Faced with Asian competition following the global elimination of quotas, a number of Sub-Saharan African textile and clothing firms are trying to stay afloat by investing in new factories.

News of the investments will help to bolster confidence in an industry whose fortunes have suffered a dramatic reversal over the last 18 months.

Falling exports in 2005 and in the first few months of 2006 have led to widespread factory closures and job losses and this trend shows no immediate signs of changing, according to a report in the latest issue of Textile Outlook International.

This decline is in stark contrast to figures for 2000-04 - which was a period of optimism and growth.

Between 2000 and 2003 clothing shipments from Sub-Saharan Africa to the USA rose in volume terms by an average of 34% a year. But in 2004 growth slowed to 10%, and in 2005 exports to the USA from the region actually fell by 14%.

Worse news came in January-March 2006 when shipments were down by over 22% compared with the equivalent period in 2005.

AGOA strengths…
During the boom years, the textile and clothing industry in Sub-Saharan Africa reaped the benefits offered by the US African Growth and Opportunity Act (AGOA).

This provided the region's clothing makers with duty-free and quota-free access to the US market.

In an era when textile and clothing exports from developing countries were restricted by quotas, this placed Sub-Saharan African producers at a clear advantage in the face of strong competition from Asian suppliers.

But the world market changed with the entry of China to the World Trade Organisation
(WTO) in late 2001, and the elimination of quotas at the end of 2004.

Sub-Saharan African clothing makers still enjoy duty-free access to the US market but this has proved insufficient to maintain their competitiveness in the face of intense competition from Asia.

Swaziland is one country which has suffered particularly badly in recent months.

Between 2000 and 2003 the country was a model of success under AGOA. Clothing
manufacturing grew from virtually nothing to an industry employing 200,000 people, directly and indirectly. Garment exports soared to the point where they exceeded sugar, and were second only to Coca-Cola as the country's biggest source of export revenues.

But with the global elimination of quotas - compounded by the fall in value of the dollar against the rand - exports from Swaziland to the USA fell by almost 50% in the first three months of 2006.

…and weaknesses
AGOA's goal of integrating the Sub-Saharan African industry into the global marketplace also appears to be foundering.

The initial vision was of a stable, self-sufficient industry achieved through vertical integration - from fibre to garment. To achieve this aim, AGOA restricts preferential access to garments made from regional or US materials.

In order to provide time for the yarn and fabric industry to become established, AGOA contains a third country fabric provision, permitting garment makers in poorer Sub-Saharan African countries to use materials sourced from the most competitive suppliers, anywhere in the world, until 30 September 2004.

But investment in yarn and fabric plants has proved disappointing and the provision has been extended until September 2007.

Extension of the third country fabric position has, however, angered those textile producers who did invest in anticipation of a captive market from 2004.

Some who built textile factories are pulling out. For example, the Malaysian company Ramatex - despite generous incentives - is threatening to cut its losses and close its state of the art fabric plant in Namibia with the loss of about 5,000 jobs, unless the Namibian government buys it from the company for a reported US$75m.

Regional optimism
However, there are signs of optimism in the region - helped, no doubt, by the imposition of new quotas against China by the USA and the EU.

One piece of good news is the announcement that ISIS Pacific Capital, a US-based company, plans to invest US$20m in a spinning, weaving and dyeing operation in Uganda by forming a joint venture with the Ugandan clothing enterprise Tri-Star Apparel.

The mill is expected to start operations quickly - as early as September 2006 - by importing existing machinery and using local raw cotton.

New investment is also going into Lesotho - the region's biggest supplier of
garments to the USA, and another AGOA success story until recently.

The Taiwanese company World Knitting has opened a US$6m garment factory in the country to make T-shirts and jeans for export to the USA. The factory, Kopano Textile,
will employ a reported 3,000 people.

World Knitting also plans to set up a fabric mill by the end of 2006. The investment will go some way towards replacing the 6,000 workers who are reported to have lost their jobs since quotas were eliminated on 31 December 2004.

Most importantly, the World Knitting and ISIS Pacific Capital investments represent a vote of confidence in the textile and clothing industry in Sub-Saharan Africa at a time when, in an era of intensifying Asian competition, the industry will need all the help it can get.

"Post-Quota Scenarios in Textiles and Clothing: Sub-Saharan African Producers
Invest for Survival" was published in Issue No 122 of Textile Outlook International.