In this virtual meeting, the Committee was briefed by the Department of Trade, Industry and Competition (DTIC) on its Clothing and Textile Sector Masterplan in a virtual meeting. The Deputy Minister said that after a Cabinet Lekgotla, the President had said that the Department must develop a masterplan for certain sectors of industry including the clothing and textile industry. A masterplan was important because of the history of the sector and over the last few years the sector had suffered because of a decline in manufacturing. The rationale behind the Masterplan was therefore based on the industry’s major contribution to the SA economy; the fact that South African retailers purchased products worth R70 billion in 2016; and the fact that imports of around 50% typically dominate clothing, textiles, and footwear and leather product purchases.
The Committee heard that the Masterplan was signed in November 2019 and seven commitments totalling R6.7 billion of new investments were made. The plan was impacted by Covid-19, but the Department had to ensure that the plan took account of the effect the impact of Covid-19 had on the sector. The plan sought to grow the market for local CTFL products; increase local CTFL procurement; stem the flow of illegal imports; use tariffs and rebates strategically; extend the Competitiveness Improvement Programme (CIP) and the Production Incentive Programme (PIP) in an appropriate format for three years; align production capacity to sales cycles; and transform the value chain.
Members asked if the Department was ensuring that labelling of products was carefully monitored; what was the Department going to do to stop illegal imports crossing South Africa’s porous borders with illegal clothing; what steps were taken to ensure the protection of whistle-blowers; how the Department ensured that companies were contributing something and not only enjoying tariffs and rebates; and elaboration on the masterplan and the provincial spread of PIP recipients.
The Committee was concerned about the visibility of tenders awarded by provinces and local municipalities which the presenter had said were a huge problem and which would be addressed. Members heard that because imports were bigger than exports and related to expanding local capacity, it was very important that illegal imports had to be addressed. On working with departments Members were informed that it was a difficult matter. The inter- agency working group had conducted raids and a substantial amount of goods were seized but sustainable capacity was needed to control the borders as the border issue was a big problem. With regard to labelling legislation the Department was working closely with Commissioner Mabuza of the National Consumer Commission (NCC) who was responsible for the Consumer Protection Act.
Members were informed that the ‘buy local’ campaign was imperative to the success of the Masterplan. The Department informed the Committee that there was very clear monitoring to ensure localisation efforts were committed to, upheld and adhered to. On how the Department looked at tenders, Members were informed that the National Treasury worked with departments to ensure 100% adherence to local content products for clothing, textiles, footwear and leather.
The Chairperson had problems with internet connectivity and asked Mr M Mmoiemang (ANC, Northern Cape) to take over the running of the meeting.
The Deputy Minister of Trade, Industry and Competition, Mr Fikile Majola, in his opening remarks, said that after a Cabinet Lekgotla, the President had said that the Department must develop a masterplan for certain sectors of industry, including the clothing and textile industry. The masterplan was important because of the history of the sector and over the last few years the sector had suffered because of a decline in manufacturing.
Briefing on the CTFL industry’s Masterplan
Dr Anneline Chetty, Acting DDG: Industrial Development Division, Department of Trade, Industry and Competition (DTIC), briefed the Committee on the CTFL industry’s masterplan. The rationale behind the masterplan was based on the industry’s major contribution to the SA economy, of 1.7% contribution to GDP, and a 1.33% contribution to total employment (2016 figures). South African retailers purchased products worth R70 billion in 2016. Added to this the fact that imports typically dominate clothing, textiles, and footwear and leather product purchases at 53.9%, 56%, 61.1% and 48. 9% of total purchases respectively. She said that the success of the masterplan was not based on the content of the plan but on the buy- in of the stakeholders.
The main policy levers were the DTIC Clothing & Textile Competitiveness Programme (CTCP) from 2009 to 2019 aimed at stabilising industry and job losses, the designation of Clothing, Textiles, Footwear & Leather (CTFL) products under the Preferential Procurement Policy Framework Act (PPPFA) Regulation for 100% local content, and the Retail Clothing Textile Footwear Leather Master Plan 2030. The key objectives were to reach retail sales of R225 billion with South African manufacturing supplying R67 billions of retail purchases and to get employment to 319 832 employed. She spoke to the social compacting framework specific commitments and core actions of the masterplan.
