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LOGO OF THE
NEWS & RESEARCH FROM THE AFRICAN CONTINENT
(#30 / 2018 - 9 October 2018)
www.africantextilesandapparel.com
Kenya’s single largest garment export to the US (Jan-Aug 18) is HS6110.30.30.53 knitted men/boy pullovers & similar articles of man-made fibers worth US$20.584m
Lesotho’s single largest garment export to the US (Jan-Aug 18) is HS6104.63.20.06 knitted women's trousers of synthetic fibers, containing >5% of elastomeric yarn worth US$43.915m
Madagascar’s single largest garment export to the US (Jan-Aug 18) is HS6203.42.45.11 woven men's blue denim trousers of cotton, not knitted worth US$12.074m
NEWS

ETHIOPIA – FIRST GARMENT FACTORY IN ADAMA INDUSTRIAL PARK, 29 September 2018
The Antex Group, a Chinese textile manufacturing company, has become one of the first firms to establish itself in the Adama Industrial Park. The industrial park comprises 102 hectares in Adama and lies approximately 93km southeast of Addis Ababa in the Oromia Regional State. The park was built at a cost of US$147m by the China Civil Engineering Construction Company. Construction of the industrial park (which includes 19 sheds) commenced in 2016 and is reported to be nearly 97% complete - the only items left are the "finishing work" and the waste water treatment plant. The park is expected to create jobs for more than 50,000 people once it becomes fully operational. Antex (SEE>>), which claims to have invested US$5m in machinery and equipment, is planning to export its production to Europe, the USA and Australia. It says it will employ 10,000 employees and generate US$500m of revenues when it reaches full production in about half a decade. READ HERE >>

The Adama Industrial Park was officially opened, by the Ethiopian Prime Minister, on 6 October. READ HERE >>


ETHIOPIA - MORE INDUSTRIAL PARKS TO BE BUILT, 5 October 2018
Ethiopia is to start the construction of three more industrial parks during the current Ethiopian fiscal year of 2018/19. Lelise Neme, the Chief Executive Officer (CEO) of the Ethiopia Industrial Parks Development Corporation (IPDC - SEE >>), said the three planned industrial parks are the Aysha and the Semera industrial parks located in eastern part of the country, and the Assosa industrial park located in western Ethiopia. READ HERE >>

A mini twitter debate has recently developed when someone tweeted that the recently appointed IPDC CEO - Ms Lelise Neme - is only 24 years old! READ HERE >>


ETHIOPIA – WORLD BANK GREEN INDUSTRIALISATION TENDER, 5 October 2018
According to the World Bank tender documentation:
"The Government of Ethiopia expects the industrial sector to play an important role in GDP growth, job creation, foreign exchange earnings, and small and medium-sized enterprise development over the coming years. … In recent years, investments in these sectors have significantly increased particularly in the apparel, footwear and textile sectors and most of the new investments are within Industrial Parks.

"The Project will support efficiency improving interventions which will lower the production cost and minimise environmental impacts, that will consequently attract and retain investment. At a broader level, the project will contribute to the decrease of greenhouse gas emissions through the removal of regulatory barriers to the implementation of energy efficiency and water efficiency investments in the private and public sectors. By providing support to the Government and relevant industries on sector specific interventions, the project will ensure that the textile and footwear sector remain competitive while the growth of the sectors is environmentally sustainable. Industrial parks will be a significant focus of this project as they are the primary tool being used by the Government to develop the textile and footwear industries and are central to Ethiopia's industrialisation strategy.
READ HERE >>


SOUTH AFRICA – PRESIDENT'S JOBS’ SUMMIT: TEXTILES & APPAREL, 3-5 October 2018
Three takeaways:
1. Masterplan: "Clothing, Textiles, Leather & Footwear Value-chain Programme - Social Partners in the sector have been working towards agreement on a Retail Clothing, Textiles, Leather and Footwear Masterplan, in order to grow employment in this labour-intensive sector. Interventions:
  • Social Partners support the process towards the finalisation of the Retail Clothing, Textiles, Leather & Footwear Masterplan 2030 (R-CTLF)
  • The Masterplan contemplates increased uptake of locally produced goods by domestic retailers. The modalities are being finalised by industry stakeholders at present but will include a number of interventions, amongst others the social partners: i) agree that the Clothing and Textile Competitiveness Programme (CTCP) should be continued until new incentives are developed to support the R-CTLF 2030 Masterplan; ii) cooperative value chain engagement will lead to greater value chain synergies and increased local sourcing; iii) that the South African Revenue Services (SARS) will work intensively to combat illegal imports. ("Presidential Jobs Summit Framework Agreement" - p31).
2. New factory with 100 workers: "Organised Labour, through one of its members, commits to open a union owned clothing factory in the Eastern Cape during the 2019/2020 financial year, which shall initially create 100 jobs, and in this way help to play a role in the re-industrialisation of a province which suffers from widespread poverty and unemployment. ("Presidential Jobs Summit Framework Agreement" - p31).

