The Trade Hub in the News

CAPE TOWN — The possibility of Africa becoming a global manufacturing power was a key focus of the inaugural Source Africa Trade Expo.

The event was aimed at creating a platform for more than 160 textile, apparel, footwear and accessories manufacturers from 15 African countries to "showcase their world-class products to an international and regional audience of professional buyers," said William Scalco of LTE Africa, which organized the event.

Supported by the USAID Southern African Trade Hub, Source Africa partnered with the American Apparel & Footwear Association as well as the African Cotton & Textile Industries Federation. Speaking during the plenary session on April 9, Erica Barks-Ruggles, Consul General of the U.S. in Cape Town said that "South Africa has attracted buyers from around the world to southern Africa because it's the gateway for Africa...although there is competition from Nigeria and Ghana these days. But it remains the gateway because of the quality, because of the value, because of the sophistication of the products that can be found here, as well as the consistency of the infrastructure."

Barks-Ruggles emphasized the support that the U.S. government has extended to Africa's textile, apparel and footwear industries, citing the significant role the African Growth & Opportunity Act has played in strengthening the continent's garment industries while also encouraging investment. "Since 2001, total exports from Africa to the United States have increased over 550 percent," she said.

She acknowledged that even starting from a fairly small base translated to $53.7 billion in 2011 from $8.1 billion in 2001, and 300,000 jobs created in Africa. While oil exports accounted for most of this increase in exports, most of the growth in jobs and economic development occurred in the sector of nonenergy exports.

"Textiles and apparel accounted for more than $850 million in exports from Africa to the United States in 2011, more than double the level of 2001, although a decline from a peak of more than $1.6 billion in 2004," said Barks-Ruggles, who served as the point person in the White House from 1996 to 1999 in order to secure the passage of AGOA.

"Garments are a major AGOA success story for Southern Africa," she said. "Lesotho, Swaziland and Mauritius, in particular, developed garment industries around AGOA and now employ thousands of sewing machine operators making apparel for some of the largest and best-known brands in the U.S., including Levi's, Wal-Mart, Gap, Old Navy, Victoria's Secret, Target, Calvin Klein, Gloria Vanderbilt, Vanity Fair and Land's End. Mozambique and Botswana have developed strategies to follow the examples of their successful [Southern African Development Council] neighbors."

Moderating a panel discussion, Steve Lamar, executive vice president of the AAFA, asked what role preference programs have in driving or supporting sourcing from southern Africa.

Angela Chew, senior vice president of global sourcing and product development for Destination XL Group, said, "You can never replace all of China, so what we do is we spread the business risk among eight ASEAN countries and Latin America."

Chew noted that her company was new to this region. "When you're moving out of China, there are many places to go to — there's Vietnam, there's India, there's Pakistan, there's Bangladesh" although social issues plague that country. "When we look at a factory, certainly we are looking at the quality, deliveries and cost structure," she added. "Certainly duty-free and quota-free — it's very attractive, but it's not the most essential in my opinion."

Lamar asked Philip Krawitz, executive chairman of Cape Union Mart, a leading manufacturer and retailer of outerwear in South Africa, about the country's role as the "S" in the BRICS economic bloc, which is "often identified as a key economic market for global brands to develop consumers."

With 60 million people living south of the equator who have access to international media — and in effect are connected to the rest of the world like never before — demand is growing at an unprecedented rate, said Krawitz. He also believes that "China would ultimately make for the Chinese market. If Chinese growth continues at the 7 percent levels they've been talking about and the Chinese one-child policy seems to be placed in the back burner, Chinese population will grow and China will be hard-pressed to meet its own production needs. Those of us who have been importing from China will see that prices have risen dramatically along with restrictions like lack of flexibility...Now those are unique opportunities for the African continent because we can be more flexible. We can certainly be competitive. In my own company, our buyers have a choice whether to buy anywhere in the world or our own factory, allowing a maximum preference of 10 percent. I can tell you that our factory, we've sold out for the whole of this year and most of next year."

Ultimately, buyers were interested in seeing whether "Made in Africa" would indicate quality. Claire Davis, vice president of technical design and outlet sourcing for Chico's, said her company had never sourced from Africa, but she was ready to see what the continent had to offer.

"We're always open to considering new sourcing opportunities," she said. "But the product has to meet our standards."

Africa's beleaguered clothing and textile industry could take advantage of a projected downturn in exports from Chinese manufacturers - but only if a wide range of reforms are implemented locally, according to industry experts at the Source Africa trade event in Cape Town last week.

Speakers at the event said that if the difficulties currently hamstringing the sector could be overcome, then Africa's clothing and textile sector could thrive.

Roy Ashurst, a senior buyer for the US-based PVH Corporation, told delegates the annual value of Chinese clothing and textile exports was expected to drop from US$250bn to US$200bn in the coming years.

"That's US$50bn of opportunity that African companies could tap into. Wages in Africa are now lower and basic commodity goods are cheaper than anywhere else in the world, so I think we have reached a tipping point that could lead to an industry revival in the continent," he said.