Achievements to date were that the masterplan was signed in November 2019 and seven commitments were made. R6.7 billion of new investment was committed to by industry with R4 billion by Pepkor. She pointed out the establishment of the Program Management Office for the implementation of the plan. The plan was impacted by Covid-19, but the Department had to ensure that the plan took account of the effect the impact of Covid-19 had on the sector. The plan sought to grow the market for local CTFL products; increase local CTFL procurement; stem the flow of illegal imports; use tariffs and rebates strategically; extend the Competitiveness Improvement Programme (CIP) and the Production Incentive Programme (PIP) in an appropriate format for three years; align production capacity to sales cycles; and transform the value chain. There was a need to strengthen the capacity of customs control and enforcement. Retailers and trade unions had supported the initiative and government was doing everything to ensure that the sector grows again.
On progress on work to date, the Department was working with Proudly SA and all stakeholders to drive localisation efforts through the extension of the Buy Local Campaigns. There was increased effort directed at the localisation of Personal Protective Equipment (PPE) manufacturing. An Inter -Agency Working Group was established within government to tackle illicit trade and it had seen an increase in Customs values declared of up to 700% for the tariff headings that the CTLF project focusses on. Seized imported clothing valued at R6.7 million was destroyed by SARS in November 2019 and there was no longer auctioning of seized CTLF goods.
She spoke to the support given to PPE Manufacturers and to the CTFL masterplan and the provinces in terms of the spread of provincial PIP recipients. The Department was working with all investment agencies within the provinces and the relevant MECs to merge activities and collaborate on tasks
Mr M Dangor (ANC, Gauteng) asked if the Department was ensuring that labelling of products was carefully monitored.
Mr T Brauteseth (DA, KZN) said he supported anything that supported local producers and manufacturers and supported the ‘carnivorous’ attacks from overseas manufacturers using ‘slave’ labour to derive a competitive advantage. He thanked the Department for putting ethics back into manufacturing.
Mr J Londt (DA, Western Cape) endorsed and supported Mr Brauteseth’s comments. He said it was important for government to lead by example in the Buy Local and Proudly South African campaigns and buying locally should be encouraged.
Ms H Boshoff (DA, Mpumalanga) said the Department spoke of work that needed to be done with various government departments. What was the Department going to do to stop illegal imports crossing South Africa’s porous borders with illegal clothing? She wanted to know what steps were taken to ensure the protection of whistle-blowers. She was concerned about the visibility of tenders awarded by provinces and local municipalities which the presenter had said were a huge problem and which would be addressed. ‘Could this be further clarified’?
The Chairperson asked how the Department ensured that companies were contributing something and not only enjoying tariffs and rebates without doing anything as he was concerned that imports accounted for 50-60% despite tariffs and rebates. He asked if the masterplan figures were annual targets so that the Department’s achievements could be monitored. He said that even when there was a ban on cigarettes, cigarettes were still coming into the country. He wanted to know how industry was being incentivised. He wanted elaboration on the CTCP - which was going to be extended for another three years- and what benefits did it bring to the industry.
Mr Mmoiemang wanted further elaboration on the masterplan and the provincial spread of PIP recipients.
On labelling, Deputy Minister Majola said labelling and the country of origin were big problems and would be a big issue in transhipment in the African Continental Free Trade Area (AfCFTA). The country of origin should be properly labelled on products.
On Mr Brauteseth’s comments on ethics, he said this was an important issue. Minister Patel was dealing with this. He said that in this sector, the biggest challenge, apart from India and some other countries, was China and the issues had been raised sharply with the Chinese embassy and with the Chinese Ministry of Trade. There were several aspects related to this notably dumping and under-invoicing and low labour costs. The matter was raised at BRICS. On the low cost of labour, he said it was an issue that was being attended to as the country was losing lots of tax revenue.
On Mr Londt’s comments on buy local, he said he agreed with this and the Department was working with industry to ensure consumption products came from local manufacturers.
On the working with departments issue raised by Ms Boshoff, he said it was a difficult matter. The inter- agency working group had conducted raids and a substantial amount of goods were seized as sustainable capacity was needed to control the borders. The border issue was a big problem.
He said the Department would come back to the Committee to do presentations on the other masterplans.