3. Measures to Combat Smuggling: "It was agreed that improved tactical interventions on sites where suspected illegal imported goods are kept or sold, are an important tool in dealing with customs fraud. It was acknowledged that there is room for improvement in this area. It was agreed that the partnership between SARS and other relevant government entities must be strengthened, including joint interventions, issuing of search warrants and conclusion of Memoranda of Understanding. The Social Partners agreed that specialist enforcement teams, with a focus on key commodities, e.g. clothing and textiles, tobacco, and fuel, should be reconstituted. Raids will focus on major distribution nexus of imported goods, including warehouses. ("Presidential Jobs Summit Framework Agreement" - p69-74).

READ HERE >>

Comment
The union involved is highly likely to be the Southern African Clothing & Textile Workers' Union (SACTWU). This new factory will add to its growing portfolio (directly or indirectly) textile and apparel manufacturing plants. Lots of questions remain: what will it make? where in the Eastern Cape? will the Industrial Development Corporation (IDC) be backing the firm with public resources? will the National Empowerment Fund (NEF) be backing the firm with public resources? will the Eastern Cape provincial government be putting public resources into the project? I guess, at least, that it is a small mercy that the plant is not in Mauritius where SACTWU already owns a significant textile and apparel manufacturing plant!
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SOUTH AFRICA – NEW GOVERNMENT FUNDED CLUSTER LAUNCHED AFTER FAILURE OF PREVIOUS CLUSTER, 1 October 2018
South Africa’s Footwear & Leather Industry Cluster (FLIC), the replacement for the National Footwear & Leather Cluster (NFLC), has finally been signed-off by the Department of Trade & Industry (DTI), which means the Industrial Development Corporation (IDC) will release funds for its operation. It is expected to start within a month. Unlike its predecessor, which employed multiple staff and included a fully-equipped footwear factory at the Vaal University of Technology, and which was shut down by the IDC because of financial mismanagement, FLIC will oversee projects run by sub-clusters. READ HERE >>

Comment
"Financial mismanagement". Perhaps the DTI / IDC would like to precisely explain why it was necessary to close down one cluster and then relaunch another operating in the same sector; and what steps have been taken to recover any money that may have gone missing (if any) or which were inapporpriately spent (if any)? In a previous edition of this blog I stated that it was essential that independent consultants should be engaged to review the work of all the sector sub-clusters – including the NFLC. This work must also include a forensic audit. This audit should not only strengthen public oversight over public funds; but suggest ways in which each sub-cluster's work may be optimised.


MOROCCO – TURKISH COMPANY TO RESCUE TEXTILE FIRM? 4 October 2018
A Turkish company has reportedly expressed interest in rescuing the beleaguered Legler Maroc from collapse. The national textile giant has been struggling for almost a decade. Legler SPA, an Italian company and a global household name in the textile industry, engaged in a joint venture with Morocco’s Atlantic Group owned by the Senoussi family, who are well-known in Moroccan industrial circles. Legler SPA and Atlantic Group formed Legler Maroc (or LGM Denim), generating an outburst a burst of optimism and quality output for Morocco’s textile industry. In the wake of the global financial crisis in 2008, however, Legler SPA decided to terminate the venture. The move left the Atlantic Group with the difficult task of sustaining a nascent giant in the face of a deeply uncertain and shaky global financial market. The company has since lurched from decreasing outputs to near bankruptcy, bringing it to the verge of total collapse in 2016 and 2017, when a number of foreign investors expressed interest in rescuing the collapsing giant. READ HERE >>


MADAGASCAR – USAID DEVELOPMENT ORGANISATION ASSISTS FIRMS TO EXPORT, 3 October 2018
In June 2014, in anticipation of African Growth & Opportunity Act (AGOA) eligibility reinstatement, a USAID project teamed-up with Madagascar’s free-trade zone partners to lead the workshop, “How To Approach the U.S. Market: Opportunities for Madagascar.” Immediately following Madagascar’s AGOA-eligibility reinstatement, USAID’s East Africa Trade & Investment Hub (EATIH) worked closely with the Malagasy government to develop a “National AGOA Strategy” to support Malagasy firms to leverage AGOA’s duty-free access to the U.S. market. Fast forward to 2018, the USAID Hub has assisted Madagascar with capitalising on its reinstated AGOA eligibility, helping the country become one of East Africa’s top AGOA exporters. So far, there has been a 671% increase in AGOA exports, from US$28.9m in the Hub’s first fiscal year to US$122.4m in the third quarter of its fourth, with Hub-supported firms accounting for 17% of Madagascar’s total AGOA exports. The Malagasy government estimates that AGOA reinstatement has helped create 26,600 new jobs, in part, thanks to the USAID Hub. READ HERE >>

Comment
The EATIH “fluff” press release is amazing. One of its innuendos is that without its support that Madagascar’s AGOA export recovery would not have been as spectacular as it has been. I somehow doubt this. As many will know many Malagasy firms were, prior to AGOA being lost by the country in 2010, very aware of the AGOA programme so were in no need of coaching or support to help them bureaucratically manage exports, or to help them find new buyers. Hopefully an independent USAID monitoring and evaluation exercise will be able to pinpoint exactly how much extra exports can be directly attributable to the efforts of EATIH.

