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NEWS & RESEARCH FROM THE AFRICAN CONTINENT
(#1 / 2019 - 5 February 2019)
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NEWS

ETHIOPIA – GROWTH TARGETS MISSED, 26 January 2019
In a report presented to the Ethiopian House of Peoples' Representatives, the Ethiopian Ministry of Trade & Industry (MTI) and the Industrial Parks Corporation (IPC) have reported performance downturns over the past 6 months in their respective sectors and subsectors.

The MTI disclosed that Ethiopia's export performance was US$135m less than what it had been in the previous year for the same period. The export target for the past 6 months was U$1.21bn – well below the US$1.96bn target set. The MTI advised that in the past 6 months that manufacturers had encountered shortages of raw material inputs – including cotton – which eventually led them to be less productive.

The IPC presented a performance audit report for the period 2015–2018. According to the evaluation in 2015/16, exports of products originating at the Bole Lemi industrial park was about US$16.9m; the original plan was to export products worth US$130m from the park. Similarly, for the fiscal year of 2016/17 exports from the Bole Lemi park were expected to earn US$40m while actual exports were US$23.8m. For 2016/17 it was planned that exports from the Hawassa Industrial Park were US$1.4m against a planned export performance of US$50m.

In responding to questions on industrial park performance, the IPC blamed the current instability and security crisis for the low output; they further stated that the IPC's mandate was to facilitate investment opportunities for investors rather than exporting products. READ HERE >>

Comment
There is nothing wrong with setting targets … and with dreaming. But why does Ethiopia not set more realistic growth targets. It has been said that the unrealised Ethiopian targets are often doubled in the next planning cycle to make up for losses in the previous cycle. The country should also try to figure out precisely why it is missing the targets it has set; and also look at the reasonableness of the targets initially set.

Maybe its time that Ethiopia's development donor partners should nudge the government to see what are the reasons behind it missing their targets. Perhaps donors, via the Development Assistance Group (SEE >>), could provide the Ethiopian government with a detailed diagnostic of the real issues facing the country's cotton sector, and its textile and apparel manufacturing industry.


ETHIOPIA – ELECTRICITY TARIFF HIKE, 10 November 2018
Following the adjustment of electricity tariffs (ranging between 30% to 90%) industrialists across Ethiopia are criticising the increments. They have requested the tariff to be revised. The new tariffs are applicable for the coming four years and that the rates are segregated on a yearly basis. READ HERE >>

According to a tweet of the Ethiopian Investment Commission (EIC) of 25 November 2018:
"Electricity tariff was not increased rather adjusted. The adjustment was meant to cover the inflationary effect, as the tariff was last fixed more than a decade ago in birr rather than in USD". READ HERE >>

Another Tweet by Anwar of 9 November 2018:
"The new #electricity #tariff #Ethiopia by #Ethiopianelectricutility will see the industry most affected, by as much as a whopping 250-300% rate increase by through 2022. Globally though, the rate is still one of the lowest, thanks to the weak #Birr." READ HERE >>
 
 
Comment
For many years Ethiopia used the claim that it had some of the cheapest electricity around in order to promote manufacturing investment. Some cynical observers commented that "it was cheap – but you had to get it regularly without interruption". They lamented the more than frequent interruptions to the supply of power. I guess electricity in the country is now just that much more expensive … however it still comes with the adage "when one can get it without interruption"!

Of course, it's not all bad news – at least manufacturers in Ethiopia the new tariffs are till 2022 - and can thus use it in their budgetting and costing of orders. A predictable budgetable medium term tariff escalation timeline would be something that many firms in other African garment manufacturers would welcome.


ETHIOPIA – TURKISH TEXTILE-GARMENT FIRM TO BE LIQUIDATED? 29 December 2018
The Development Bank of Ethiopia may soon foreclose on the bankrupted Turkish textile company – Ayka Addis Textile & Investment Group. Apparently, the state-owned bank will begin asset valuations of the plant soon and once completed, it is possible that the plant will be sold. The troubled Group failed to repay the ETH2.8bn (US$98.3m) it loaned from the Bank and another ETH300m (US$10.5m) it borrowed from the Commercial Bank of Ethiopia. The company was established in Ethiopia in 2010 – at one stage it employed over 7,000 workers. READ HERE >>

Comment
Apparently, in 2018, the government of Ethiopia persuaded one international donor to employ an expatriate manager to run the plant … hardly something, in my view, that donor funds should be used for.

The UK funded Enterprise Partners (EP) has stated: "Enhancing the Competitiveness of the Textile Sector:- Concept note development is currently underway for a new intervention based on the learnings from the Ayka turnaround. The concept note is expected to be approved, and the intervention launched in January." (EP Newsletter – 3 January 2019).

Enterprise Partners then stated: (EP Newsletter – 1 February 2019): "The pilot with Ayka is progressing well and the management of DBE [Development Bank of Ethiopia] has approved part of the working capital financing required for the turnaround strategy. The first phase on assessment of DBE's NPL portfolio and its Asset Management Company has been completed and endorsed by the management. Discussions have taken place with the senior management on how to execute the recommendations, start disposing-off some of the repossessed factories and ultimately reduce the NPL position. Next month international experts will be hired to come up with specific distressed companies valuation and disposal policy for the board's approval. EP will organise a consultation session with the World Bank and other stakeholders working on this area for better coordination".

Yes! – this plant does employ many people – but its continued operation does not systemically strengthen the entire Ethiopian textile and apparel value chain. The question should be asked - why did the plant failed? Was it because of the Ethiopian business environment? Was it because the CBE loaned money to the wrong business? If the answer is yes to any of these questions is that what British taxpayer funds should be spent on! Of course, saving the plant may shield the Ethiopian government from substantial embarrassment! I wonder if the banking of political capital by a development project is something that can be scored in a market systems approach! For more on market systems and monitoring and evaluation SEE >>.


