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South African retailers, including The Foschini Group Ltd. and Woolworths Holdings Ltd., are increasing investment in local clothing manufacturers, both to reduce dependence on Chinese imports and to ensure a supply chain disorganized by Covid restrictions. 19.
The companies have signed until an industrial plan that includes a goal of sourcing 65% of its products from local manufacturers in the next decade.
While progress toward the goal varies by chain, the spread of the coronavirus has sharpened their collective focus.
The pandemic caused “such disruptions in the supply chain that everyone just sits there and says: do we really want to rely on China again?” TFG CEO Anthony Thunström said in an interview.
“I think the penny is down and retailers are increasingly looking to buy locally.”
The initiative comes as South African President Cyril Ramaphosa seeks to revive a manufacturing industry that has deteriorated since the lifting of apartheid-era sanctions two decades ago, allowing companies to seek cheaper alternatives from foreign suppliers.
Reestablishing the sector would help achieve the goal of creating jobs, easing an official unemployment rate that is at a 17-year high.
“When South Africa opened to trade in the late 1990s, China came in and decimated the market, as cost was the only determining factor,” said Lawrence Pillay, Woolworths’ chief sourcing officer.
“But the world has changed radically and now there is much more than just the cost. Sustainability, carbon footprint, logistics challenges: all these factors will force us to rethink ”.
However, opening new factories during a pandemic will not be easy. The decline of the industry has led to a shortage of skills, training and raw materials, which means that a significant initial investment will be required to eventually realize savings from shorter delivery times and cheaper transportation costs. That’s at a time when consumer confidence is low, putting retailers on the defensive.
“There are certain products, like heavy winter jackets, that we just don’t have the materials and skills in South Africa to produce yet,” Thunström said.
South Africa will not be able to fully revive the industry because local retailers “cannot replace all product ranges,” added Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.
TFG, which sources about 22% of its clothing locally, has hired 550 more workers at two South African factories this year and sees the potential to add several thousand more, according to the CEO.
As South Africa works to revive its garment industry, nearby countries like Mauritius and Madagascar are also increasing their capabilities.
The measures taken by those island nations are good examples of how self-sufficiency in industry can be achieved, according to Woolworths’ Pillay.
“If we want our local retailers to source 65% of their product within South Africa’s borders, then we have to consider a wide range of product categories,” he said.
“In 28 years, I have never seen better cooperation between retailers, government, labor and manufacturers. In 10 years we can recreate the industry. “
Read: Food Prices Are Rising Again In South Africa – Here’s What An Average Food Basket Costs
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