via Clothing sector can be turned around: Youmans – NewsDay Zimbabwe August 12, 2015
NewsDay business reporter Victoria Mtomba (ND) caught up with Zimbabwe Clothing Manufacturers’ Association chairman Jeremy Youmans (JY) on the state of the clothing sector following the ban on second-hand clothing imports by Finance minister Patrick Chinamasa in his Mid-Term Fiscal Policy review last month.
ND: What is the average capacity utilisation of the 105 companies in the clothing sector?
JY: The 105 companies are those we deem as the formal sector paying National Employment Council levies and pension fund contributions. These companies currently employ 8 000 people. There is also an unknown number of SMEs (small and medium enterprises) and informal operators estimated at about 200. The formal part of the sector is operating at about 45% capacity utilisation.
ND: What are the immediate strategies that the clothing sector has adopted to remain viable?
JY: We are working on numerous strategies to rebuild the industry up to 35 000 employees within five years. Most of the growth is restricted by lack of orders for locally manufactured goods. So we are spending a lot of time on raising the profile of the industry and trying to make more people aware that we do exist. We have the Clothing Manufacturers’ Rebate which enables us to import raw materials, which are not manufactured in Zimbabwe duty-free. We have finalised a progressive wage settlement which allows for better planning and forecasting for companies. We are working with various support agencies on enhancing technical expertise in the industry, implementing productivity-related pay schemes and product awareness systems. We are working with the Zimbabwe Revenue Authority on stemming the inflow of imported goods which do not have the correct duty paid on them.
ND: How many companies have closed down in the sector since 2009?
JY: Some of these figures are hard to confirm and some have shut and reopened, but we estimate about 150.
ND: What were the major reasons for the closures?
JY: With dollarisation, wage rates went up about 400% as did the general cost of doing business in Zimbabwe. Further, our borders were opened and imported goods suddenly flooded the market. In addition, the rand has devalued 40% against the United States dollar over this time, making our prices 40% more expensive.
ND: From the companies that were closed down, which ones can easily be turned around?
JY: Many can be easily turned around. This is because most of the factories are still there and so is the machinery. Even if machinery needs to be upgraded, the capital costs of doing so are relatively small compared to other industries. Likewise, many of the skilled labour is still available, albeit unemployed, at the moment.
ND: What is required for the turnaround and how many companies can attain that?
JY: What is needed are orders and working capital. The working capital is a problem at the moment with the constraints within our financial sector, but the monies required are not huge and we believe a change in thinking by banks would open up this factor. But to employ working capital, we need orders and working capital and that is why we are trying to maximise the orders available to local manufacturers. This can be done by encouraging local procurement by government, private sector and consumers. It can also be done by reducing the amount of clothing being imported. On this basis, most of the companies can be reopened.
ND: How many employees does the sector have?
JY: We currently employ 8 000. This is up from 6 000 two years ago, but down from our peak in the late 1990s of 35 000.
ND: Do you have the capacity to provide cheap clothing for the general populace facing economic hardships?
JY: Yes, we do. We will never be able to supply everything that everybody in Zimbabwe wants to buy. The capacity is there, but needs to be rebuilt. There are many ways to make a garment cheaper and consumers need to be wary of very cheap clothing, just like anything that is “very cheap”. For example, fabric dyed with AZO dyes is cheaper than normal dyes. However, such dyes are linked to cancer and clothing made from AZO-dyed fabrics is outlawed in many countries to protect people from this risk.
But garments made from such fabrics will be cheaper. We believe that our garments are competitively priced.
However, this is often hidden because of the large mark ups added on by retailers.
ND: Generally, clothes in Zimbabwe are expensive. What mechanisms do you require to make clothes cheaper?
JY: The cost of a clothing garment is made up of about 60% raw materials and 40% overheads. Unfortunately, while our textile and other industries are rebuilt, the majority of raw materials are imported, so we are paying the same price as the rest of the world. The major overhead is labour cost.
This can be partly offset by productivity, but remains a challenge for us, particularly with the rand- US$ devaluation.
So we need to control labour costs while maximising productivity and work on reducing all other overheads.
Better brand development, recognition, and a focus on quality and service will enable us to offer a net comparative advantage to our customers and buyers.
ND: In terms of sourcing and availability of raw materials, where does the sector get most of its materials and are they cheaper?
JY: Unfortunately, most are imported, as mentioned, mostly from Asia and China in particular. This is purely based on price, but there are other factors. However, when buyers are demanding price limits on garments, the price of the raw materials does become crucial to achieving those limits.
ND: What is your reaction to Finance minister Patrick Chinamasa’s move to ban the import of second-hand clothes?
JY: We support it as it does assist the industry by reducing the amount of imported clothing which can be sourced from local manufacturers.
Only by increasing demand for locally manufactured goods can we ever hope to rebuild the sector and the whole economy of Zimbabwe. And we need to start somewhere.
Second-hand clothing is donated by people who no longer want to wear it any more, for whatever reason.
When donating it, they are told that it will be given to very poor people who cannot afford to buy clothing for themselves.
However, the goods have been redirected to our markets and are sold as a profit-making venture. There is no control over their condition, state of cleanliness or worthiness and are baled together with an assortment of other clothes, making validation and screening very difficult. South Africa has never allowed second-hand clothing. They confiscate it at the border and burn it.
We understand that some people have made a business out of this market, but if it is at the cost of the formal market, it cannot be sustainable. About 27 000 people lost their jobs in clothing alone due mainly to the influx of cheap imported goods, main sold at sub-economic prices.
These people had families to feed and school fees to pay just like anyone else.
As more and more people lose their jobs due to imported goods, there will be less and less people who can buy goods and in the end there will be no markets for anyone, as there will be no customers.
So we need to deal with some controls and measures which may appear harsh in the short term, but are focused on rebuilding Zimbabwe into a nation where most people are employed and can afford to buy new clothes rather than relying on handouts of other nations.