KENYA – CHINESE TO CONTROL MOMBASA PORT? 20 December 2018
The Kenyan government risks losing the lucrative Mombasa port to China should the country fail to repay huge loans advanced by Chinese lenders. Also at stake is the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the seaport. The loans were granted for the development of the Standard Gauge Railway which links Mombasa and Nairobi. The rail line was completed in 2017 and cost US$3.6billion to develop. READ HERE >>

Comment
The low use of the rail link (affectionately known as "SGR") has impacted upon Kenya's garment manufacturing industry. It is known that in 2018 the Kenyan authorities – rumoured to be at the instruction of the country's President - virtually hijacked garment exports on a number trucks heading to Mombasa. The trucks were ordered to go to the Nairobi Contaner Deport and place their containers on rail carriages. Apparently, many of these trucks en route to the coast, were without some manufacturer's knowledge or consent. I guess that the government wanted to see increased usage of the line in order that it could pay off its rail line construction debt.

It is interesting is that Kenya exporters would rather use road freight than the high-speed SGR rail link. I wonder why this is? Is road transport cheaper? Is it more reliable? Is it because companies want greater hands-on control of their containers between the movement from their factory to the export port? Are there more things to manage when using rail (i.e. road freight transport to the inland container depot; then rail shipment to the port; then the scheduling of a truck to take the container to the shipping stack)?

Of course the Kenya government could raise road taxes in order to encourage rail use ... but this may raise the ire of truck owners.

I know that many Maseru (Lesotho) based garment exporters will not use the r
ail connection to Durban as they fear their container exports may get lost/robbed, or will not arrive at the port on time.


ETHIOPIA – WOMEN AND LABOUR LAW, 29 November 2018
A workshop organised by the Ethiopian Industrial Federation of Textile, Leather & Garment Workers Union (IFTLGWU), with support from the IndustriALL Global Union and the Netherlands' FNV Mondiaal, has highlighted some of the problems of Ethiopia's labour laws. At the workshop, Ethiopian unions said that they wanted minimum wages to be included in the amended labour laws, and for the rights of workers to be recognised in the industrial parks. READ HERE >>

Comment
It is interesting that unions have stated that they want worker rights to be recognised in industrial parks. I wonder what this means? That there are severe transgressions of labour laws and internationally recognised labour norms?

I wish them well in campaigning for minimum wages. I am sure that the prices paid for electricity, water, wastewater treatment, industrial property rentals, accommodation for expatriate workers, the use of railway infrastructure will be allowed to rise. Ultimately, I guess, it's the Ethiopian working class that will ultimately pay the biggest price for the country's industrialisation.

The ILO has recently launched a Better Work programme in Ethiopia – it is highly unlikely … nay impossible … that they will ever be allowed to go anywhere near the issue of minimum wages. Will they be able, as they did in Lesotho, ever be able to produce some research that states that workers need a minimum wage of XXX a month to survive. I think not!

Recently the ILO's Betterwork published some research on piece rate wage systems in the garment industry. What is the bet that this is something that will eventually be pushed in the Ethiopian Better Work programme (and in many other Better Work programmes in countries where wages are outrageously low)?
FOR MORE ON THE ILO PIECE RATE RESEARCH
"Piece Rate Pay & Working Conditions in the Export Garment Sector"
SEE RESEARCH SECTION BELOW

EAST AFRICA - JOINT COMMUNIQUÉ OF 20TH ORDINARY SUMMIT OF HEADS OF STATE OF THE EAST AFRICAN COMMUNITY, 1 February 2019
PARAGRAPH 11. "The Summit received a report on the review of the textile and leather sector in East Africa with a view to developing a strong and competitive sector that gives consumers better choices than imported textiles and footwear. The Summit directed the Council to conclude the matter and report to the 21st Summit."

Comment
It will be interesting to see what the EAC comes up with. Clearly they are going to have to rethink strategies - the restrictions on the import of worn garments did not work out too well.


KENYA – HELA TAKEN TO LABOUR COURT, 1 November 2018
Allegations of pregnant workers being fired for requesting maternity leave, and those joining unions facing dismissal. These worker and human rights violations have led to Hela Intimates being taken to Kenya's Employment & Labour Relations Court. Hela supplies global brands in Europe and the US including Victoria Secrets and PVH (which owns Calvin Klein, Tommy Hilfiger). In Kenya, Hela employs over 2,500 workers. Apparently, the company pays a minimum wage of Ksh12,000 (US$116) per month instead of Ksh14,000 (US$136) for machine operators. READ HERE >>


KENYA – MINIMUM WAGES FOR EPZ WORKERS, December 2018
An Export Processing Zone Wages Council, which would deal with matters pertaining to wages, productivity and the training of workers, could be established by the Ministry of Labour. READ HERE >>

Comment
What has happened to the Kenyan minimum wages' increase for the period 2018/2019 that should have been implemented on 1 May 2018? It seems like this increase was only approved by the Minister on 18 December – and then only gazetted in mid-January 2019 … backdated to 1 May 2018. It appears that workers got a 5% increase! This was the same increase that the President of Kenya announced at the 2018 May Day rally. In May 2018 it was reported that many Kenyan employers were not impressed by the 5% announcement. There were press reports where some pointed out that in the previous year (ED: a Kenya election year!) that they had to absorb an 18% increase to the country’s minimum wage – implying that for 2018/19 they should not have any increase at all.

One wonders if this increase may induce some Kenyan garment employers to attempt to reduce the incentive payments that are typically paid to their employees. Recently there have been a number of strikes in both Bangladesh and Mexico when employers rolled back bonus / incentive payments after wage increases.
.