On the issue of imports, imports had to be addressed. Imports were bigger than exports which needed to be addressed and related to expanding local capacity. Secondly illegal imports had to be addressed. There had been a surge in the smuggling of cigarettes when cigarettes were banned. The illegal trade in cigarettes needed to be rolled back.
On the monitoring of companies, the PMO would have to help to do this. Companies had to be monitored. Labour and industry were committed to ensuring that the masterplan succeeded.
On the provincial spread, the Department had started a process of working with MECs to focus and coordinate work with provinces.
On labelling legislation, Dr Jaywant Irkhede, Director: Leather & Footwear, DTIC, said that the Department was working closely with Commissioner Mabuza of the National Consumer Commission (NCC) who was responsible for the Consumer Protection Act. The Department had regular meetings with the Commissioner. In the past if anything did not meet labelling legislation requirements; the NCC was notified who would give a release note. This process was not properly monitored. For the last two years clothing, textile, footwear and leather was included in protected and prohibited list of imported products and anything detained had to be returned to the country of origin. The previous practise of allowing goods to be sold to countries on the rest of the continent had been stopped. That was how far the Department had come in terms of the Consumer Protection Act.
On illegal imports, he said the Department was working closely with SARS and Customs and the latter had a challenge in that because of a lack of automation and lack of systems SARS could only use two out of six possible valuation methods. As a team it had now recommended the use of blockchain methodology to automate the whole process. In future there would be more automation in the import valuation. He said the Department was working with the CPIC to eliminate counterfeit goods coming into the country.
Ms Elaine Smith, Director: Clothing & Textiles, DTIC, said she would address the Clothing and Textile Competitiveness Program (CTCP). The Department was thinking of changing the name to clothing, textile, footwear and leather competitiveness program because the latter two were included from the start. The program supported industry by supporting interventions that would improve their competitiveness in terms of people, processes and products market development and capital equipment. The program was coming to an end and would be adapted to address Covid-19 related impacts on the industry and would probably be in the form of using an interest rates subsidy and cluster programs. The target was for companies to be sustainable financially, to grow the sector and grow jobs. On the spread of companies in provinces, she said it was related to production incentives which had been running for ten years. All manufacturers were equally able to apply and the biggest manufacturers were historically in the Western Cape and KZN but the sector was growing in Gauteng, Limpopo and the Eastern Cape.
On the ‘buy local campaign’, Mr Mahendra Shunmoogam, Director: Policy Implementation, DTIC, said that ‘buy local’ was imperative to the masterplan. Proudly South African had recently launched the ‘buy local’ campaign with John Kani, the actor, spearheading the campaign and there would be a specific clothing, textile, and footwear and leather campaign launched to drive demand. The Department had been in conversation with stakeholders such as Woolworths who were switching some lines to on-shore production.
On the monitoring of companies and whether companies were sticking to the objectives of the plan and not only deriving benefit from tariffs and rebates, he said the Department had very clear monitoring to ensure localisation efforts were committed to and upheld and adhered to. Each industry sector had relayed specific targets confidentially to the Department and this was being monitored. There was some sluggishness in meeting the targets because of Covid-19 but adjustments were being made.
On how imports were affecting the country, he said the inter-agency working group was looking at advanced technology such as blockchain technology to ensure no undervaluation of the product and no illegal consignments. The inter-agency working group was also working on upgrading border controls and the Department was also working with SACU and the implementation of protocols.
Regarding the provinces and how the Department looked at tenders, there had been issues regarding public sector procurement. The Department was working with the National Treasury and the departments to ensure 100% adherence to local content products for clothing, textiles, footwear and leather. There were problems in many institutions because of a lack of familiarity with the legislation. The DTIC was the custodian of this legislation and was working with procurement agencies to strengthen monitoring tools.
He said a task team on skills and productivity was looking at the impact of technology in the sector in coming years to ensure the future of the industry.
The Deputy Minister said the Department would come back to present on the other masterplans when called upon to do so by the Committee.
Mr Mmoiemang then summarised the meeting.
Other Committee Business
The Committee adopted two sets of draft minutes and received notice of a meeting to be held the following day with the Portfolio Committee of Trade, Industry and Competition on outstanding matters regarding the National Lotteries Commission.
Both Mr Brauteseth and Mr Mmoeimang indicated their apologies for being unable to attend that meeting as they had other meetings they needed to attend.
The meeting adjourned.
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