BUSINESS DAY TV: Weak rand has its advantages when it comes to exports
PRECIOUS Moloi-Motsepe is African Fashion International’s founder and executive chairperson P1.
BUSINESS DAY TV: SA’s textile industry is on a drive to help local designers export their goods. This comes at a time when the rand has significantly weakened against the dollar, which could make local products more attractive for consumers. But it could also drive input costs higher. So is the local unit a help or a hindrance to local fashion designers and producers? Joining for me on News Leader is Dr Precious Moloi-Motsepe, African Fashion International’s founder and executive chairperson.
Dr Precious ... so let’s get straight into it. The rand has weakened significantly this year, have local producers and designers been able to take advantage of this?
Precious Moloi-Motsepe: Yes, it is quite shocking for most of our producers with the weak rand, but of course there are advantages. With the weak rand, of course, most of our local designers and most manufacturers are in a position to export and improve their income based on the weak rand. We also have what we call the “lipstick effect” in the fashion industry ... when the rand is low most people do not buy cars and your big budget items and they tend to go for the luxury fashion and lipsticks, and hence the name. So there is a short-term move towards the cheaper goods by consumers, but long-term the producers, manufacturers, retailers would be looking at exporting their items.
BDTV: You touched on exporting, which is really like I said in the drive for government bodies like the DTI (Department of Trade and Industry)... are designers taking this up, are they really looking at export as a way forward?
PMM: Yes, the government’s Industrial Policy Action Plan (IAPP) which was launched to try and improve jobs, particularly in the wake of our high unemployment rate, focused on industries like the fashion and clothing sector because of its ability to produce more jobs which are low priced. It’s not very expensive for most people to get into the fashion manufacturing space. It has actually invested a lot of money, R1.2bn or so into improving the competitiveness of the industry through improving the skills in the industry, helping manufacturers and producers buy equipment. And, it has also looked at clusters like this Southern African sustainable textile and fashion cluster to try and improve job creation in that space. There is a drive to try and improve jobs within the fashion and clothing industry, hopefully by 2020 to something like 7,000 more jobs and improve the SMME (Small, Medium and Micro-sized Enterprises) space, create more than 400 SMMEs in the fashion and clothing industry. So government is doing a lot to try and help to build the industry, which we know had suffered a lot after the influx of cheap imports from China.
BDTV: We talked about some of the benefits of now having a weaker local currency. There is also obviously a downfall to having a weak local currency and that’s especially if our designers and producers rely on importing the materials they need to make the beautiful fashion that we see here today. How much of an impact is that having on the industry?
PMM: Obviously for the fashion and clothing industry one of the highest input cost is the fabrics, 55% of our fabrics would be obtained locally by some of our designers and manufacturers and the rest they have to import. And because of the high import costs it makes it difficult for them to pass the saving onto the consumer, so there have also been discussions and talks around how we try and do what the DTI has done so well for the vehicle manufacturing industry in terms of the rebates. And we can look at how we could create some form of rebate for imported fabrics. There are some items that are on the list for receiving rebates, but I believe we can do more and help our local manufacturers and designers to improve their competitiveness.
BDTV: One of the ways that they could improve competitiveness, and you’ve been very complimentary of the government and the DTI and what they’ve done to encourage the sector. A lot of international retailers are eyeing SA out. We’ve had H&M open up stores here. Do you think we should be moving towards policy changes as well, where you are almost asking those international retailers to put say 20% of whatever they put on the floors of their shops which need to be locally produced. Are we there yet?
PMM: That’s a really important policy area for government to look at. Obviously our fashion and clothing market industry is looking very attractive for international retailers who have come to realise that Africa as a young continent, a growing continent has a demographic advantage to it. And also that we have had an increase in our middle class over the years, and that in 10 years’ time we will have a really good sized middle class across the continent as well as in SA. So in the past government had looked at the cheap Chinese imports and had put in regulation there to try and protect the local industry, but obviously that had not been enough.