ZIMBABWE – GOVERNMENT INTERVENTIONS NEEDED, 30 January 2019
The Zimbabwe Clothing Manufacturers' Association (ZCMA) says its members could create 5,000 jobs in 2019 if the Zimbabwean government intervened as it had indicated that it would. The ZCMA chair stated that the inclusion of school wear in Statutory Instrument (SI) 122 encouraged the growth in the industry. According to the ZCMA chair government commitments have not been actioned and so the local production of the majority of school wear remains a missed opportunity for the sector and the country. READ HERE >>

Comment
SI-122 of 2017 expanded the list of items requiring a Zimbabwe import license. The statutory instrument does not give tariff codes for school uniforms [EDITOR: FOR THEY DO NOT EXIST!] and neither does it define what a school uniform is thus making it difficult for traders to understand what exactly is being controlled. The SI-122 measure is supposedly aimed at encouraging the development of a Zimbabwean clothing manufacturing industry.

Interestingly, South Africa has also recently gone down the route – for import customs tariff purposes - of defining a tariff preference for school wear. SACU's Customs tariff rebate 311.40 / 5513.21 / 01.06 that was gazetted (SEE >>) allows for the import of select categories of fabrics to make shirts. The Gazette notice reads: "Woven fabrics of polyester staple fibres, containing 60 per cent or more by mass of such fibres but not exceeding 70 percent, mixed mainly or solely with cotton, containing yarns with a dtex of 115 but not exceeding 145, of a mass exceeding 100 g/m2 but not exceeding 119 g/m2, dyed, plain weave, in such quantities, at such times and subject to such conditions as the International Trade Administration Commission (ITAC) may allow by specific permit for the manufacture of shirts classifiable in tariff headings 62.05 and 62.06".

However, the guidelines issued by ITAC have added the wording "… manufacture of SCHOOL shirts classifiable …". I wish them luck in enforcing this, for these are only guidelines!


ZIMBABWE – COTTCO TO GET OWN FARM? 28 January 2019
The Cotton Company of Zimbabwe (Cottco) has applied for 40,000 hectares of land in the Mbire district as it wants to venture into cotton farming. The company said the demand for Zimbabwean cotton globally was high and they had applied for 20,000 hectares in Kanyemba, and another 20,000 hectares in Mushumbi for irrigated cotton production. READ HERE >>


ZIMBABWE – POSSIBLE CORRUPTION IN COTTCO, 2 November 2018
An investigation by the Special Presidential Prosecution Unit has unearthed a cartel of senior executives at Cottco, together with a group of high-profile politicians, as being behind a spate of illegal cotton trading in the country. READ HERE >>

Further charges were slapped (on 13 November 2018) on some of the Cottco directors, by the Zimbabwe Anti-Corruption Commission for allegedly misappropriating US$10,3m from the parastatal. READ HERE>>


ZIMBABWE – AN EL NINO THREAT FOR COTTON, 8 November 2018
Cotton farmers in Manicaland who benefited under the Presidential Inputs Scheme for the 2018/19 season are optimistic of a productive season regardless of the El Nino threat forecast by the Meteorological Services Department. READ HERE >>


AFRICA – EL NINO ALERT, 10 January 2019
The Climate Prediction Center/NCEP/NWS and the International Research Institute for Climate & Society have advised that an El Niño is expected to form and continue through the Northern Hemisphere spring 2019 (~65% chance). READ MORE >>


TANZANIA – COTTON PRICE, 30 January 2019
The Tanzania government is set to increase the price paid to cotton farmers to TZS2500 per (US$1.08 ) kilogram in the 2019/2020 season from the current TZS1,100 (US$0.48) following a surge in prices in international markets. READ HERE >>


TANZANIA – GOVERNMENT SUPPORT FOR COTTON SECTOR, 17 January 2019
The Tanzania government has injected TSh7bn (US$3m) into the cotton growing sector to support the distribution of insecticides, and to revive the ginneries. The government plans, for 2018/19 growing season, to double the country's cotton production to 440,000 tonnes from 220,000 tonnes the previous season. A target of 600,000 tonnes is has been set for the 2019/20 season. Apparently, the Tanzania government will initiate a programme to improve the textile sub-sector by mobilising small-scale business operators to engage in tailoring and cotton spinning. READ HERE >>


TANZANIA – GOVERNMENT BANS GMO TRIALS, 23 November 2018
The Tanzania government has surprised many with its decision to ban all GMO trials in the country. Members of the research community were in shock that the government did not only ban ongoing trials on GM seeds but also directed the Tanzania Agriculture Research Institute (TARI) to destroy evidence of the research immediately. Newly appointed Agriculture minister stated that TARI had contravened government approval procedures as they were supposed to give the agriculture ministry the findings of research to enable it to be able to consult with other ministries to satisfy ourselves that the GMO seeds were safe and did not carry any risks to humans. READ HERE >>


MOROCCO – TURKISH IMPORTS CAUSE JOB LOSSES, 28 January 2019
The Moroccan Secretary of State for Foreign Trade has stated that the continuous increase in Turkish textile imports to Morocco has caused the loss of approximately 46,000 jobs between 2013 and 2016. READ HERE >>


ETHIOPIA – ITALIAN INVESTMENT IN ETHIOPIA, 23 January 2019
The Cavico Group, an Italy-based textile conglomerate, which has set up a US$100m plant in the newly inaugurated Kombolcha Industrial Park. READ HERE >>


ETHIOPIA – INDIAN INVESTMENTS, 21 January 2019
KPR Mills (SEE >>), a significant company in the Indian textile town of Tirupur, has advised that it has started a production unit in Ethiopia to take advantage of lower labour costs, duty savings, and shorter shipment times to the US and European markets. KPR joins a clutch of other Indian textile and apparel plants, such as Raymond, Arvind, Best Corporation and JJ Mills, that have set up in Ethiopia mainly because their Made-in-India products are finding it difficult to take on the competition from Bangladesh, Cambodia and other nations. READ HERE >>


ETHIOPIA - GOVERNMENT TO IMPROVE LOGISTICS SECTOR, 12 January 2019
As part of the ongoing economic reform program, the Ethiopian government is working to overhaul the national logistics sector. The government is planning to cut the import-export transit time by half. A worksheet plan issued by the Office of the Prime Minister has indicated that high cost of logistics is undermining the country’s overall trade competitiveness. The document cited limited participation of the private sector in the logistics sector as one of the shortfalls in the sector. It stated that lack of modern systems and inefficient customs clearance procedures are some of the key challenges.

