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After compensating for logistics and other import tariff costs, the South African clothing
and textiles industry would be as competitive as Chinese imports. This is a trend we
seeing across many manufacturing industries. HiSense, which manufactures fridges
and other white goods, is exploring the possibility of exporting white goods from their
factories in Atlantis, Cape Town to South America. The average clothing and textile
wage is 15% lower in the Western Cape than in the rest of the country, which strengthens
the case for relocating clothing and textile manufacturing in the Western Cape even
further.
The case for reshoring manufacturing from China is not only a South African phenomenon.
A recent survey conducted in the US by the Boston Consulting Group said that 24% of
firms are actively shifting production from China back to the US. If US firms are reshoring,
the case for South African reshorsing must be even stronger.

Industry Support

In addition to cost drivers, the Department of Trade and Industry (DTI) offers significant
assistance to clothing and textile firms. The DTI’s Clothing and Textiles Competitiveness
Programme (CTCP) aims to stabilise employment and improve overall competitiveness
in the clothing, textile, footwear, leather, and leather goods manufacturing industries.
Through the Competitiveness Improvement Programme (CIP), the CTCP promotes cluster
formation through cost-sharing grants. In addition, The Manufacturing Competitiveness
Enhancement Programme aims to provide further support to manufacturing firms. In
the next edition of the QEB we will discuss these programmes in more detail.

In conclusion, it is our view that within the context of recent labour market and currency
trends, reshoring clothing and textile manufacturing offers an opportunity to local PROVINCIAL OUTLOOK NATIONAL OUTLOOK GLOBAL OUTLOOK GAP HOUSING INVESTOR NARRATIVE SPOT THE OPPORTUNITY PORTFOLIO INSIGHTS KHULISA NEWSLETTER ELECTRIC VEHICLES ENERGY SECURITY LOOKING AT GDP
manufacturers. Cost factors that drove notable increases in imports from low cost
destinations such as China have dissipated. The Western Cape still has considerable
labour capacity, know-how and management skills in the clothing and textile industry.
These could be productively utilised and effectively outcompete Chinese clothing and
textile imports.

Retailers are demanding considerably shorter production times and quicker time-to-
market timeframes. Logistics from China could add more than a month to the time
it takes goods to make it to retailers’ shelves. With the assistance of the DTI’s Clothing
and Textile industry support initiatives, more agile production approaches could be
employed by smaller scale local manufacturers, which would shorten time-to-market
even further.

Given the growth in consumption of clothing and textiles (not only in South Africa but
also in the SADC region), changes in comparative cost structures, national support to
the industry, and shifts in retailers’ requirements, investors will do well to consider the
value proposition presented by the clothing and textiles manufacturing sector.

QUARTERLY ECONOMIC BULLETIN 2016 53