There are areas also of looking at import duties that government has regulation on, 45% for import duties. But obviously there are a lot of players who somehow find a way to avoid that and bring in clothes without the requisite import duty so government is also clamping down on those. But I agree with you that in terms of the influx of the international fashion players who pose huge competition for our local industry, there could be mechanisms whereby they create opportunities for local designers. You can have an H&M or one of the retailers absorb or create shelf space for some of our local designers. In terms of procurement, there should also be a certain percentage of their budget to be focused on improving and contributing towards local fashion and clothing industry improvements.
BDTV: You mentioned that you want to create 7,000 more jobs by 2020 ... at a time like this in SA, where unemployment is basically in crisis, we’re at over 26% especially for our young citizenry. You have something called the development platform, perhaps walk us through the kind of opportunities there for young entrepreneurs to get involved and create jobs.
PMM: Yes, absolutely. With African Fashion International Week created seven years ago when we realised the opportunity to promote and propel local designers on an international platform, and particularly to ensure that they have the commercial benefits from the skills and talent that we have on the continent. We have been instrumental in the success of designers like your David Tlale, Thula Sindi whose clothes from some of our designers are here right in front of us. We have designers who export, like Marianne Fassler, we have designers who have opened stores in SA as well.
But as African Fashion International, we’ve realised that we need to create sustainability in the industry by growing young designers who will also come into the industry and be able to compete at a global level. So we work with industry experts to identify talented young designers in fashion colleges and they get recruited, they go through rigorous criteria for admission into our programme and we take them and pair them with established designers throughout SA who mentor them on the business side of fashion. They come out of colleges with the technical expertise, but they need to learn the skills of how to run successful fashion businesses. To date we have trained, in the last five years, about 75 students from colleges and we have some who have become very successful and have become very well-known like Rich Mnisi who currently shows at the Mercedes Benz Fashion Week platforms, and we’ve got Eleni Labrou who is a young designer to really watch out for. We have had designers who bring so much innovation into their cultural heritage such as Laduma who does a label called Maxhosa infusing his own cultural heritage and creating clothes that are globally relevant and wearable.
BDTV: Often the misconception is that you’ve made it once your clothes are in London and that’s really changing that perspective, because Africa is becoming such an important player in the fashion market, Nigeria for example. How important is intra-African trade in terms of this industry specifically?
PMM: It’s very crucial.... What holds us back at this stage, we’ve mentioned input costs for the clothing, the fabrics, there are other areas such as the physical infrastructure, e-commerce.... We could very well help designers overcome these challenges, but we still have challenges with broadband, so e-commerce although it’s an area that’s very exciting it’s still small comparatively speaking with other nations, but that’s an area of growth. So intra-African trade (is) very important. African Fashion International actually ensures that we have that designers that showcase on our platform that come from Nigeria, Angola, and Morocco. We have on our platform, the pan-African designers and the reason we do that is to ensure that when you have international buyers, even buyers from Africa, they are able to spot designers from every corner of the continent and therefore we can achieve our mission of having African fashion in every major city in the world.
BDTV: Just wrapping up, Fashion Week is around the corner and I’m sure you’re very busy preparing for that. It’s a very prestigious event and it’s coming back to Johannesburg. In the current economic environment, have you seen any pullback in terms of when you’re organising an event like this are you still getting the sponsorship that you need to run really what is a world-class event?
PMM: Yes it is challenging times particularly with companies pulling back on their marketing budgets. We’ve been very fortunate that in the last four years that we’ve had Mercedes-Benz SA as our title sponsor for both Mercedes-Benz Fashion Week Joburg and Mercedes-Benz Fashion Week Cape Town. The two events are going through a major change, because we’re trying to align our designers’ businesses with times where consumers would spend more, so for instance we will have now Mercedes-Benz Fashion Week Joburg, which will be held in August in Johannesburg, whereas it was in Cape Town before. It will be held in Johannesburg which is a big economic hub in SA, on the continent and also because the season spring/summer which we will be showcasing is a very long season so consumers get to continue buying from the designers between August and into the December holiday period. And we will do the Cape Town Fashion Week in March, which is an advantage for designers and sponsors alike because at that time you have business as well as leisure tourists in Cape Town. So we will have major returns on investment.
Precious Moloi-Motsepe, African Fashion International’s Founder and Executive Chairperson, chat's to us about whether the weak rand is a help or a hinderance for the local textile industry.