The expected outcome of the logistics turnaround strategy is to reduce the import-export transit time by half by 2020. “Reduce the number of documents required for import and export by half, reduce the average duel time of imported goods to two days in dry ports and increase general cargo carried by multi-modal transport system coverage to 90%,” the document stated. READ HERE >>

Comment
All reports are that logistics in Ethiopia are horrendous. The World Wank's 2019 "doing business" indicators recorded the following with regards its "trading across borders" metric.
Source: World Bank Doing Business 2019

Its astounding that the Ethopian government has set itself the target of reducing the time targets by XX amount by XX date. I am 100% sure it will miss them ... and not by a small margin. Setting economic targets and missing them seems to be a national sport of Ethiopian leaderships!


SOUTH AFRICA – VALUE CHAIN RETAILER TRADING RESULTS

PEPKOR GROWS QUARTERLY REVENUE BY 6%
South African retailer Pepkor Holdings, previously Steinhoff Africa Retail (STAR), said on Monday its quarterly revenue rose by 6.1% in the three months to end-December. The clothing and furniture retailer said revenue for the quarter rose to R19.5bn (US$1.43bn), while the clothing and general merchandise segment reported sales growth of 6.1% compared to the same period a year ago. READ HERE >> and HERE >>. For a fairly good profile of Pepkor's operations outside of the Southern African Customs Union (SACU) in Africa. READ HERE >>

MR PRICE TRADING UPDATE FOR 9 MONTHS ENDED 29 DECEMBER 2018
Group retail sales and other income for the 9 months ended 29 December 2018 increased 5.8% over the corresponding period in the prior year. Mr Price expects the trading environment in Q4 to remain very challenging. It says that global and domestic market uncertainty continues and improvements in the economy and consumer health are likely to be muted until the risk events settle and the general elections in South Africa take place in May 2019. Key focus areas for it will be inventory management (including clearing Q3 excess stock and controlling Q4 new inputs) and delivering merchandise that offers great value to our customers. READ HERE >>

WOOLWORTHS TRADING UPDATE FOR 26 WEEKS ENDED 23 DECEMBER 2018
Group sales for the 26 weeks ended 23 December 2018 increased by 1.9% (+2.7% in constant currency) compared to the 26 weeks ended 24 December 2017. In South Africa, Woolworths Fashion, Beauty and Home (‘FBH') sales declined by 2.0% (comparable stores were 2.4% lower), impacted by a significantly smaller winter clearance sale in the first quarter. Sales in the second quarter of the year have, however, shown positive growth. Price movement was 1.7% for FBH, (and 0.8% for "fashion"). READ HERE >>

THE FOSCHINI GROUP (TFG) 9 MONTH TRADING UPDATE
TFG consolidated turnover for the 9-months to 29 December 2018 increased by 22.7%. This growth was underpinned by strong Black Friday trade as well as strong December trade across all the business segments. The impact of Black Friday, in pulling forward what would have traditionally been December sales, is becoming more pronounced, especially in certain merchandise categories such as cosmetics and jewellery. Turnover growth in the various merchandise categories for TFG Africa were as follows: clothing 12.2% (same store growth 8.8%); homewares 8.4% (same store growth 3.8%); cosmetics 1.2% (same store growth 0.9%); jewelry 3.6% (same store growth 2.4%) and cell phones -1.8% (same store growth -3.0%). READ HERE >>

EDCON – IS APPAREL RETAILER TOO BIG TO FAIL?
The plan to save struggling retailer Edcon rests equally on securing a new investor, and reaching an agreement with the retailer's landlords and lenders, Edcon group chief executive has said. The retailer is in the process of a significant restructuring and a recapitalisation effort to keep its doors open. The Public Investment Corporation (PIC) is among the investors it has approached for funding. The PIC manages around R2-trillion in assets on behalf of entities like the Government Employees Pension Fund. Edcon needs roughly R3-billion (US$225m) for its recapitalisation plan to succeed, though how much of this money will come from a new investor — such as the state-owned asset manager — is not clear. Edcon accounts for around 10% of shopping centre space, according to the South Africa Property Owners Association (SAPOA), and there is concern that its closure would hurt the retail property sector. READ HERE >>

Comment
Should Edcon collapse there will be a dramatic impact on Southern Africa's apparel manufacturing industry. It is possible that garment (and textile) manufacturing plants in South Africa, Swaziland, Lesotho, Botswana, Mozambique, Mauritius and Tanzania will be negatively affected. Of some concern to South Africans will be the future of Celrose - Edcon's garment manufacturing facility located on the North Coast of South Africa's KwaZulu-Natal province. SEE >> and SEE HERE >>

There are rumours that Celrose – or part of it – may be up for sale. So who would be the potential buyers? Anyone taking a large shareholding will obviously be concerned that it is heavily reliant on orders from Edcon stores.

South Africa's Industrial Development Corporation's (IDC) name has been talked about as a possible investor. Is it possible that the Southern African Clothing & Textile Workers' Union (SACTWU) – which already directly owns significant textile and apparel interests (in South Africa and Mauritius) may be interested? SACTWU certainly has the financial resources – in December 2018 it sold R408m (US$30.6m) worth of its shares in an investment it had in Tsogo Sun (a gaming and leisure group). READ HERE >>

Of course, it is possible that the cash SACTWU obtained from this transaction may already be allocated to some other venture. Some time ago it loaned about R244m (US$18.3m) to a South African media group (READ HERE >>), and the owner of this group is reportedly in severe financial difficulty. There are also rumours that SACTWU's directly owned investment - TCI apparel (SEE >>) – is requiring support to sustain operations.


