South Africa's Western Cape textile industry is working flat out to take advantage of US export opportunities provided by the Africa Growth and Opportunity Act (AGOA).

But according to Wendy Wilson, textiles and footwear senior manager for credit insurer Credit Guarantee, companies need to find ways to manage and control this rapid growth.

"Manufacturers have to quickly get to grips with costly machine upgrades, demanding new specifications, heightened expectations from workers and vastly larger raw material orders," Wilson said. "These expenses have to be weighed carefully against the tight margins American buyers have negotiated. In fact, there still seems significant uncertainty about the extent to which these margins will filter down to the bottom line."

Helena Claassens, economist for the SA Textile Federation, said local exports of textiles and clothing to the US were expected to reach R1.3 billion this year from R1 billion in 2000, but 80 per cent of that amount comprised garments.

"The benefits of AGOA still have to flow down the production pipeline from the clothing manufacturers to the yarn producers and eventually to fibre producers," Claassens said. "In addition, most sub-Saharan countries except South Africa and Mauritius received a special arrangement to use third-country fabrics, such as from the Far East, for the first four years of the eight-year term."

Warnings against over-extending capacity for AGOA have been echoed by both Cape of Good Hope Bank and Wesgro. Both said recent economic events would dampen expectations about the future absorption of imports to the US.

Wilson said: "Some mills have recommissioned machines that have been mothballed for years. Virtually all plants are now running 24-hour shifts, seven days a week."

By Barnabas Thondhlana.


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