Many of the United States Agency for International Development’s (USAID) Trade Hubs (well there are only two left now after the West African trade hub was closed early in late 2017; while the Southern African Trade & Investment Hub (SATIH) is going through major trauma – they are now looking for their third Chief of Party in less than 2 years) are contracted to raise exports and facilitate investment – and to report by how much they have done so. Big numbers are important for they often represent "work" and "success". Therefore the tendency to exaggerate and imply successes is huge.

I suppose this is not the problem of the development project contractors who win the USAID tenders to run these types of projects – contractors do what their paymasters want. I believe the fault lies with those USAID development types that design project terms of reference. In my view while some parts of these development projects should focus on improving sales – more emphasis should be placed on interventions that strengthen in-country / regional value chains; interventions that would support improved competitiveness; and, measures that improve government systems. Interventions that require continued injections of donor money should be discouraged.



EAST AFRICA – SECTOR FIRMS AT US TRADE SHOW, 17-19 September 2018
The United States Agency for International Development’s (USAID) East Africa Trade & Investment Hub (EATIH) supported a number of east African companies to exhibit at “Sourcing at Coterie" in New York. Coterie is, apparently, a trade show that connects women’s apparel and fashion accessories designers with the international “who’s who” of retailers. The fifteen firms that either attended, or were represented by the Hub, generated 121 connections with USA buyers for potential orders valued at US$159,440. Of the five firms in attendance, two were from Kenya and the other three were from Uganda, Tanzania and Ethiopia. They presented their apparel, fashion accessories and footwear products alongside samples from ten Ethiopian and Kenyan footwear firms that were represented by EATIH. READ HERE >>

Comment
It will be interesting to see, in the next three years, as to how many orders actually materialised out of this year’s Coterie. If orders materialised and this attendance at the trade show was considered to be a success it would also be interesting to see as to how many of the companies that attended (or virtually attended) entirely fund (booth costs; air travel, accommodation, subsistence) themselves to undertake additional trips to USA trade shows.


CAMEROON – COTTON INPUTS DISTRIBUTED, 5 October 2018
The Cameroonian minister of agriculture has advised that 2,250 tons of fertilizer has been forwarded to the national cotton producers association (CNPCC). Sodecoton oversees about 250,000 producers of the CNPCC. The move is to help improve Sodecoton’s production which returned to profitability in 2017 following three successive gloomy years. In 2017, the company reported a net profit of CFA4.3bn (US$7.5m) after cumulative losses of CFA35.6bn (US62.5m) over the previous three years. READ HERE >>


EGYPT – COTTON OUTPUT TO EXPAND, 6 October 2018
Egypt is expected to export around 65m kg of long-staple cotton worth US$150m in the 2018-2019 season the chair of Egypt's Alexandria Cotton Association (ACA) has stated. The Egyptian long-staple cotton yield amounted to 55m kg in the 2017-2018 season, 35m kg in the 2016-2017 season, and 30m kg in the 2015-2016 season. The ACA attributed the growing exports of Egypt's long staple cotton to the 50% annual increase in the cotton plant area (which reached 138,600 hectares in the 2018-2019 season, compared with 90,720 hectares last season and 55,020 hectares in the 2016-2017 season). The ACA predicted that the plant area would expand to between 168,000 to 189,000 hectares next season, despite a warning that Egypt will find it difficult to effectively market the increased output of its long-staple cotton. The Indian market, a major traditional market for Egyptian cotton, purcahses 50% of Egypt's cotton exports. Exports also go to China, Pakistan, Turkey, Brazil and Bangladesh. READ HERE >>


EGYPT – ITALIAN FIRMS INVESTMENT INTEREST, 4 October 2018
Italian companies in the textile sector have taken part in an initiative by the United Nations Industrial Development Organisation (UNIDO) in Egypt. The initiative included a round table discussion and two on-site inspections of cotton plantations and production facilities. The round table discussion focused on sustainability of the textile sector as well as ''investment in quality'' throughout the entire production chain and ''development of the skills'' of workers. The meeting was held as part of the Egyptian Cotton Project, an initiative by UNIDO/Filmar that was funded by the Italian Development Cooperation Agency. READ HERE >> More details of the US$1.5m UNIDO run programme can be found HERE >>.


