Textile industry on the brink of collapse | The Herald

via Textile industry on the brink of collapse | The Herald November 28, 2013

ZIMBABWE’S textile industry, which at its prime was one of the major employers in the country, is on the brink of collapse as fears mount over the closure of more textile firms. While other sub-sectors of the manufacturing industry are going through extremely difficult challenges, the textile sector appears to be one of the hardest hit.

The textile companies are operating below 10 percent of their capacity due to inadequate working capital needed replace obsolete equipment and stiff competition from cheap fabric imports which have seen the country literally relying on imports.

Like other critical sectors of the economy, the industry has not been spared from power shortages, high labour costs and unrest and, in some instances, mismanagement.

Being a high volume, low margin industry, any factor that militates against these fundamentals has serious consequences on the survival of the sector, industry players say.

At its prime, the industry employed about 24 000 people but less than 4 000 are now under its payroll, according to the Zimbabwe Textiles Union secretary-general Mr Silas Kuvheya.

In the past five years, about 8 000 workers were rendered jobless from the 12 000 the sector employed. And the downstream industries such as clothing and retail, which fed on textile firms, employed even more.

Similarly, 94 percent of textile companies were operational but are now down to 34 percent. Mr Kuvheya said Government needed to mobilise funds specifically for the textile industry.

“We have experienced three scenarios; some companies were placed under judicial management, others were liquidated and others ceased operations,” said Mr Kuvheya.

“It is sad that a sector that had given attention to value addition is collapsing. We are now exporting lint instead of adding value and earn more revenue.”

Most textile companies are under judicial management, with wafer thin prospects of recovering.

David Whitehead Textiles, which used to be the largest textile firm, is under provisional judicial management. Also under court-directed reconstruction order are Merspin, National Blankets and Irazin and Travan, a subsidiary of Modzone.

Karina Textiles shareholders have applied for liquidation and the matter is before the courts. Cotton Printers, formerly owned by Meikles, was also liquidated two years ago.

The sustained decline of the textile industry has hit some clothing factories whose products have become so uncompetitive due to high production costs compounded by raw materials shortages. Last year, Kalahari Clothing was placed under reconstruction as well while Bernstein retrenched most of its workers.

Saybrook Manufacturers was also placed under similar reconstruction arrangements while Bulawayo-based Archer Clothing Company went into judicial management in 2011. Lancashire Clothing Company, spinning company Scottco and Chinhoyi-based Afroram Spinners Limited were also reported to be going through difficult challenges. As a result, increasing clothing imports versus dwindling exports reveals the displacement of local industry in both domestic and international markets.

The de-industrialisation of the textile sector has resulted in Zimbabwe exporting most of its cotton lint, depriving the country of the much needed foreign exchange earnings if it had exported value added products such as yarn and fabric.

The local fabric market is now dominated by imports particularly from China, Pakistan and India. Most clothing retail shops are also largely packed with imported clothes.

“The textile industry has been seriously hit by unregulated imports which are undercutting the local industry”, David Whitehead former chief executive Mr Edwin Chimanye said. “We now have most of the fabric coming outside the country.”

He said the collapse of the industry was worsened by economic challenges characterised by hyperinflation. During this time, there was no meaningful investment into the country.

Mr Chimanye said companies started considering investing in capital expenditure after the introduction of multi currencies in 2009 but this has been hampered by shortages of long-term finance. The only available credit is of short-term nature.

“Government is the biggest loser. It used to generate more revenue from taxing employs and companies. The tax losses are very huge and this must be reversed,” he added.

“With the Government now paying attention to unemployment, something has to be done to enhance capacity and productivity as the sector has potential to generate jobs. Government intends to create more than two million jobs if the next five years.