GHANA – REDUCING SMUGGLING INITIATIVE, 21 January 2019
The Ghanaian government has suspended plans to implement the tax stamp policy for the textile industry in January 2019. The delay is to ensure that additional security features are added to the stamp. In 2018 the Ghanaian government revealed plans to use tax stamps on textiles to curb textile smuggling. READ HERE >>


GHANA – TAX INCENTIVE FOR LOCALLY MADE TEXTILES & APPAREL, 8 January 2019
The local textile industry has received a boost following the government's decision to zero-rate Value-Added Tax on the supply of locally manufactured textiles for three years. The move is to help reduce their cost build up, make the local textile industry price-competitive, and to help local firms to compete with the influx of cheap textile products from other parts of the world. READ HERE >>


SOUTH AFRICA - SCHOOL UNIFORM SUPPLIES, 9 January 2019
South Africa's Competition Commission has urged schools to adhere to the school uniform guidelines aimed at curbing anti-competitive behaviour at schools. The investigation into anti-competitive behaviour at schools was concluded in early 2018. The probe established that some schools still had exclusive contracts with one supplier and that these contracts didn't go through a competitive and transparent bidding process.

The Commission states that it has been agreed that all parties should follow government school uniform guidelines, which include:
  • School uniforms should be as generic as possible such that they are obtainable from as many suppliers possible
  • Exclusivity should be limited to items that the schools regard as necessary to obtain from pre-selected suppliers, e.g. badges.
  • Schools should follow a competitive bidding process when appointing suppliers.
  • Schools should appoint more than one supplier to give parents more options.
  • The concluded agreements should be of limited duration.
READ HERE >>

Comment
There is more to this than meets the eye. An investigation was launched with great fanfare. Stakeholder representations were accepted; glory was shone on the government for intervening on the cost of uniforms. Then! Well not much. In fact … nothing! Now, this is the result. A whimper … a restatement of basic school uniform policy and competition law 101!


SOUTH AFRICA – HARD TO REPLACE DICKY HEADS TO BRITS, January 2019
Long-standing CEO of Gelvenor Textiles (SEE >>), Dicky Coetzee, has left the company and has joined Brits Non-Wovens (SEE >>). Brits is a part of the Deneb Investments group (which also includes: Frame Knitting Manufacturers, Winelands Textiles (major investment Hextex), Romatex Textiles, a series of factory shops, and some international clothing and sports brands). Deneb Investments is a subsidiary of Hosken Consolidated Investments (HCI) – both are listed on the Johannesburg Stock Exchange. HCI and Deneb have strong connections to the Southern African Clothing & Textile Workers' Union (SACTWU).

Comment
Dicky Coetzee will be hard to replace. Gelvenor is a sophisticated operation – they have made material that is used to make parachutes in Russia. Gelvenor is controlled by private equity investor Jacobs Capital (SEE >>). This Durban based outfit used to own a share of Da Gama Textiles, and it still owns MB Workwear (SEE >>). Its been rumoured for some time that MB Workwear may be battling – there have been retrenchments at its KwaZulu-Natal province operation; parts of its administration was moved to the Hammarsdale offices of Gelvenor; and, its attempt to set-up a lower cost production facility in Lesotho came to a halt when it was beaten to an industrial premise formerly occupied by the now liquidated Peter Blond & Associates. I suspect that Jacobs are gonna have a very tough time finding a replacement CEO.


KENYA – WORN CLOTHING IMPORTS RISE, 20 January 2019
Kenya's import of second-hand clothes in the first three quarters of 2018 was 134,000 tonnes - just 1,800 tonnes shy of 2017 full-year importation. However, according to the Kenya Association of Manufacturers (KAM), the smuggling of textiles and apparel products is a concern too. READ HERE >>

Comment
KAM is now arguing that smuggling is one of the main impediments to the growth of the Kenyan textile and apparel manufacturing industry. Remember it was KAM that led the East African charge to limit the import of worn clothing; and, they were the first to retreat in response to a US threat to remove the country's AGOA privileges. Of course they are right ... smuggling is a huge issue.

KAM is now apparently lobbying that all finished textile and apparel imports should be subjected to blanket import duties of up to Sh2m (US$19.7k) for a 20-foot container, and Sh4 million (US$39.4k) for a 40-foot container. This, they state, will protect local companies from unfair competition. Its likely that the proposal to tax containers with a set a customs tariffs is not compliant with their WTO bindings. But hey! … making non-WTO-compliant suggestions relating to textiles and apparel customs tariffs is not new. In South Africa, government consultants have recently proposed to increase duties way beyond the country's WTO bindings.

It's a case of sense … becoming nonsense! What is it that textile and apparel industrialists are thinking when they think their countries can thumb their noses at the rules of multilateral institutions. Many are like "mini-me-Trumps" – severely short on grey matter … however … unlike Trump short on any power!


KENYA – POLICE UNIFORMS TO BE MADE LOCALLY, November - December 2018
It has been reported that Moi University has entered into a deal with the Government to produce the fabric to be used in making the new police uniform. Moi University "owns" Rivatex. READ HERE >>

Apparently, the country's 60,000 police officers will have to wait for at least 2 years to get all the required uniform which are being manufactured locally. General Duty Officers were expected to wear the new uniform in December 2018, but that did not happen raising concerns related to local manufacturers' capacity to produce the uniforms. READ HERE >>

Following media reports on the alleged shortage of material for the new police uniforms, the Kenya Association of Manufacturers (KAM) has denied there is a shortage of fabrics and have emphasised that local factories can produce fabrics that meet the requirements, standards and production quantities needed by the police. READ HERE >>

The modernisation of Rift Valley Textiles (RIVATEX) is at 82%, according to the project's main financier – the EXIM bank of India. It is hoped that the plant will be commissioned in April 2019. The modernisation will reportedly enable the plant to process 40,000 bales of cotton annually. India EXIM contributed KSh3bn (US$29.5m) to the factory's modernisation; the Government of Kenya contributed KSh2bn (US$19.7m). READ HERE >>

Comment
How many times have I heard textile manufacturers say that customs tariffs on select fabrics should not be reduced because they can make the fabrics themselves? Then government officials – often, like sheep - believe them! Rather than asking questions like: "when last did you make the fabrics in viable quantities?"; "would your product pass rigorous independent quality tests?"; "how much more expensive will your product be relative to the imported product?"; "from an order being placed to delivery how many days would that take?"; "if you received sizable orders for the said product would this mean that you would have to dump other product offerings?".


