The Sunday Mail
Julius Ingwe
Zimbabwe needs to industrialise. We are all saying it. But how do we do it and where do we start? Industrialisation is about value adding within our own borders, rather than employing and paying someone else to do it in another country.
The greater the value addition here, the more benefit we derive. Our own clothing sector offers one of the best places to begin this strategy.
Since the Industrial Revolution, the clothing sector has been used by many countries to drive economic growth. Whilst many manufacturing businesses require significant capital investment in machinery and processing techniques, clothing remains as a low capital-based business, but with a huge ability to create employment.
This alone qualifies it for support given the current economic challenges. In addition, clothing is the last stage of a cotton-to-clothing chain, which offers one of the greatest levels of value addition relative to all value chains.
The value added from cotton lint to a garment is about 1 000 percent. This value chain interfaces with many other value chains via the crop’s by-products and is extremely efficient in its output. For example, while cotton lint feeds the textile and clothing industries, oil from the seed can be expressed into cooking oil and leaves a protein cake that can be used for animal feed.
Currently, Zimbabwe spends an estimated US$20 million per month importing soya seed and/or cooking oil. It is believed that cooking oil made from a mixture of soya and cotton seed is superior to other cooking oils.
Encouragingly, both soya beans and cotton seed can be grown in Zimbabwe, which has the potential to save the country more than $240 million in imports. This also creates enormous opportunities on farms, ginneries and processing plants.
Likewise, the seed cake can also conveniently substitute imported cake and be used in meat and dairy sectors, which, in turn, provide input into the food and leather sectors.
Statistics from the National Employment Council for the Clothing Industry (NECCI) indicate that, there are 85 companies that are still operating formally.
These companies employ around 7 000 people. However, the sector used to employ 35 000 in its heyday. Imports have taken a toll on the industry. It is estimated that Zimbabwe imports between 75 percent and 80 percent of its clothing. Many of these goods come in duty-free and are produced in countries such as China and South Africa, which pay their manufacturers huge cash export incentives and subsidies.
And this makes it hard for local manufacturers to compete.
Support
The recently launched Zimbabwe National Industrialisation Policy and the Local Content Policy recognise the clothing industry as a low-hanging fruit. In 2013, Government introduced the Clothing Manufacturers Rebate (CMR), through which registered manufacturers can import raw materials not manufactured in Zimbabwe duty-free.
Chairperson of the Zimbabwe Clothing Manufacturers Association (ZCMA) Mr Jeremy Youmans insists that CMR can protect local industries against imported finished goods and, therefore, promotes import substitution.
But conditions tied to the CMR are punitive to some clothing companies, especially SMEs. They definitely have to be tweaked in order to make the facility accessible to all formal and tax compliant players.
Wages
Wages represent the largest overhead for a clothing company. The introduction of the mono-currency, which has now devalued significantly, along with the high inflation being experienced, has eroded workers’ pay. The clothing industry is traditionally one of the lowest paying sectors in the world, and this naturally creates challenges.
While the sector has one of the lowest NEC wages in Zimbabwe, it has historically been one of the highest paying clothing sectors in the region. When the local currency was at parity to the US dollar, the sector struggled to compete with a deluge of subsidised garments flooding Zimbabwe. So, devaluation provides the local manufacturing sector with an opportunity to gain back what they have lost, particularly in the clothing sector. In 2014, the clothing sector, via the NEC, pioneered an agreement to have companies include productivity-related pay schemes in addition to the NEC-agreed remuneration.
This has been very successful in many companies as employees have been earning more in total than they would have. This agreement was renewed in April this year, but has already been overtaken by events. A new agreement was reached last week. Workers in the sector have continued to push for closer cooperation with employers, especially in the current trying economic times. They believe that employers need employees and employees need employers. Unions want decent work standards for all employees in the sector.
Decent work is a pillar of the International Labour Organisation, of which Zimbabwe is a member. Decent work includes fair treatment, liveable wages and social security.
In this regard, the Clothing Industry Pension Fund (CIPF) — which is overseen by a board of trustees constituted by both employers and the employees – has been pivotal.
It has a reputation as one of the country’s better performing industry pension funds, which goes some way to secure the future of clothing sector employees.
Raw Materials
Sourcing raw materials has emerged as one of the major challenges facing the sector. Only one textile mill is producing significant amounts of fabric and nearly all trims suppliers have closed down. And this means most raw materials have to be imported.
As a country, we export about 95 percent of our cotton lint, 80 percent of our cotton yarn and 25 percent of our cotton fabric.
The clothing manufacturers take up whatever they can from the local textile suppliers, but they only supply a small proportion of the products that consumers demand. The balance has to be imported. Currently, the sector is struggling to get adequate allocations of foreign currency from the interbank market, even though it is one of the sectors on top of the Reserve Bank of Zimbabwe’s priority list. Consequently, this has resulted in an absurd situation, where the country continues to export partly manufactured goods and import them back as finished garments.
So the sector can help to export more and substitute orders for imported finished garments. ZCMA says eight of its members are exporting to countries as far afield as Germany, which shows that they can compete on price, quality and ability to supply.
Evidently, there are those who would rather ignore this fact by continuing to import goods so that they can enjoy foreign buying trips.
So, what needs to be done? There are definitely some quick wins:
The sector needs to get its fair allocation of foreign currency for raw materials and capital equipment.
The “make local, buy local” campaign – which is being promoted by the Ministry of Industry and Commerce and Buy Zimbabwe – must gain traction. Government has to lead this drive by insisting that tenders for clothing paid for by local taxes should support local manufacturers. Zimra, Zesa, municipalities, et cetera, should all be encouraged or, if necessary, compelled to buy from local manufacturers. Too often, these goods are imported directly or allocated to traders for unspecified reasons.
Local retailers should be forced to display the goods they are selling that are made locally, which will highlight the variances, particularly on price. This will enable consumers to make their choice accordingly.
Consumer awareness campaigns on the accrued benefits to the country and its population of pursuing a policy of local procurement need to be made more regularly.
Policies and support interventions need to be coordinated and synchronised through the cotton-to-clothing value chain and not implemented on a sectoral basis as is done now.
Local clothing companies need to market themselves more to make local consumers aware of what can be procured locally.
It makes sense to drive a local procurement strategy. It is just common sense. By buying from local manufacturers, we develop our own market for goods and also create jobs. It is possible to create a virtuous circle from this.
There is nothing new in this way of thinking. It is the basis of many, an industrialisation model, that has been used around the world. It works.
The clothing sector is unique because it requires relatively less resources to get going compared to other industries and has an immediate and substantial payback.
It will only work if we work together and do it properly.
Julius Ingwe in an expert in the clothing industry and has been involve in research in the cotton-to-clothing value chain
