State weighs plan to help garment sector

The plan could see SA increase tariffs on strategic apparel products to the maximum level allowed under SA's commitments to the World Trade Organisation (WTO), raising import duties on some products to up to 45%.

It is understood that the package includes a recommendation that SA launch a safeguard probe on some clothing products, which could see an additional provisional duty levied on garment imports.

The sector's position is apparently so dire that the state is mulling over implementing the rescue plan in two phases to speed up its response.

The first part of the plan would involve facilitating cheaper credit through the Industrial Development Corporation and giving manufacturers access to incentives under the newly launched manufacturing investment programme.

A second phase, now being drafted, would extend production allowances to manufacturers, to improve their competitiveness.

Local is lekker

The plan also advocates an aggressive “buy local” campaign, with all levels of government obliged to procure clothing requirements locally.

The plan to raise trade barriers comes in spite of the WTO urging its members to not resort to protectionist measures in response to the crisis.

Edwini Kessie, counsellor of the WTO council and trade negotiations committee division, warned recently that world trade would contract 8%, or more than $1-trillion, if all WTO members were to raise their import tariffs to the maximum levels allowed.

The plan is part of a wider response to the crisis under the auspices of the National Economic Development and Labour Council.

Clothing manufacturers have been hit hard by a credit freeze resulting in retrenchments.

Industry layoffs

The South African Clothing and Textile Workers' Union said on Monday the sector had shed 2200 jobs in the first two months of this year.

Moreover, numerous rescue packages extended to ailing clothing industries worldwide are compounding the pressure on the local industry.

Global state support

China has increased state support while India will give its ailing industry an export incentive.

Spain and Portugal announced bail-outs worth €800m and €850m, respectively, while Mauritius and Nigeria have also pledged cash to help their industries. But the biggest problem faced by the industry is a lack of credit.

“The crisis is affecting us inasmuch as banks and credit insurers are taking a jaundiced view of the industry,” said Alan Jarvis, CE of Formosa.

He said insurance cover had dropped to half the level it was at last year, while the cost of credit had surged, putting a severe strain on cash flow.

Competition and illegal imports

Seardel CE Walter Simeoni at the release of the group's interim results last week lamented subsidisation programmes in other countries, which created unfair competition, while high levels of illegal imports were compounding the pain.

Seardel, the largest employer in the sector, reported extended losses of R183m for the six months to December.

Department of Trade and Industry industrial policy chief Nimrod Zalk yesterday did not respond to messages for comment.

Source: Business Day

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