Opportunities abound for SA textile sector
SA would benefit by putting in place mechanisms to cater for demand by EU retailers
Clothing and textile value chains all over the world are recognised for their capacity to generate large-scale employment with relatively low barriers to entry and short skills acquisition periods.
According to SA’s Bureau for Food and Agricultural Policy, farm-level cotton production can create one permanent job for every additional hectare of cotton planted. Exporting to the EU at preferential rates under the EU-Southern African Development Community (SADC) Economic Partnership Agreement provides additional incentives for garment production in countries such as SA.
But potential not realised is an opportunity, and ultimately income, lost. Based on Cotton SA’s last end-of-year market report, local 2020 cotton production was 26,800 tonnes, making up less than 10% of the 300,000 tonnes of cotton content sold annually by local retailers. There would seem to be a real opportunity to develop new production capacity and importantly jobs in the domestic textile industry. Significant progress has already been made thanks to SA’s clothing and textile sector master plan.
With a view to reaping the benefits of this plan, an EU-funded study was undertaken in April 2020 to explore the potential contribution of partnerships between local and EU businesses in the wool and cotton value chains in SA. The study shared the sector’s progress in securing domestic sustainability and traceability and underscored the need for early processing capacity to uplift the industry and benefit multiple downstream and upstream enterprises. If experience is anything to go by, to generate additional processing capacity in a comparatively short time will require a good deal of new investment.
One approach to raising investment could be to create innovative channels through which manufacturers access soft loans or venture partnerships. This and other stimulant options appropriate to the sector are recognised in the National Planning Commission’s most recent Economic Progress Towards the National Development Plan Review (December 2020), which emphasises the “need for industrial dynamism in job-creating sectors” and that “capital must be actively raised for labour-absorbing investments”.
The review says that SA needs to build capacity in critical areas that facilitate international trade, including inspections, the setting of phytosanitary standards and the capacitation of standards-setting bodies. It also says that SA needs to deepen its commercial and diplomatic presence in, as well as its intelligence on, key trade partners. Notably, the EU remains the country’s biggest trade and development partner.
The EU’s commitment to the region underlies the facilitation of significant dialogue in many trade-related areas, including dedicated and ongoing discussions between local and EU companies on opportunities and impediments in the clothing and textile sector.
The establishment of sector-specific networks would be of great benefit. In the EU, for example, the European Enterprise Network (EEN) has set up sector support desks that allow for SME engagement at the sector level. In addition, the EEN’s textile desk hosts an annual Fashion Match expo to facilitate partnerships and identify opportunities.
The EU was able to support local representation at the virtual edition of the Torino Fashion Match 2020 in Italy, the second time SA has participated. Cape Wools SA spoke on its adoption of sustainable production practices in a well-received presentation. I am optimistic that the demand by EU retailers and, linked to this, the export opportunities for sustainably produced fibres to the EU, might well be the key to new investment in and job creation through the beneficiation of natural fibres in SA.
Development finance institutions such as the European Investment Bank are well positioned and positively disposed towards investment in the sector and SA would benefit by putting into place mechanisms that will allow it to tap more effectively into these support opportunities. While the global Covid-19 pandemic certainly dropped obstacles in the path of growing the sector, it has also clearly reinforced the importance of near-sourcing and quick response as vital competitive attributes to meet consumer demand.
More broadly perhaps, to reinvigorate its textile sector SA is faced with a number of choices, each of which present their own particular opportunities and challenges. These include how it positions itself within the African Continental Free Trade Area (AfCFTA). Additionally, and regardless of how SA pursues economic recovery and growth, it will need to continue to reassure potential investors and funders by providing policy certainty on broad economic and political issues, including land expropriation, broad-based BEE and — in this case — textile-specific issues.
EU and SA businesses and investors have the opportunity to explore investment and partnership drives that will translate into real business-to-business engagements through the EU-SA Partners for Growth project. Let us make optimal use of our joint trade arrangements and project initiatives to facilitate linkages with development funders, technology partners and export markets.
• Dr Kionka is EU ambassador to SA.
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