industry
If drastic action is not taken soon, the textile industry may face irreversible damage, writes Karen Harverson
South Africa’s R8,8-billion textile industry is trying hard to get its house in order before trade barriers come tumbling down and it is faced with international competition.
Already, a government programme, implemented last September, is phasing down tariff duties over seven years.
But while the industry — the sixth-largest manufacturing employer — has accepted it must become internationally competitive, there is growing concern over lack of government support, particularly in controlling illegal imports and supplying finance to help restructure the industry.
“If the flow of illegal imports is not stemmed, South Africa’s entire manufacturing base — not just in the textile industry — – will be irreversibly damaged and millions of jobs lost in the process,” says newly appointed president of the Textile Federation, Mike Hankinson.
The Department of Trade and Industry (DTI) reports that “unrecorded” imports of textiles from 1990 to 1994 may have cost the fiscus between R400-million and R600-million in lost revenues, says Hankinson.
Durban’s customs and excise is in a state of near collapse, with high levels of staff demoralisation and corruption. Hankinson claims that less than 1% of containers are inspected in a department that oversees the entry of more than 70% of South Africa’s containerised goods.
The federation wants to help customs and excise by providing training, finance and expertise. It regards the control of illegal imports as crucial to the industry’s survival, but “we’ve not yet had clarity from government on the role we can play,” says Hankinson.
Commissioner of Customs and Excise Daan Colesky says the organisation has received numerous offers of help from all sectors of industry. “We’re assessing the various offers to see how we can best make use of them, but the problem is we do not have sufficient staff to dedicate personnel to one particular industry.”
He adds that with the restructuring of Customs and Excise into the new South African Revenue Services from next month, additional funds will be made available, which will enable it to fill vacant positions. “We have a 20% vacancy rate, but once we can fill these positions and make use of the private sector for specialised training, the smuggling problem will begin to improve.”
Dumping is another bugbear for the industry, but the process of instituting anti-dumping procedures against a country and company is so complicated and time-consuming that many companies feel it’s not worth pursuing.
Says Brian Brink, executive director of the Textile Federation: “The legislation works well for a specific product such as garden forks, but when it comes to textiles and clothing, it is difficult to determine under which tariff structure the product should fall.”
With many cases taking up to a year to resolve, Brink says anti-dumping legislation is not seen as a solution to industry’s problems.
But as tariff protection falls away, this may well be where the industry should look for support, especially in light of last week’s announcement by the DTI that the Board on Tariffs and Trade (BTT) has been urgently requested to investigate and make substantive recommendations on the restructuring of the anti-dumping/countervailing system.
BTT deputy chairperson Leora Blumberg says South Africa’s anti-dumping system has been the subject of much debate and criticism from many parties: local industries and unions who believe the system is not responsive to concerns about unfair imports that are causing material injury, particularly in the face of liberalisation and lower tariffs; foreign exporters and importers who believe the system is administered in a way that is protectionist; and trading partners who are concerned about its inconsistency with international rules and practice.
Blumberg agrees the textile industry has not really utilised anti-dumping mechanisms in the past, which are aimed specifically at “unfair” imports and are very country and company specific.
“The tariffs in this country have in the past been structured in such a way as to protect the industry from both fair and unfair trade. There also may have been a perception that the board did not have the capacity to deal with investigations in this industry.”
She adds that with reducing tariffs and restructuring of the industry, as well as the restructuring of the anti-dumping system (in particular increasing capacity), there may indeed be more interest by this industry in utilising anti-dumping mechanisms.
On the issue of how the restructuring of the textile industry will be financed, Hankinson says the industry spent R900-million in 1995 on new plant and equipment and is planning to spend R1,1-billion this year.
But government has been somewhat vague on the role it intends to play. The Swart Panel, convened in 1993 to develop recommendations for a long-term strategy for the industry, suggested government supply a comprehensive R4,5-billion supply-side package to help the textile and clothing industries restructure.
However, in last week’s Budget, Finance Minister Chris Liebenberg only made mention of some R180-million to be set aside for supply- side packages for the entire manufacturing spectrum.
Hankinson dismisses this amount as insignificant. “The French government supplied its textile industry with R1,7-billion a year to assist its competitiveness with the Far East and Italy, because they want the industry to survive.”
He argues that with or without supply-side measures, the industry has to restructure to survive. “But with government intervention, more companies would survive, more product could be exported, and fewer jobs would be lost.”
Says South African Clothing and Textile Workers’ Union (Sactwu) deputy general secretary Ebrahim Patel: “Everyone accepts the industry must restructure. But leaving it to the market is equivalent to abandoning it to an inevitable decline.”
Rather, says Patel, the industry should be restructured along three pillars: active industry policy measures to improve technology, quality and training; trade reforms to gradually liberalise trade barriers and promote exports; and a social adjustment programme to retrain workers.
Instead, the government has seized upon just one of the measures — the phase-down of import duties, which is likely to have dire consequences on the textile sector of the industry. Already more than 2 000 jobs have gone since the programme was implemented last September.
A Sactwu survey, which analysed 265 companies, shows that 17 700 jobs were cut in the clothing, textile and leather industry between September 1995 and February 1996.
Patel estimates another 100 000 jobs will be lost directly and indirectly as a result of the seven-year phase-down period.