ETHIOPIA – HAWASSA INDUSTRIAL PARK PROGRESS, 27 December 2018
In the past 2 years 20 textile and apparel firms in Ethiopia's Hawassa Industrial Park, whose construction was completed in July 2016, have earned US$38m in export revenues. Thus far the industrial park has created job opportunities for 23,000 Ethiopians. READ HERE >>

Comment
Remarkably slow progress – perhaps in part explaining why PHV (the US brand that has focused its Africa purchasing from Hawassa) may have restructured the composition of its expatriate hub staff managing production in Ethiopia (and in Kenya).


ETHIOPIA – JIMMA INDUSTRIAL PARK INAUGURATED, 8 December 2018
The Chinese built Jimma Industrial Park, in Ethiopia's Jimma town (350km west of Addis Ababa) has opened. The US$61m park is expected to host investors in the light manufacturing sectors - mainly agro-processing, and, textile/apparel products. The park has an area of 75 hectares; and consists of 9 industrial buildings. READ HERE >>


ETHIOPIA – TEXTILE & APPAREL FORUM WITH KOREAN INVESTORS, 7 December 2018
A forum aimed at enhancing ties between Ethiopia and South Korea in the textile and apparel investment area has been held Addis Ababa. READ HERE >>


EGYPT - TEXTILE CITY DEVELOPMENT, 17 January 2019
The construction of the first phase of Egypt's textile and garments city in 50% complete - the entire phase is scheduled to be finished by the end of 2019. The first phase will comprise 600,000 sqm and will house 150 factories. The entire project is being developed at a total cost of US$2.1bn over an area of 3.1m square meters that would house a total of 592 textile units. READ HERE >>


EGYPT – WILL IT WIN FROM US-CHINA TRADE WAR? 13 December 2018
The real winner of any future US-China trade war might very well be Egypt. With lingering uncertainty, rising labour costs in East Asia and a scheme that gives Egyptian manufacturers tax-free access to the US market so long as Israeli materials are used, Asian textile and garment manufacturers and Western buyers are increasingly turning to Egypt. READ HERE >>


EGYPT – GLOBAL CONSULTANTS TO ADVISE GOVERNMENT, 5 November 2018
Egypt's Public Enterprise Sector Minister has held talks with a delegation of Werner International - management consultants to the world textile, apparel and fashion industry - on administrative measures to develop companies affiliated to the Cotton & Textile Holding Company. READ HERE >>


EGYPT – PROTECTING THE BRAND OF EGYPTIAN COTTON, 24 December 2018
The Egyptian government has created an official steering committee to safeguard the future of the Egyptian Cotton brand. The new committee is made up of government and trade representatives has been appointed by the Minister of Trade & Industry. It will be responsible for the licensing and promotion of Egyptian Cotton globally and will police the integrity of the supply chain to ensure full compliance, traceability and transparency. The Cotton Egypt Association (CEA), which until now has had sole responsibility for licensing and promoting the luxury cotton brand, has been incorporated into the new structure. READ HERE >>


ZIMBABWE – INVESTMENT NEWS

US$40M INDIAN TEXTILE INVESTMENT, 23 December 2018
One of India's larger textile firms, Shreejikrupa Spinners, is considering investing over US$40 million in setting up a polyester manufacturing plant in Bulawayo. READ HERE >>

DAVID WHITEHEADS RESUSCITATION, 18 December 2018
David Whiteheads is in negotiations with two unnamed investors who want to revive the struggling textile firm. The company resumed operations in 2018 following two years of inactivity after receiving a US$2m bailout from the Reserve Bank of Zimbabwe. David Whiteheads used to produce 20million metres of fabric per year and employed 3 000 workers. READ HERE >>

MERSPIN UPGRADE, 19 December 2018
Bulawayo-based Merspin has secured technical support from a Swiss company to redesign the local plant and recommend new equipment for a proposed factory upgrade. The company closed down in 2010. READ HERE >>

Comment
David Whitehead Revival! Again! How many more times must we read this!

It surprising all these reports about potential textile and apparel value chain investors and partners are coming out now. Could this be a ploy by some existing Zimbabwean clothing manufacturers to say to the government – "this industry can grow – more investors will come in – but you have to let all of us have access to foreign exchange so that we can buy inputs".


NIGERIA - MASSIVE SMUGGLING OF TEXTILES & APPAREL, 13 December 2018
The Minister of State for Industry, Trade & Investment has said the cumulative value of textiles and garments imported or smuggled into the country annually was estimated at US$4.2 bn. The Minister stated that US$329m worth of revenue was lost to importation and smuggling of textiles and garments per annum. READ HERE >>


CAMEROON – FUNDING SUPPORT FOR COTTON PRODUCTION, 15 January 2019
The Arab Bank for Economic Development in Africa (BADEA) will loan the Government of Cameroon funds to enable the Cotton Development Company (SODECOTON) FCFA15bn (US$26m) to import fertilisers for cotton production; and FCFA6bn (US$10.4m) to improve the production capacity of the company's factories. READ HERE >>


CAMEROON – COUNTRY TARGETS 295K TONNES, 11 December 2018
The Cotton Development Company (SODECOTON) is targeting a production of 295,000 tonnes of cotton during the current 2018-19 campaign. READ HERE >>


