(5 minutes read)
• South African retail companies like The Foschini Group and Woolworths are increasing investment in local clothing manufacturers aimed at reducing dependency on Chinese imports
• This is interpreted as a move to secure a supply chain severely affected by the impact of the Covid-19 pandemic
• This could also lead to promoting local businesses, an avowed objective of the South Africa government, whose economy is facing a double whammy arising from Covid-19 and onset of the second wave of recessionary conditions
South African retail companies like The Foschini Group and Woolworths are increasing investment in local clothing manufacturers aimed at reducing dependency on Chinese imports. This is interpreted as a move to secure a supply chain severely affected by the impact of the Covid-19 pandemic.
The retailers have set a target of sourcing 65% of their goods from local manufacturers within the next decade, which is set to rewrite the business deals substantially. This could also lead to promoting local businesses, an avowed objective of the South Africa government, whose economy is facing a double whammy arising from Covid-19 and onset of the second wave of recessionary conditions.
Recently South African President Cyril Ramaphosa has come out with a massive plan to revive a manufacturing industry and to enable companies to seek cheaper alternatives from overseas suppliers. This will help create jobs, easing the official unemployment rate that’s at a 17-year high of over 30%.
China has a huge presence in the South African market driven by the relative cost advantage of the Chinese goods. Apart from cost, production processes are increasingly dictated by concepts like sustainability, carbon footprints, and challenges of logistics. This could change vision and approach of many countries to do businesses including South Africa.
Snapping bonds with China in the immediate future may be a pipedream for South Africa, given that there is scarcity of capital, shortage of skill, power disruptions and logistical challenges. Whatever could be the vision of the government to build capacities within; it is going to be a tough call in the short run and the immediate medium run. In all likelihood, sourcing from China or other countries may continue for quite some time, perhaps at an incrementally reduced level.
With AfCFTA unfolding, there can be increased competition from African countries to sell their products in the relatively developed markets in the continent like South Africa, Nigeria, Kenya and Tanzania driven by the size of the population and purchasing power of the people. A case in point is textiles. While South Africa and Ethiopia are developing facilities for manufacture of textile items, countries like Mauritius and Madagascar are building their capacities in the textile sector to cater to the other African markets since their domestic demand will not be able to sustain an industry.
