The T-shirt tells the story of the South African clothing industry and the struggle to maintain local production against the wave of cheap imports from China.
An imported T-shirt typically sells for R15,90 on the shelves of a well-known South African retail chain targeting the lower-end of the market.
The retail group, which asked to remain anonymous because of the sensitive nature of price information, said it marks T-shirts up by 15% to 19% from an original price of around R13.
Assuming that the company paid the almost 40% tariff on clothing products, the product cost about R8 when it entered South Africa.
In contrast, South African-made T shirts sell for between R19 and R29 in the same retail store.
Using this price structure, the lowest a local factory could have supplied the retail company at is R15,40 — nearly twice the landed price of the Chinese garment.
Between 1995 and last year, the value of T-shirts South Africa imported from China soared from R600 000 to R320-million, according to Quantec data.
The domestic economy saw clothing imports grow as the tariff dropped from a 74% average in 1995 to 33,2% in 2004.
As the rand strengthened after 2002, clothing imports took off. In a book on the sub-Saharan clothing industry, Etienne Vlok reports that, from 2002 to 2004, Chinese clothing imports to South Africa increased by 335%.
Vlok says China’s share of imports increased from 54% to 74% during that period, and its share of clothing imports grew to 85%.
T-shirts rose from 1% to 7% of total textile and clothing imports from China between 1995 and last year, according to Quantec data.
Many analysts caution that the official data gives a conservative picture of what is happening to the clothing industry, because it does not reflect widespread under-invoicing and illegal importation.
Following a downward trend in the cost of imported T-shirts from China to South Africa, the price halved from R11,50 in 1998 to R5,80 in 2004, according to customs data.
To combat the surge in imports from China, the government has announced that it will impose import quotas on clothing and textile imports until December 2008. These quotas, which do not include T-shirts, were decided on the basis of areas in clothing production where South Africa had local capacity and through negotiations with China, said an industry participant who asked to remain anonymous.
Tracing the production of a T shirt highlights the challenges to the local industry, which saw a dramatic 37,4% decline in employment between 1996 and last year, according to Vlok.
The first step in making a T shirt is sourcing raw material. While South Africa and its neighbours produce cotton and wool in large quantities, many commentators argue that fabric poses a big challenge to the clothing industry. It accounts for about half of the cost of a garment, said Justin Barnes of the Benchmarking and Manufacturing Analysts in a recent paper on the clothing industry.
Yet, he said, the shortage of domestically produced fabrics and the limited variety of fabrics produced locally constrains the growth of the clothing sector.
The average tariff on fabric was 17,3% in 2004 and has not changed much since, said Myriam Velia at the University of KwaZulu-Natal. But one clothing producer imported fabrics from India and Europe for 20% cheaper than he could get locally, where the products were available.
Barnes shows that the geographical proximity of domestic firms becomes less of an advantage if they have to import fabric. On average, international clothing firms can deliver an order in 105 days, while domestic firms in the Western Cape take 65 days to deliver and those in KwaZulu-Natal take 25 days. When domestic firms have to import fabric, the response time lengthens to 103 days in the Western Cape and 149 days in KwaZulu-Natal.
The importance of being able to source fabrics locally is one reason that some have argued that tariffs on textiles should not be reduced.
Ebrahim Patel, general secretary of textile union Sactwu, acknowledges that you cannot produce all fabrics in South Africa, which is why the union has never put pressure on retailers to stock 100% manufactured goods.
The next step in producing a T shirt is the manufacturing.
Wages in the clothing industry are the lowest in the manufacturing sector, ranging from about R550 a week in urban areas such as Cape Town to R320 a week in rural areas such as Isithebe in KwaZulu-Natal. Still, these wages are much higher than those earned by Chinese workers, who earn about R100 a week, according to Patel.
He explains the wage differential as the result of China’s artificially depreciated currency, the Chinese government’s efforts to subsidise workers’ wages through measures such as housing provision and the repression of trade unions.
Some argue that local clothing producers can improve their competitiveness not by lowering wages, but by upgrading production.
A case study of Monviso Knitwear in the Western Cape shows that the firm was able to improve productivity and can produce “strappy tops” at 8% less than the same quality item from China, despite much higher wages. The company can provide Woolworths with garments in three weeks in contrast to the three months a Chinese producer would take to fill an order.
The Customised Sector Programme is part of the government’s efforts to develop local supply chains by working with retailers, clothing and textile producers.
When a T-shirt is complete, it goes to a retail outlet for final sale to a consumer. Many analysts point out that there is a trade-off between protecting the local industry and benefiting the consumer.
“You need to look after workers but you can’t keep their jobs at the expense of the poor, nor keep the poor clothed at the expense of the workers. You need to find a balance,” said Professor Mike Morris of the University of Cape Town. He added that retailers are the “driving source” in the value chain.
Some argue that retailers profit from cheap imports from Asia, but do not pass those benefits on to consumers.
Speaking anonymously, one retailer said final sales prices have grown over the past three years, giving an example of an increase from R19,99 to R25,99 for a T-shirt. The retailers are still offering local producers about R10 a garment.
Retail profits have also exhibited strong year-on-year growth. Edcon has grown from a pre-tax profit of R263-million in 2002 to R1 851-million last year in nominal terms, and Mr Price has grown from R193-million to R411-million in the same period, according to Vlok.
Despite the ability of some producers to manufacture T shirts, various commentators have said that South African producers should move into more value-added areas of the economy where they will not be competing on price with low-cost competitors such as China.
Proudly, profitably South African
South African textile and clothing firm Tradelink Textile Industry produces half a million of that ubiquitous basic T-shirt, which most commentators say South Africa cannot manufacture profitably. Yet Tradelink has grown production by 60% in the past four years and has been approached by buyers from the top retail chains.
The firm also manufactures a lot of promotional wear, including 220 000 T-shirts for the Independent Electoral Commission this year. “We can sell a T-shirt competitively against a Chinese garment landed in South Africa,” said Tradelink MD Dave McClenaghan.
The secret behind Tradelink’s success is the fact that “raw material comes in at one end and T-shirts come out at the other”, he said.
The company buys cotton locally and from neighbouring countries, produces fabric and manufactures T-shirts in a vertically integrated firm structure. This allows the company to control the supply chain cost-efficiency and quality throughout the production process. Tradelink is able to reach some economy of scale through high-volume production and capacity utilisation. It has also employed technology that is not used elsewhere in South Africa and focused on training workers.
“Lots of people say that South African labour is not cost-efficient, so I ask them how much they invest in training to raise productivity to international levels,” said McClenaghan.
Despite his successes, he said that there are many other lower-cost producers out there, and it makes sense for firms to seek to enter segments of manufacturing where they can add value.