LESOTHO – TEXTILE SECTOR FACES PROBLEMS, 3 October 2018
According to Fitch Solutions Lesotho's textile manufacturing sector, which made 13.1% of GDP growth in 2016, is expected to under perform due to structural issues and lower demand from South Africa. The textile sector has been one of the main engines of growth in Lesotho, but its prospects remain grim due to several factors. There continues to be little domestic value addition in the supply chain of the textile sector with most factories preferring to "Cut, Make and Trim", keeping the sector's competitive advantage focused only on cheap labour. Secondly, the sub-sector's performance and profitability is held back by the high cost of doing business in Lesotho as indicated by the poor performance of the country in the labour market risk sub component of our proprietary Operational Risk Index, which ranks Lesotho 192nd over 202 countries covered globally. This leaves Lesotho's textile sector's growth largely dependent on clothing demand from South Africa - where part of the goods are exported to. With higher inflation and lower household disposable incomes likely to weigh on South Africa's consumer demand, Fitch Solutions believe the sector will face severe headwinds in the coming quarters, weighing on headline country growth. READ HERE >>


ZIMBABWE – COTTON INPUT DISTRIBUTION STARTS, 2 October 2018
The Cotton Company (COTTCO) of Zimbabwe has started distributing inputs for the coming season, with farmers applauding the company for the timely disbursements, which they say will enable them to plant on time and improve their yields potential. Zimbabwe’s cotton production reached 130,000 tonnes in the last season, the highest in nearly five years due to inputs support by the Government. The government supported inputs package includes two-50kg bags of basal and top-dressing fertiliser and seed; farmers will also receive chemicals. In addition to inputs, COTTCO is also providing tillage assistance to high potential cotton farmers and those without draught power. COTTCO is targeting 400,000 farmers this year, up from about 380,000 growers last year.

The government’s intervention came after yields dropped to 28,000 tonnes in 2015, the lowest in nearly two decades after farmers shunned the crop due to lack of funding and poor prices. As a result of inadequate levels of inputs and agronomic support by cotton merchants – which led to low yields – proliferation of side-marketing and poor debt recovery in the past few years, the industry almost collapsed. Poor debt recoveries also resulted in contractors fearing higher levels of risk and consequently cutting back on the inputs financing. About five years ago, Zimbabwe had more than 10 cotton merchants and most of them, including US-based Cargill, have closed down.
READ HERE >>


WEST AFRICA – ISLAMIC FINANCE FOR COTTON, 1 October 2018
For a decade, the International Islamic Trade Finance Corporation (ITFC) has been a catalyst for growth in key African industries, acting as a major source of capital and a springboard for cross-border trade and exports.

In West Africa, cotton is an essential commodity and a major cash crop for farmers, positively impacting livelihoods and standards of living. Cotton culture acts also as a guarantee for rural food security as farmers use some of the available agricultural inputs, such as fertilisers and insecticides, not only to enhance cotton growing but also food crops. This “white gold” represents an important export and revenue-generating vehicle for the region and is therefore a promising tool for poverty alleviation. For these reasons, since inception, one of ITFC’s strategic areas of intervention has been to help transform the region’s cotton sectors through the provision of Murabaha trade finance and create direct links between exporters and importers in OIC member nations.

In addition to financial investments, ITFC supports several technical interventions designed to create a stronger, more sustainable cotton sector in the region. These include: i) a soil fertility project, which is a partnership with Tunisian companies through the AATB programme, aimed at enhancing soil fertility in cotton growing regions; ii) the Cotton Trade Bridge Project, which aims to create a direct connection between exporters in sub-Saharan Africa with cotton importers from Asia thereby eliminating costly intermediaries and enhancing revenues for African exporters; and, iii) the DEDICOT Project, an ITFC partnership with the International Organisation of Francophone Countries (OIF) to boost cotton trade and investment between West African ginners and Moroccan spinners.

To date, ITFC has approved 21 sustainable financing operations in the cotton sector in West Africa, in Benin, Burkina Faso, Cameroon, Côte d’Ivoire and Mali. Overall, in the sub-Saharan Africa region, ITFC’s investments in the cotton sector are over US$1.4bn to date.
READ HERE >>


ZIMBABWE – NEW INDUSTRIAL POLICY, 5 October 2018
Zimbabwe president has stated that the country will soon have a new Industrial Development Policy, National Trade Policy and the National Export Strategy that will drive the country’s export-led industrialisation agenda. Zimbabwe wants to boost exports and fight the widening trade deficit, which rose by 34% to US$1.26bn between February to June 2018. READ HERE >>


ETHIOPIA - POLITICAL TENSIONS, 1 October 2018
There’s no doubt that Ethiopian Prime Minister Abiy Ahmed’s first five months in office have brought enormous change to the country. He’s also been hailed for shepherding Ethiopia to a historic peace agreement with neighbour Eritrea. Thanks to Abiy’s astounding short-term gains, Ethiopians both at home and abroad are feeling hopeful. But all is not well in Ethiopia. Ethnic tensions and violence are on the rise. Ethnic conflicts are not new, but the levels of violence being witnessed today are very disturbing.

Ethiopia has more than 80 ethnic groups. Despite recent improvements, it also has a weak economy and an overwhelmingly poor citizenry. If Abiy wants to make a genuine attempt at real democracy he must do away with tribal politics and make stronger strides towards national unity.

