Reducing a dependency on Chinese imports. Photographer: Dean Hutton/Bloomberg

TFG and Woolworths have signed up to an industry plan that includes a target to source 65% of their goods from local manufacturers within the next decade.

South African retailers including TFG and Woolworths are increasing investment in local clothing manufacturers, both to reduce a dependency on Chinese imports and secure a supply chain thrown into disarray by Covid-19 restrictions.

The companies have signed up to an industry plan that includes a target to source 65% of their goods from local manufacturers within the next decade. While progress toward the goal varies per chain, the spread of the coronavirus has sharpened their collective focus.

The pandemic caused “such disruptions to the supply chain that everyone’s sitting back and saying do we ever really want to be that reliant on China ever again?” TFG Chief Executive Officer Anthony Thunström said in an interview.

“I think the penny’s dropped and retailers are looking more and more to buy locally.”

The initiative comes as South African president Cyril Ramaphosa looks to revive a manufacturing industry that’s deteriorated since the lifting of apartheid-era sanctions two decades ago, which enabled companies to seek cheaper alternatives from overseas suppliers. Re-establishing the sector would help achieve a goal of creating jobs, easing an official unemployment rate that’s at a 17-year high.

“As South Africa opened to trade in the late 1990s, China came in and decimated the market as cost was the only dictating factor,” said Lawrence Pillay, head of sourcing at Woolworths. “But the world has changed radically and there is now so much more than just the cost. Sustainability, carbon footprints, challenges of logistics, all of these factors are going to force a rethink.”

“There are certain products, like heavy winter jackets, that we just don’t have the materials and skills in South Africa to yet produce,” Thunström said.

South Africa won’t manage to revive the industry in full because local retailers “can’t replace all the product ranges,” added Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.

TFG, which sources about 22% of its apparel locally, has hired 550 more workers across two South African factories this year and sees the potential to add several thousand more, according to the CEO.

While South Africa works to revive its clothes-making industry, nearby countries such as Mauritius and Madagascar are also adding to their capabilities. The steps taken by those island nations are good examples of how self-sufficiency in the industry can be achieved, according to Woolworths’s Pillay.

“If we want our local retailers to get 65% of their product within the borders of South Africa, then we have to look at a broad scope of product categories,” he said. “In 28 years, I’ve never seen better co-operation between retailers, government, labour and manufacturers. In 10 years we can re-create the industry.”

Source© 2020 Bloomberg

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