CAMEROON – U-TURN ON GMO COTTON, 19 December 2018
Cameroon's cotton development company (Sodecoton) which, until recently, said it will introduce GMO cotton to boost its production has now revoked this decision. It has stated: "The experimentation of genetically modified cotton was conducted for a research purpose. This research stopped during the 2017-2018 crop year, in accordance with the authorisation received from the Ministry of Environment, Nature Protection and Sustainable Development (Minepded), on the implementation phase in an open environment. As this experimental phase was completed since April 2018, and so far no regulation has been obtained from the public authorities to continue this activity, Sodecoton has put an end to this research component". READ HERE >>


UGANDA – BAN WORN CLOTHING IMPORTS DEMANDED, 11 January 2019
Ugandan cotton ginners under their umbrella organisation, the Uganda Ginners & Cotton Exporters Association, have asked their government to ban the import of second-hand clothes. They argued that the import of second-hand clothes into Uganda undermines government`s efforts to promote local industries. READ HERE >>


TUNISIA – GARMENT WORKERS WAGES INCREASE BY 7%, 2 January 2019
The Tunisian Textile & Garment Federation (FTTH) has signed an agreement with the country's National Labour Union (UGTT) that will increase wages by 7% for each year until 25 December 2020. Typical garment worker wages in Tunisia range from US$158-183 per month. READ HERE >>


SOUTH AFRICA - ORGANIMARK DEAL, 20 November 2018
OrganiMark will work with Sweetbridge to deliver trade financing for sustainable cotton in a best practice platform for integrated value chain management. Sweetbridge is an open source second layer blockchain-based financial system that utilises a triple entry accounting protocol to provide continuous assurance and real-time audit of accounting treatments and financial statements. Sweetbridge and OrganiMark provide a US$20 million deal structure to finance the integrated value chains they support in South Africa. Sweetbridge's foundational protocols will provide cheaper cost of capital, near instant payments, reduced error rates whilst making any fraud all but impossible, for the entire value chain including major retail brands. READ HERE >>


SOUTH AFRICA – DOWNSTREAM VALUE ADD TO COTTON & MOHAIR, 22 November 2018
Role players in the domestic cotton and mohair industries have joined forces to ensure that a greater portion of natural fibres produced in South Africa is also processed and consumed in South Africa. READ HERE >>


SOUTH AFRICA – COMPETITION TRIBUNAL FINES TENDER CHEAT, 28 NOVEMBER 2018
The Competition Tribunal has confirmed a settlement agreement with Eye Way Trading which engaged in collusive tendering when responding to a tender issued by National Treasury for the supply of fabric used to make uniforms for the Department of Correctional Services, the South African Airforce and South African Military Health Services. In the settlement agreement Eye Way Trading confirms that the conduct has ceased and agreed to pay a penalty of R115,000 (US$8,600). READ HERE >> and READ HERE >>


KENYA – CHINESE SILK COMPANY TO SET UP, 4 November 2018
The world's largest producer of silk, Guangdong Silk-Tex Group, has announced plans to set-up in Kenya. The company will establish a silk processing factory in the Athi River EPZ, and a silk farm elsewhere in the country. The cocoon farm will comprise an estimated 8,237 acres of land. The venture is expected to create over 300,000 jobs. READ HERE >>

Comment
300,000 jobs! Apparently! Yeah! Yeah!


RWANDA – SILK PROCESSING VENTURE, January 2019
The Rwanda Silk Processing Factory, which is a result of a partnership between a Rwandan and Korean firm, and the National Agriculture Exports Development Board will soon be established in the Kigali Special Economic Zone. The plant's Managing Director stated that in 2019 they would export 20 tonnes of silk which will generate US$800k. He stated that by 2025 that exports should be over US$100m. He said that to date more than Rwf776m (US$880k) has been invested in the factory. READ HERE >>

Comment
US$100m in exports! Apparently! Yeah! Yeah!


SOUTH AFRICA – FALKE SOCKS PROFILE, 26 November 2018
Instead of importing, like so many other clothing brands, nearly half of the 7.5-m pairs they produce locally are exported — mainly to the US, but also to New Zealand and recently, since February this year, to Australia. Annual exports to the US now number 3.5-m pairs. READ HERE >>



GHANA – DEDICATED PORTS OF ENTRY FOR TEXTILES, 1 November 2018
Traders of textile products in Accra have raised concerns about the government’s decision to designate the Tema Port as the only entry point for all imported textile products. The traders argued that the new measure would kick traders who import small quantities through the Aflao border out of business. “This decision does not favour us at all. Some of us do not have the capital to import a container full of textile products and so we go through the Aflao border to Togo and purchase the 100 or 200 pieces we can afford to run our business. In bringing it to Ghana, we pay the required duties at the border. Introducing a singular entry point will collapse our business,” said one trader. READ HERE >>

Comment - A South African Angle
Dedicated ports of entry have the potential to focus the anti-smuggling efforts of customs officials. However, they can be implemented stupidly and are merely measures to significantly impede legitimate trade. Currently a team of South African government appointed consultants is looking at stitching together a strategy (called the “Masterplan”) to develop the country’s textile and apparel (and footwear) manufacturing industry. One of the proposals the consultants have come up with are dedicated ports of entry for textiles / apparel / footwear. On the face of it it all seems rather sensible … but then one gets to the detail of their proposal.

The Masterplan consultants state:
“[It is r]ecommended that South Africa follow the Indonesian model - CTFL [clothing/textile/footwear/leather] imports to be restricted to four points of entry into South Africa: i) Durban seaport, ii) Port Elizabeth seaport, iii) Cape Town seaport; and, iv) OR Tambo International airport. All imports entering South Africa (including via land border posts) to be cleared in one of these four ports of entry only."

The problem is – how will manufacturers in Lesotho, eSwatini (Swaziland) and Botswana – all members of the Southern African Customs Union (SACU) clear their textile / apparel / footwear goods into South Africa? Will they be required to transport them all the way to the specified ports mentioned in order to clear goods that are destined for South Africa? The proposal is silly; and has clearly not been well thought through! Imagine how South African retailers would react if they were told that the only way their clothing and footwear products could enter Namibia would be via the port of Walvis Bay?; or could enter Swaziland only through the Piggs Peak border post?. Hopefully South Africa’s government
will reject the proposal. Dedicated ports of entry "Yes" - but a rational approach is required.