To understand the latest events, it’s necessary to look to Ethiopia’s history. Ethnic tensions have simmered – and often boiled over – for decades. Some of the earliest signs can be traced back to 1991, when former president Colonel Mengistu Hailemariam’s regime was removed from power. The coalition, known as the Ethiopian People’s Revolutionary Democratic Front, was made up of four ethnic parties: the Oromo Peoples’ Democratic Organisation, Amhara National Democratic Movement, Southern Ethiopian People’s Democratic Movement, and the Tigrayan People’s Liberation Front. Soon after the coalition came together, it introduced an ethnic federal system of governance to try and address historic ethnic grievances by giving Ethiopia’s different regions the chance to administer themselves. This federal system allowed regions to organise along tribal lines. It also led to the rise of ethno-nationalist movements, which eventually weakened Ethiopia’s national unity. Ethnic intolerance grew and gained momentum, and ethnic violence became a permanent fixture of Ethiopian politics.
READ HERE >>

Comment
As I have reported in past editions of this blog the new Ethiopian leadership has injected a seismic change into the politics of the country - it has moved with great speed from a totalitarian state to one where the effects of democratic reform are visible. This move has most probably saved Ethiopia’s AGOA eligibility which was under threat.

However the government must do more to democratically reduce the existing ethnic tensions. These tensions will continue to impact upon the production of garment factories, for example: in order to deal with ethnic protests the government still authorises the cutting of telecommunications services ... its difficult to communicate with your head office or a USA buyer without phone or the internet connection. Ethnic tensions have also resulted in work general strikes. These strikes have caused production delays, delays in getting manufacturing inputs in and exports out. Outbreaks of civil violence have resulted in travel advisories - US embassies put the fear of God even into the most seasoned US apparel buyers and quality control staff; while extra security for expatriat staff costs a fortune. Ethinic tensions have also been known to impact on recruitment practices. In some areas of Ethiopia the indigenous population, who do not want to work in garment factories, remain opposed to “foreigners” wanting to work in factories in "their" areas resulting in recruitment vacuums.


UNITED STATES – SOUTH AFRICA ... A NOTORIOUS MARKET FOR COUNTERFEITS, 1 OCTOBER 2018
According to the American Apparel & Footwear Association (AAFA) (SEE >>):
“On behalf of the member companies of the AAFA, we appreciate this opportunity to submit comments to the United States Trade Representative’s (USTR) 2018 Special 301 Out-of-Cycle Review of Notorious Markets (investigation: USTR-2018-0027). We are grateful to the USTR for its strong and unfaltering commitment to the protection of American intellectual property rights around the world. AAFA’s Brand Protection Council (BPC) vigorously pursues brand protection efforts, with a focus on the global war against counterfeit apparel, footwear, accessories and other supplier products. Stolen intellectual property costs our members billions in lost sales, damage to brand reputation, and substantial legal expenses. Ultimately, these costs lead to USA job losses and higher costs for USA consumers.

The AAFA listed a number of markets around the world where they alleged widespread intellectual property theft - trademark counterfeiting and copyright piracy. The AAFA specifically lists a South African geographic area: "Jeppe Street from Polly to Von Brandis streets", in Johannesburg.
READ HERE >>

Comment
Sure there is a lot of illegal brand protected apparel being sold in South Africa. And one cannot fault the AAFA in it wanting to protect the intellectual property of its members. Counterfeiting is a scourge and it must be addressed. However, there does not seem to be any recognition by the AAFA that the customs division of the South African Revenue Services (SARS) has done to stop counterfeits. SARS’ intercept figures appear to be illustrious – are these SARS' seizure figures not accurate? To what extent do they under report the problem?

Furthermore, if there are transgressions why is the AAFA are not more specific about exactly where the problems are … offering a range of city streets is surely not enough for South African police investigations … or are they saying that every vendor in this area guilty? Has the AAFA reported exact locations of the retailers selling copyright infringed garments to the police? What actions have the licensed brand holders taken to stop illegal sales of their garments in South Africa? Are the US brand holders alleging that the goods have been made in South Africa? … or are they alleging that they have been imported into South Africa? If they allege they have been made in South Africa they should provide evidence to this effect. If they allege they have been made elsewhere they should report the countries / manufacturing facilities to US authorities! I guess the AAFA would therefore have no problem in requesting that the US administration imposes sanctions on these countries … perhaps via additional customs tariffs … in order to stop the sale of counterfeits!


RWANDA - WORN CLOTHING IMPORT ISSUES, 5 October 2018
In a bid to resuscitate local manufacturing, east African governments, including those of Kenya, Tanzania, Uganda and Rwanda, agreed in March 2016 to increase customs tariffs on imported used clothes with the intention of phasing imports out by 2019. In the 2016/2017 financial year, Rwanda raised the tax on imported used clothes from US$0.20 to US$2.50 per kg and to US$4 in the next financial year.

A Rwandan academic says the decision to tax used clothes was not just about money. It was also about reclaiming dignity. "This is a political choice which holds the citizen's dignity at its centre," Ladislas Ngendahimana, a political analyst based in Kigali, says of a "Made in Rwanda" campaign. "We ultimately make decisions for ourselves and the Rwandan people," he added.

According to the CEO of the Rwanda Development Bank, the decision to tax used clothing has already helped develop the local textile and shoe industries. Production has increased from US$59.5m in 2015 to US$70.6m in 2017. "It had a policy objective which we see already producing positive results."

