factors that killed the fashion industry in South Africa and drove consumers to buy Chinese goods.”
Mehtar believes, though, that that South African clothing industry will eventually bounce back, although he remain uncertain as to how long this process will take. He said: “The best model may be to manufacture locally again because consumers want instant gratification and ‘fast fashion’.”
Indeed, it seems that more and more South African retailers are adopting fast fashion as a business mode. Low inventory levels and fast turnaround of stock now necessitate a supply chain that can react quickly to changing trends. This may well mean that South African-made clothing may slowly start to become more attractive to local retailers.
In terms of the impact of fast fashion, Mitchell was more reserved, however. He said: “It is a model that favours locally-sourced stock. However, you have to remember that the priority is that the goods have got to sell first – before they sell fast.”
Either way, the impact of a re-emergence of South African-made clothing on Chinese suppliers is likely to be minimal. This is largely because the volume end of the retail market in South Africa is still dominated by Chinese and other Asian suppliers. This looks set to inevitably continue. Mitchell said: “The Chinese clothing industry is definitely going to continue to play a significant role in South Africa.
Valjee agrees, pointing out that clothing is a market where consumers are notoriously fickle. He said: “Consumers don’t have much loyalty. They are motivated more by a competitive retail selling price than by the origin of the product.”
There were a number of local regional suppliers based outside South Africa exhibiting at ATF 2014. In fact, a number of textile companies from Lesotho, Madagascar and Mauritius are increasingly eyeing neighbouring South Africa’s retail market, while taking advantage of their own lower domestic labour costs to keep production expenditure down. It has even been suggested that, after Asia, the next threat to South Africa’s industry likely to be growing competition from its neighbours.
Regardless of where products are sourced, though, South Africa is not a great place for retailers at present. The retail industry is likely to remain depressed, warn economists, as consumers struggle with inflation. This has stubbornly persisted at around 6% for the past year, although there are signs it is now beginning to ease slightly. This, though, is putting pressure on South Africans’ pocketbooks and means there is less disposable income available for non-essential items, such as fashionable clothing.
High levels of bad consumer debt have also led South African retailers to tighten their credit facilities, inevitably to the detriment of sales. Mr Price, a low-end clothing retail chain, has capitalised on its cash-only policy with its customers – a strategy that saw the company’s first-half-year profits in 2014 rise by 23%. However, several retailers, including the biggest listed clothing retailer in South Africa, Truworths, had to write off large sums of bad consumer debt in 2014.
South African clothing retailers are now forecasting continued market weakness, with annual growth in clothing and footwear sales in the run-up to Christmas 2014 down by about 2.5% on the previous year.
This subdued climate has meant that several South African retailers have been forced to look for growth outside South Africa’s borders, notably in Nigeria and Ghana. For example, Edcon, one of the country’s largest clothing retail groups, now has 188 stores outside South Africa.
Competitive pricing and innovation
Commenting on the consumer appeal of Chinese clothing, Mitchell said: “The main value proposition of Chinese-made clothing is the quality of its finishing. In my view, it outstrips locally-made products. Their innovation is excellent too. Our customers get a better overall value deal from our Asian-sourced clothing.”
Mitchell described as “absolute nonsense” the notion that Chinese clothing should be synonymous with poor quality. He said: “Affordability shouldn’t be confused with low quality.” Chinese manufacturing technology and the highly-efficient production environment of many Chinese companies means that cost efficiencies can now be passed on to the end-customer.
One Ningbo-based shirt manufacturer, BingBing, for example, has a factory with a capacity of 100,000 shirts per month. Referring to the crucial price-quality relationship, Jack Lee, BingBing‘s sales manager, said he is confident that the company can target the South African medium- to high-end market with its shirts. These are items it now produces at price points that compete well with locally-made products.
In terms of consumer trends in the clothing market, Mitchell said: “Customers are always looking for freshness and innovation when it comes to clothing. They are also very discerning, very tough, buyers. The most influential trend at the moment is just how much value their money can buy – a function of high inflation.”
The Chinese exhibitors at ATF, however, were quite upbeat about the regional southern African markets for their products. One company confidently targetting this market is Chaozhou Jinshan Shoes Industrial Ltd, a business that manufactures sandals in the low-to-middle price bracket. Even though suppressed consumer spending in South Africa poses a challenge to many suppliers, Huang Gonsheng, the company’s sales manager, believes he can turn this into a marketing opportunity.
He said: “In South Africa, the consumer’s main concern right now is price. We are hoping to be able to take advantage of this demand for lower-priced footwear.”
Guangzhou Jinsheng, similarly, is looking to expand its export market in South Africa. The company, which exports worldwide, manufactures specialised non-woven polypropylene fabrics. These are used as inputs for making protective and surgical clothing, printable shopping bags and agricultural applications. Peter He, a Senior Manager with the company, said: “Although South Africa is not a big market for us, we do see it as an interesting opportunity.”
Asked as to the likely clothing trends in South Africa in the near term, Lynda Benjamin, Co-owner of Roger Benjamin Fashion, an agent for various imported clothing and footwear brands, said simply: “Price, price, price.”
Mehtar, though, believes that, in such a diverse society as South Africa, where consumers have widely differing budgets, the ability to provide a broad product range to suit all pocketbooks is of paramount importance. He said: “Customers are very price-conscious in South Africa, but the problem is they’re also fashion-conscious and want brand quality at an affordable price. If the quality of goods isn’t up to the mark, then customers will abandon them.”
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