ANALYSIS: AGOA keeps African textiles afloat
By just-style.com | 29 April 2010
AGOA has boosted textile and clothing exports from sub-Saharan Africa
Sub-Saharan Africa is still struggling to make its way in the global textile and clothing industry - but companies are convinced that without the US' African Growth and Opportunity Act (AGOA) the outlook would be bleaker.
One decade ago this May, the AGOA tariff preference programme was launched by the US: it gives qualifying African countries zero tariff exports for the huge US market - and statistics show that the sub-Saharan textile and clothing industry has benefited.
Since 2002, there's been a slow but steady increase of textile and clothing exports from AGOA qualifying sub-Saharan African countries to the US, from US$798m in 2002 to US$914m in 2009.
At Source Africa B2B, a three-day conference in Cape Town, South Africa earlier this month, textile and clothing merchants from around the globe gathered for a series of pre-matched meetings that paired regional, European Union (EU) and US buyers and retailers with interested African sellers from locales as diverse as Lesotho, Swaziland and Ghana.
Now in its sixth year and sponsored by USAID, the conference has averaged US$10m (EUR7.4m) in business annually. Organisers said they expect it to grow.
"People don't know what Africa has to offer," said Amanda Hilligas, former AGOA adviser who helped organise the event.
Hilligas said she contacted the buyers directly about the conference, but many had never considered using the continent for their manufacturing and buying needs.
But AGOA, signed into law on 18 May 2000, has, to an extent, changed that.
"When AGOA started, I got a lot of calls from US buyers," said Joop de Voest, a leading industry and USAID consultant and organiser of the event.
"AGOA has had a massive impact," added Kevin Ashton, South African representative of global garment hanger manufacturer Braiform, who has seen first-hand the effects of AGOA on the region, especially in the neighbouring kingdom of Lesotho, where upwards of 60,000 of its 2m residents are now employed in the garment industry.
Lesotho is the largest sub-Saharan African exporter of garments to the US, with about 80% of its textile and garment shipments going stateside.
South African retailers are the next biggest purchaser of Lesotho-made garments, followed by Canada and the EU. Smaller volumes also go to Dubai, Qatar, Chile, Japan and Taiwan.
Tokky Hou, an official from Swaziland's Far East Textile, believes AGOA's presence has indeed generated jobs in this small African kingdom.
"Without AGOA it'd be terrible," she said during last week's conference, her second visit. "A lot of factories opened because of it."
In 2009, textile and apparel exports from Swaziland to the US were US$95m.
Other attendees at the conference also stressed sub-Saharan Africa, with its poor infrastructure, logistical problems and poor capacity for large-volume orders, would not even have been considered an attractive destination for inward investment by foreign textile and clothing companies were it not for the tariff-free opportunities AGOA provides.
As a result, with AGOA's legislative authority up for renewal in 2015, African textile and clothing exporters are concerned that their new American buyers will pull out if the programme ends.
The problem is manufacturing in Africa still presents buyers and manufacturers with other, much more basic, challenges.
Limited capacity and logistical handicaps are rife. Under-developed, rural nations such as Mozambique and Swaziland suffer from erratic power supplies and unreliable communication networks.
And while African workers are enthusiastic, the skill level is often rudimentary.
"The African labour force is just not as sophisticated from a technical sewing standpoint," said John Maser, vice-president of apparel development at US-based Rocky Brands.
"They're good at simple sewing but they're not yet doing complex garments here."
Many buyers at the conference also cited the difficulty in sourcing quality fabrics from the continent.
"We're trying to broaden our range but the lack of good fabric is a huge stumbling block," said Janine Passley, co-founder of Ei8ht, a UK-based company providing sustainable sourcing strategies for companies such as Topshop and ASOS.
From oil to copper to diamonds, Africa is known for its poor oversight of precious commodities. The fabric industry is no exception. Fully 95% of cotton leaves Africa.
To counteract this, AGOA has what it calls a "special rule" in place for lesser developed sub-Saharan African countries (those with a per capita Gross National Product (GNP) under US$1,500 in 1998, which excludes South Africa).
This allows them duty- and quota-free access to fabric originating anywhere in the world, without risking their critical made-in-Africa status under AGOA.
China's one-size-fits-all economy is another hurdle, particularly for South Africa.
The giant scope of China's manufacturing industry and the strength of the South Africa currency the Rand has left the South African textile and clothing industry in shambles.
Clothing exports from South Africa hit a low in 2009 at ZAR600m (US$80m), compared to its peak of ZAR2.2bn (US$290m) in 2003.
And textile exports dropped from ZAR4.5bn (US$600m) in 2008 to ZAR3.9bn (US$520m) in 2009.
"We just can't compete with China," said Brian Brink, executive director of the Textile Federation (Texfed), the official organisation of the South African textile industry.
But probably the most salient issue that has driven decline in the South African industry is the cheapness of labour in China, (albeit one that might prove short-lived).
"It simply makes for unfair competition," said Johann Baard, executive director of the Cape Clothing Association, "particularly in a developing country like South Africa where it decimates your industrial base."
A lot to offer
Still, despite the struggling industry in South Africa, Southern Africa as a whole has a lot to offer overseas and regional buyers.
AGOA benefits aside, the continent's closer proximity to the US and similar time zone to Europe means a rapid response to orders.
African manufacturers also need the work. "Africa is hungry for business, and that's a plus," said Tim Constantine, president of the US-based World Apparel and Design.
Constantine said as one of the world's fastest growing economies, China has enough on its plate.
"We look at personal relationships, and there's a clear advantage here. People want to work."
The enthusiasm for Africa was palpable at the conference. "There's so much potential in Africa," said Swaziland-based textile manufacturer Hou.
"I think the more people who come here to see, the better it'll become," added merchant Kevin Ashton.
By Alison Moodie.
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