The C&H factory in Kigali's Special Economic Zone is bustling with activity. Hundreds of workers cut fabric, check labels, operate sewing machines, and carefully monitor the "Made in Rwanda" products for quality. Originally starting out as an export-oriented manufacturing plant, mostly for clients in the USA and Europe, this Chinese-owned factory has moved into producing garments for the local market. Since the import tax on used clothing was implemented, orders from the USA have decreased. But custom inside Rwanda has increased. C&H has opened a second plant to deal with the rising demand. At the moment the plant export 80% (to the US and Europe) and 20% is for the local market.

On the other hand traders say the taxes have made used products unaffordable for most Rwandans. Around the Biryogo market, an entire network of traders has been affected by the tax. Tailors who altered used clothes and wholesalers and distributors who transported goods to smaller towns and villages across the country are now without work. According to those who remain, many left to the DRC for Uganda to continue their businesses. One female tailor who works outside the main Biryogo market said her clientele had fallen by 60%.
READ HERE >>
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TABLE OF THE WEEK

SUB-SAHARAN AFRICAN APPAREL EXPORTS
TO THE UNITED STATES
USING THE AFRICAN GROWTH & OPPORTUNITY ACT
2017; JAN TO AUG 2017 COMPARED WITH JAN TO AUG 2018
FEATURE

SOUTH AFRICA'S
RETAIL CLOTHING, TEXTILE, FOOTWEAR & LEATHER (R-CTFL)
'MASTERPLAN'

PART III - SMUGGLING
As has been reported in the last few editions of the "African Cotton, Textiles & Apparel Monitor" a number of South African cotton-textile-apparel-footwear-retail value chain stakeholders are currently engaged in a process that will lead to the development of “Masterplan”. This “Masterplan” – essentially a value chain development strategy for a defined niche of the broader cotton-textile-apparel pipeline – will run between 2018/19 until the year 2030.
(The comments made here under reference a "draft" presentation prepared by the "Masterplan" consultants - circa late August 2018.)
IF YOU WANT A COPY OF THE "MASTERPLAN" CONSULTANT’S LAST PRESENTATION PLEASE WRITE TO ME AT: editor(at)africantextilesandapparel.com

The "Masterplan" consultants correctly recognise that the smuggling of textiles and apparel (and footwear) into South Africa (including the Southern African Customs Union (SACU)) is a major problem that significantly undermines the stability of the existing manufacturing industry. They state the following:
  • “Illegal imports (counterfeiting, under-invoicing, smuggling) – epidemic levels – 20% reduction in demand = 20% loss of SA R-CTFL value chain employment and fiscal contribution” (see slide 28)
  • “High tariffs on finished goods provides rewards for illegal imports (price differential) and limits competitiveness space for retail >> encourages ‘complicity’ in purchase of illicit products from finished goods vendors (“Newcastle” or illegal imports)” (see slide 28)
  • Remedies for Consideration – Illegal Importing" (see slide 37): Objectives: i) Re-establish control over CTFL imports entering South Africa; ii) Reduce criminal activity within value chain; iii) Ensure fair competition in the domestic R-CTFL value chain. a) the DTI to establish senior government task force to urgently resolve illegal importing; b) South Africa follow the Indonesian model - CTFL imports to be restricted to four points of entry into South Africa: Durban seaport, Port Elizabeth seaport, Cape Town seaport, OR Tambo International airport; c) all imports entering South Africa (including via land border posts) to be cleared in one of these four ports of entry only.
  • "Remedies for Consideration – Under-Invoicing of Imports” (see slide 38): Objectives: i) Eliminate criminal activity within the CTFL value chain ii) Re-establish market related pricing mechanisms within the R-CTFL value chain. a) Recommended that the DTI introduce Minimum Specific Tariff (MST) – as per Colombia. Key remedy to eliminate large scale value chain criminal activity. b) Recommended MST as follows: i) US$10 per kg for finished products (clothing, household textiles, footwear, leather goods and accessories); ii) US$5 per kg for fabrics; iii) US$2.50 per kg for yarns. c) Formula is ad valorem tariff (see next section) or MST, whichever is the higher.
Comment
Restricted ports of entry – makes sense. It will mean that imports are easier to control by a small group of dedicated customs officers. But to make all textiles, clothing and footwear made in countries like Lesotho or Swaziland to be cleared in one of the four dedicated ports of entry is absurd. This will undermine South Africa’s stated intention of regional integration!

The consultants recognise that South Africa retailers are ‘complicit’ in the purchase of illicit products from finished goods vendors (i.e. importers). An interesting admission. The South African Revenue Services’ (SARS) customs division runs a “preferred traders” regime (
SEE >>). In this context it would seem to make sense that a condition for any retailer to be accredited as a “preferred trader” would be that they have in place a system that independently checks their own purchases (including those purcahsed through intermediates) for compliance with South African customs laws and regulations. This would mean not only that customs duties are paid (on both finished goods, and the fabrics and garment trims used to make the finished goods), but that goods bought from countries with preferential trade agreements with South Africa are made with rules of origin compliant fabrics / yarns / etc.

