[IPAP 2012/17]

1. [IPAP 2012/17] Address to the Portfolio Committee on Trade and IndustryWednesday 7 November 2012Apparel Manufacturers of South Africa (AMSA)

2. State of the SA Clothing Industry • Cheapest job creator at R20k per job • Employs 57 000 formal employees • Represents at least 50% of total clothing jobs in SA • Biggest cost components: • Fabric (and other raw materials) 50-60% • Labour 25-35%

3. Cost components State of the SA Clothing Industry • Fabric • Only 1% of woven fabric consumption is currently bought locally, and less than 40% of knitted fabric is bought locally • Over 80% of consumption imported, attracting 22% duty • Amortized this adds 15% to ex factory prices • Price differential local vs imports = 15-20%

4. Cost components State of the SA Clothing Industry • Labour • New wage settlement for 2013 enables better management of labour costs • Improved relationship with Labour • In spite of some job losses, many companies have stabilised and grown

5. Clothing and Textile Competitiveness Program

6. Clothing and Textile Competitiveness Program Two components: • PI - Production Incentive • CTCIP - Clothing and Textile Competitiveness Improvement Program

7. Clothing and Textile Competitiveness Program • PI - Production Incentive • Grants for training and capital expenditure based on % value-add • Great benefits to many companies • Not translated into job creation yet • Improved competitiveness • Cost reduction • Improved efficiencies • IDC challenges to smaller companies

8. Clothing and Textile Competitiveness Program • CTCIP - Clothing and Textile Competitiveness Improvement Program • Cluster or Individual Company improvement projects • 75% or 65% subsidy for training and service providers • Many case studies of successes

9. Designated sector for local procurement • Great Opportunities for clothing sector – large volumes in government procurement • Not aware of any new entrants to state tenders • Need improved transparency • Need assistance in process to become a supplier through successful tenders

10. Opportunities and challenges • Fabric input costs • Duty relief immediately levels playing field to comparative imported clothing • Slow progress – 9 years • Only 30-40% of locally produced textiles goes into Apparel • Only 1% of Apparel’s woven fabric consumption is bought locally, and less than 40% of knitted. • The SA Textile industry is unable to supply the input needs of the apparel sector. • IMMEDIATE relief is needed

11. Opportunities and challenges • PI and CTCIP • Real success stories in larger firms • Expand to make more accessible to smaller firms • Red tape re applications and submissions negatively affect the reaching of IPAP milestones • Local Procurement • Large volumes available in Government tenders • Assistance needed in order to open up successful tenders to clothing manufacturers who do not currently supply Government

12. Opportunities and challenges • Illegal trading and under-invoicing • Lost opportunity for government in import duties • Lost opportunity and unfair competition to formal local manufacturers • SARS Customs and AMSA works closely together on reference pricing and peer group reviews. • Other challenges • Utility costs • Infrastructure • Transport • Fuel price • Volatile Rand

13. SUMMARY • Clothing jobs stabilized for last year • Great opportunities for growth • Affordable job creator • Build on successes of PI and CTCIP • Fabric duty relief • Government tenders • Illegal trading