SOUTH AFRICA - NATIONAL MINIMUM WAGE INTRODUCED, 27 November 2018
With effect from 1 January 2019 South Africa's national minimum wage of R20 (US$1.50) per hour has come into force. READ HERE >

Comment
The national minimum wage will affect all sectors of the economy - including the textile and
clothing manufacturing
sector. One of the unions leading the charge on getting the National minimum wage introduced has been the Southern African Clothing & Textile Workers' Union (SACTWU).

For years SACTWU has had problems in getting employers in many parts of the country to abide by the statutory
minumum wages set by the country's national bargining council for the clothing manufacturing industry (SEE >>). The area of Newcastle in the country's KwaZulu-Natal province has been a particular problem. The union, and sector wage compliant employers, have faced many up-hill battles in getting rogue employers to abide by the minimum wage agreements made law by the government. However they have been very reluctant to enfoce the minimum wage agreements for it may have resulted in factories closing - and this may have had political consequences for the union which is a close ally of the ruling African National Congress (ANC) party. By getting the government to enforce the minimum wage, rather than the bargaining council, the union is not seen to be destroying jobs. The new minimum wage has been tactically set at a level that it is insignificantly slighly higher than the statutory minimum wages in the Newcastle area.
 
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PROJECT NEWS

EUROPEAN UNION & ETHIOPIA
24 January 2019

The EU Commiioner for International Cooperation & Development and the Ethiopian Minister of Foreign Affairs signed three new programmes to promote sustainable economic growth and job creation in Ethiopia.
 
Total Financing: €130 million.

Broad Programme Actions
: The 3 programmes are part of the implementation of the ‘Africa-Europe Alliance for Sustainable Investment and Jobs', which aims to deepen the economic and trade relations between the two continents, in order to create sustainable jobs and growth. These financing agreements between the EU and Ethiopia support job creation (€50m), sustainable energy (€35m) and the establishment of agro-industrial parks in Ethiopia (€45m). The Job Compact aims at supporting Ethiopia’s industrialisation strategy. The job compact is an agreement between the Government and international partners in order to create decent employment opportunities for Ethiopians and refugees.

For more information READ HERE >>
 
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RESEARCH

Piece Rate Pay and Working Conditions in the Export Garment Sector”. Floriana Borino. Discussion Paper No. 28., for the ILO Better Work Programme. Geneva, Switzerland. December 2018.

Synopsis: Garment industry workers are more likely to be concerned with sexual harassment and verbal abuse and more worried about workplace accidents and injuries if they are paid partially by the piece rather than by the hour.

The ILO discussion paper explored the impact of piece rate pay on wages and working conditions, using data from around 6,000 workers employed in garment factories in Vietnam, Indonesia, Jordan, Haiti and Nicaragua. The factories are all registered with Better Work, a flagship ILO programme jointly managed by the International Finance Corporation, which improves working conditions and competitiveness in the global garment industry. The research found that workers whose pay is jointly determined by hourly pay and a piece rate (described as partial piece rate pay) are more likely to report reduced emotional and physical health compared to workers paid by the hour. Typically in these systems, workers receive the hourly base salary, which is often very low, and the incentive pay, based on the output, is obtained only if a certain output threshold is reached.

Patrick Belser, Senior Economist with INWORK said of the findings: “Piece rate can be a win-win for both employers and workers, but it needs to be designed in a fair way that is consistent with decent work objectives. Involving workers and trade unions in the design of pay regimes will go a long way to offset some of the negative impacts of piece rate wage systems. There is also a role for governments to provide a robust legislative framework and to ensure that all workers, including those who are paid piece rates, earn at least the minimum wage.” The full report can be found HERE >>.



Weaving Better Working Conditions into Rwanda’s Garment Industry: A Market Systems Analysis in Rwanda's Garments & Tailoring Sector”. International Labour Organisation. Geneva, Switzerland. August 2018.

Synopsis: The garments and tailoring sector in Rwanda is in its infancy and most businesses in this sector are largely informal. Sida's Promoting decent work in Rwanda’s informal economy programme is specifically tasked with trying to improve job quality for informal workers. This report sets out potential intervention areas which can address the root causes of key market constraints to better job quality. It looks at how to strengthen the garments and tailoring market system and improve job quality for the informally employed. The full paper can be READ HERE >>.
 
UPCOMING EVENTS
  • OECD Forum on Due Diligence in the Garment and Footwear Sector - Conference - 13-14 February 2019. Paris, France. Afternoon session on 14 February 2019: “Due diligence and responsible investment in emerging markets”. This session will explore how companies and investors can conduct due diligence in emerging markets in global garment supply chains, as well as hearing the experiences of producer countries, including Ethiopia. SEE >>
  • Morocco Fashion & Textile - Trade Show - 28-31 March 2019. Casablanca, Morocco, For more information: www.moroccostyle.net
  • Intertex Tunisia - Trade Show - 4-6 April 2019. Tunis, Tunisia. For more information: www.intertextunisia.com
  • Source Africa - Trade Show - 12-14 June 2019. Cape Town, South Africa. For more information: www.sourceafrica.co.za
  • Destination Africa - Trade Show - 9-11 November 2019. Cairo, Egypt. For more information: www.destination-africa.org
  • Africa Sourcing & Fashion Week (ASFW) - Trade Show - 9-12 November 2019. Addis Ababa, Ethiopia. For more information: www.asfw-online.com

EDITOR COMMENT!
OH THIS IS GONNA BE INTERESTING - TWO MAINLINE AFRICAN TEXTILE & APPAREL SOURCING EVENTS HELD AT THE SAME TIME ... THE ASFW AND THE DESTINATION AFRICA TRADE SHOWS ! SOMEONE IS GONNA BLINCK AND CHANGE THE DATES ... WHO
 
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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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