Those fashion retailers listed on the stock exchange should put in place corporate instruments, with teeth, to limit smuggling (e.g. this would apply to all products coming through - imported by themselves; through sourcing agents and design houses).

None of the "Masterplan’s" interventions deal with the issue of cheating with the trade rules of origin – especially with the SADC protocol on trade. The SADC trade protocol typically provides that garments made in one SADC Member State can be imported, free of customs duties, into another SADC Member State on condition that the fabrics used to make the garments have been made within a plant in the SADC region. The administrative provisions relating to the management of the rules of origin in the SADC trade protocol need to be strengthened so it is easier to check if they are being abused; and tougher rules of origin verification requirements should also be encapsulated in the "Tripartite" and "Continental" free trade agreements that SACU Member States are currently negotiating. In this regard, since cross border customs co-operation is difficult, provision should be made for private sector contractors (e.g. SGS, Intertek, Bureau Veritas) to undertake compliance with the trade rules of origin inspections.

I can understand the logic of using Minimum Specific Values (MSV) – but using United States Dollars (US$) instead of the South African Rand (ZAR)? How will this work out in the long run - changes to the dollar based reference price every week? The major problem with this proposal on MSV - and I suspect that the consultants are must be aware of it - is that the duties that they have set out will in many cases be far in excess of South Africa's World Trade Organisation (WTO) tariff bindings (i.e. the maximum tariffs that South Africa said they would impose on imports).
SEE HERE >> (see hyperlink on "bound tariffs"). So this proposal - as good as it may sound to many (some textile manufacturers are still having multiple orgasms at the very thought of it) - unless South Africa is prepared to abandon the rules based multi-lateral trading system it most probably will not fly.

Moving to weigh based assessments will involve considerable expense as weigh bridges will have to be installed in all ports of entry. Weigh bridges will cause additional delays in getting goods delivered!

In my view the way to limit the smuggling of textiles and apparel will be to
FIX and PROPERLY RESOURCE SARS. This would mean:
- establishing a dedicated, fully resourced, unit in SARS customs - meaning sufficient finance (to be able to hire large warehouses to detain suspected smuggled goods) and new staff (new staff may not be [yet] corrupted). This unit should only focus on textile/apparel/footwear products
- this SARS' unit should develop real research capacity. For example: an up to date list of benchmarked costs of textile and footwear raw materials; a list of minimum values for products; have the ability to undertake research on import trade data; etc
- this SARS' unit should develop dedicated strategies. For example: one for cross border smuggling from Lesotho/Swaziland/Botswana/Namibia; one for Mozambique; one for Mauritius/Madagascar; one for the rest of SADC; one for OR Tambo airport; one for the port of Durban; one for SA's other ports; etc. Apparently 66% of all South African textile, apparel and footwear imports are cleared by just four clearing agents - thus a strategy should be developed for each of these clearing agents
- training border post customs officers on textiles and apparel – especially with product identification; what products should typically come through these border posts and what should not (e.g. there are no blanket manufacturers in Lesotho so why are blankets coming through Lesotho border posts into South Africa?).

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In the 1990s South Africa’s textile and clothing manufacturers contributed funds to engage a group of consultants (led by a group of private detectives) whose job was to disrupt and/or catch textile and apparel smugglers. Private detectives infiltrated and tracked smuggling rings both inside and outside of South Africa. They trained customs officers. Funding for the Customs Law Enforcement Task Group (CLETG) dried up as the industry hit hard times.

Currently there is one industry stakeholder that has sufficient resources to resucitate this model – the Southern African Clothing & Textile Workers' Union (SACTWU). SACTWU should recently have been repaid a significant loan it made to Sagarmatha (linked to the Independent newspapers group) – it apparently loaned the group R244m (US$16.3m) – half of which should have been repaid in August 2018. (
READ HERE >>) It could take 10% of this loan repayment amount and engage a private sector grouping (led by private investigators) to track down smugglers and secure prosecutions. With the right private sector group engaged (it could include those senior SARS staff forced out of their jobs by the recently deposed, Zuma aligned, SARS' head) I am sure that this would do more in the short to medium term to protect existing value chain jobs than any of the wish-list of SARS interventions.
RESEARCH

Financing the Development of Special Economic Zones in Tanzania”. Supporting Economic Transformation (SET) - a DFID funded programme which provides practical policy support to governments and their partners (including donors and the private sector). Dar es Salaam, Tanzania. 5–6 June 2018.

Synopsis: Tanzania has registered relatively little progress to date in establishing industrial parks and special economic zones (SEZs). None of the SEZ projects included in the country’s Second Five-Year Development Plan (FYDP II) have yet been realised. SEZs and industrial parks were not mentioned in the Minister of Finance and Planning’s latest speech to present the estimates of government revenue and expenditure for 2018/19, and the government appears to be prioritising spending on other infrastructure development over zones. Instead, the private sector is increasingly expected to step in to develop new zones. Securing the necessary finance to develop these zones still appears to be challenging, although negotiations to attract investment into certain zones, such as the Bagamoyo Port project, are more advanced.

