Saturday, January 22, 2022

Textile industry poised for growth

There is great anticipation that Botswana’s textile and clothing sector could be poised for more growth reminiscent of the golden years of 2005-2008, when the sector was one of the biggest export revenue earners. The optimism was heightened by the recent announcement by Minister of Trade and Industry Dorcus Makgato-Malesu, of yet another stimulus package for the textile industry, meant to assist companies with wages, boost operational efficiency and improve productivity. Tension mounted after the elapse of the last bailout plan in 2011 as government procrastinated over a proposed P500 million-5 year bail out for the textile industry, while thousands lost their jobs as industries closed shop.

The embattled textile industry, once tottering on the brink of collapse, heaved a collective sigh of relief when Makgato-Malesu announced a P20 million lifeline over the next 12 months, effective November 2013. It was a short term cash injection meant to avert job losses and inculcate the spirit of competitiveness in the textile and clothing sector. The program is in the form of a wage subsidy based on the existing Ipelegeng wage rate. The new program prescribes minimum employment levels and is based on performance with emphasis on increased productivity and export targets.

After the last stimulus package expired in 2011, government and Botswana Exporters and Manufacturers Association (BEMA) took the gap year in 2012 to develop a textile industry strategy that among other things advocated for creation of a value chain between raw cloth retailers, manufacturers and buyers for the South African chain stores that are littered throughout the country. “The strategy aims to lure South African buyers to purchase from local producers. But to do that we must be able to meet their huge demand and also produce goods that are up to standard in terms of quality,” said Gideon Phiri, Executive Director of BEMA. He added that the strategy would also be linked to existing government policies like EDD and private sector development program.

Ms Makgato-Malesu also announced that the stimulus package will address implementation of the textile and clothing sector strategy. The strategy was implemented after cabinet refused to grant the textile sector the P500million bailout, demanding a clear plan of action that highlighted prospects of profitability and employment creation. BEMA is also hopeful that the twelve month bailout plan is a just stop gap measure that will be replaced by a more durable program once the long term strategy is in full swing. “The short term stimulus package does not allow manufacturers to re-tool. We believe the package should be at least 5 years so that manufacturers can use it to borrow from financial institutions,” said Phiri.

But what is so special about the textile industry? Why is government molly-coddling the industry with cash injections and stimulus packages? The answer is that the textile industry is a huge generator of revenue and one of the biggest employers, especially of women. It also has huge prospects of empowerment, as employees who are trained in-house can use their skills to make a living outside their work places. For many years the textile industry was the biggest export revenue earner after diamonds and copper/nickel.

At its peak in 2005 the textile industry employed 10, 000 people and 7, 840 in 2007. The figures slumped to 6, 600 in 2008 and 6, 134 in 2009 as the global economic recession began to bite. Since 2004 the textile industry has been benefitting from salary subventions and the Duty Credit Certificate Scheme (DCCS), SACU initiatives that were meant to increase the region’s competitiveness. Since AGOA, Botswana’s exports rose from about US$2.2 million in 2001 to about US$16.6 million in 2008. By 2009 it was clear that the sector was in trouble. Government threw the sector a P38 million lifeline and employment figures immediately shot up to 7, 442 in 2010-2011. In the same period, Carapparel single handedly exported US$14.9 worth of goods under AGOA, and it was the only company in Botswana that was exporting to the US.

The stimulus package also saved around 5, 591 local jobs. But things took a turn for the worst when the bailout plan elapsed in 2012. Companies were collapsing while thousands lost their jobs as cabinet procrastinated over a proposed P500 million bail out over 5 years. The value of Botswana’s textile exports slumped two thirds to P609.6 million, down from P1.8 billion in 2011. Once again government has come to the rescue with a P20 million 12 month stimulus with the hope of breathing life back into the ailing textile industry.

With more emphasis on operational efficiencies and productivity, coupled with BEMA’s efforts to court buyers from South African chain stores, Botswana just might establish another local market to add to the huge potential inherent in the US. More importantly, the bailout plan will secure much needed jobs for Batswana. The big question is for how long? Will the textile industry ever be self-sustainable?

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