Against this backdrop, the SET programme held a two-day workshop in Tanzania to discuss options for financing the development of SEZs and related infrastructure. The workshop agenda and focus were designed in collaboration with Tanzania’s Export Processing Zones Authority (EPZA). It was attended by a range of different stakeholders, including representatives of Tanzanian development finance institutions, Tanzania’s Ministry of Industry, Trade & Investment (through the ministry’s Textile Development Unit (TDU -
SEE >>) and a range of external experts with knowledge of, or interest in, financing and other elements of developing industrial parks and SEZs in Tanzania and elsewhere in the East African region. For the full set of papers see: OVERVIEW HERE >> and EVENT REPORT HERE >> and WORKING PAPER HERE >>.

Comment
Its hard to see the value add of this workshop – the SET is not especially known for their skills in developing economic zones; nor coal face economic zone financing issues. It is known that the funders of the Textile Development Unit (funded by the Gatsby Charitable Foundation SEE >>) some years back (+/-3 years) engaged a consultant to look at the establishment of a Tanzania SEZ - more specifically a textile and apparel zone in Kibaha (25km inland from Dar es Salaam). Surely this international specialist economic zone consultant must have looked at the issue of the private sector financing economic zones – if not, his terms of reference were severely deficient.

It appears, from the outside, as if the TDU is premising a considerable part of its strategy of developing Tanzania’s textile and apparel industry by trying to get a textile and apparel industry economic zone developed - in Kibaha. Some years ago this made some sense. But it has severe limitations. The limitations are that if an EPZ development is green-lighted soon (say starting in January 2019 … which is most probably unlikely) that it will take at least two years to develop the most rudimentary zone. Then an interested apparel investor (of significant proportion) will have to set up and train its staff and become fully operational – this could take another 18 months to two years. But what investor will do this if the African Growth & Opportunity Act (AGOA) expires in September 2025? ... as any investor setting up in Tanzania will surely want to target the USA market. Of course Tanzania / the EAC could negotiate a replacement free trade agreement with the US – but maybe the Tanzania government will not sign the trade agreement (it has still not signed the Economic Partnership Agreement with the EU).

To me any strategy to develop Tanzania’s textile and apparel manufacturing industry
should in the short to medium term comprise the following elements:
  • develop strategies that would encourage existing garment firms to supply the local and regional (EAC) market places (starting with Tanzania government procurement systems)
  • attract any apparel investors that they can to set-up in Tanzania in order to exploit export markets. This will include: a) finding them industrial structures that they can rent; b) the Tanzania government agreeing to provide investors’ (and their buyers) with a reasonable number of work and residence permits for their necessary expatriate staff
  • interventions that would encourage existing textile and apparel plants to expand - especially those textile plants owned by Tanzanians.

DISCLOSURE
I worked for the Tanzania Gatsby Trust, in the period 2009 and 2010, on a project which aimed to develop the country's textile and apparel manufactuing industry.
UPCOMING EVENTS
  • Maroc Sourcing 2018 - Trade Show - 11-12 October 2018. Marrakech, Morocco. For more information: www.marocsourcing.ma
  • Textile Exchange Sustainability Conference - Annual Conference - 22-24 October 2018. Milan, Italy. For more Information: www.textileexchange.org
  • Cotton House Africa - Pan African Cotton Conference - 1-3 November 2018. Kampala, Uganda. For more information: Cotton House Africa
  • Destination Africa - Trade Show - 17-19 November 2018. Cairo, Egypt. For more information: www.destination-africa.org
  • ATF Expo - Trade Show - 20-23 November 2018. Cape Town, South Africa. For more information: www.atfexpo.co.za
  • 77th Plenary Meeting - International Cotton Advisory Committee (ICAC) - Annual Conference - 2-7 December 2018. Abidjan, Ivory Coast. For more information: www.icac.org and SEE HERE >>
  • Sourcing at Magic - Trade Show - 4-7 February 2019. Las Vegas, United States. For more information: www.ubmfashion.com
  • Morocco Fashion & Textile - Trade Show - 28-31 March 2019. Casablanca, Morocco, For more information: www.moroccostyle.net
  • Source Africa - Trade Show - 12-14 June 2019. Cape Town, South Africa. For more information: www.sourceafrica.co.za
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about Mark Bennett - Editor

"The African Cotton, Textiles & Apparel Monitor"
I have almost 30 years' experience working in Africa's cotton, textiles and apparel value chain. Initially I was, for 15 years, a sector trade unionist in South Africa; then, from 2004 onwards, I worked as a development consultant for various Southern / Eastern African governments, and domestic private sectors. In my development activities I have been engaged by private sector foundations, and by DFID and USAID funded contractors. I find it rewarding creating development interventions that help cotton, textiles and apparel stakeholders to better processes, improve productivity, increase sales and add investment. See my full CV at Devex or LinkedIn.
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