World Bank senior trade specialist Thomas Farole agreed, noting rising Chinese costs. "China's minimum wage has doubled in the last five years so Africa has a serious advantage over the world's largest clothing and textile producers in this area. As Chinese wages increase, the country will shed 85m jobs [across all sectors]. The continent won't get them all of course, but they should get some."

He added Africa's relative proximity to Europe and the US would also help. "There is also a change on the way in terms of companies pulling back to regional networks to buy stock. Buyers in the US and EU do not want to wait for four weeks to get stock, and Chinese producers find it difficult to turn around orders quickly due to their geographical proximity to these markets," he said.

Struggling to compete
But Africa will still have to compete with exporting countries in the Middle East and the likes of Indonesia, Vietnam and Bangladesh. Even with preferential trade agreements such as the USA's African Growth & Opportunity Act (AGOA), African companies have struggled to compete locally, regionally and internationally.

Samuel Gayi, head of the commodities special unit at the UN Conference on Trade and Development (UNCTAD), explained Africa's clothing and textile sector remains too fragmented for the global economy, harming competitiveness.

Currently its clothing and textile industries operate in small economic zones, with poor transport infrastructure and inefficient labour markets. In addition, companies have to contend with high inflation rates, the threat of political instability and weak institutions.

"Infrastructure is the key to increasing trade in general. Pan-African roads could cost US$32bn but they could generate US$250bn of additional trade over 15 years. The plans are there to develop these transportation corridors, but they need to be implemented," he maintained.

This not only stunts exports outside the continent, but also inter-Africa trade, which is further hampered by inadequate domestic transport policies, difficult business environments and inefficient border and customs procedures.

World Bank statistics reveal that over the last 20 years Sub-Saharan Africa has only secured 1% of the global apparel trade, with China getting a massive 41%.

International Textile Manufacturers Federation (ITMF) figures concur: in 2011, China remained the largest clothing and textile exporter in the world by far, and no African country appeared in the world's top 20 for that year.

Its best performer was Egypt, a long-standing cotton producer, which exported US$3.5bn worth of the fibre.

As further proof of the industry's stagnation across most of the region, the ITMF said that investment in the technology and skills needed to develop Africa's apparel industry over the past 10 years was also extremely low.

Asian inflow
South Africa, the continent's biggest economy and traditionally a clothing and textile hub for the region has shown how difficult it is for African companies to withstand the flood of Asian low cost goods, according to trade consultant Liz Whitehouse, South Africa-based managing partner at Whitehouse & Associates.

"South Africa's clothing industry has been under enormous pressure for a while, with total imports in this sector now valued at US$1.5bn - a 370% increase over the last decade. The government linked the decline of the local industry to Chinese imports and, as a response, imposed quotas on those goods.

"This left a gap in the market that was filled by Bangladesh and Vietnam, and Asia now accounts for 80% of South African clothing imports," she said.

Whitehouse added that South Africa and others could learn from Mauritius, whose products are selling well in her country.

Sub-Saharan Africa's top apparel exporters, the Mauritians sold US$769m worth of clothing and textile product internationally in 2010 - more than double Madagascar, its closest rival.

"Mauritius supplies high quality products and has used its physical proximity to Africa, and shorter lead times, to build good relationship with a lot of South Africa retailers. They are flexible, deliver according to the schedules, have a strong design capacity, and a two-week turnaround time to market on their orders," she said.

Cause for hope
And although the situation in South Africa's clothing and textile industry is grave - at least 50,000 jobs were lost in the clothing sector in the last decade - there may be cause for hope. The local industry has recorded modest growth since 2010, when exports grew to US$174m from US$166m the year before.

South Africa's Department of Trade and Industry director general, Lionel October, said his government's clothing and textiles competitiveness programme (CTCP), established to support the industry, was helping turn things around.

"Local retailers are increasing procurement from local manufacturers and there is confidence starting to be shown by the new investment in the sectors," he said. "The CTCP stopped the employment decline in these sectors and more than 12,000 new permanent jobs have been created.

He added that more than 400 companies have been helped by the CTCP, with ZAR1.5bn [US$165.5m] worth of applications approved.

Regionally, the private sector is also trying to react, having formed the African Cotton and Textile Industries Federation (ACTIF) in 2005.

ACTIF executive director Rajeev Arora said the organisation's "main focus is to develop the value chains, and to secure foreign direct investment so we can build the capacity of manufacturers.

"We work in an advisory capacity with most governments and are discussing how agreements like AGOA should be taken forward after 2015, when it is scheduled to finish. There are many challenges but we are working to deal with them," he explained.

The Clothing and Textiles Competitiveness Programme (CTCP) had, to date, created more than 12 000 new permanent jobs in South Africa's clothing, textiles, leather and footwear sectors, Department of Trade and Industry director-general Lionel October said on Monday.

Speaking at the Source Africa 2013 conference, in Cape Town, he indicated that the CTCP, which was launched in September 2010, had breathed new life into these sectors, with more than 400 companies having been assisted under the programme and R1.5-billion worth of applications having been approved.

"Local retailers are increasing procurement from local manufacturers and there is confidence starting to be shown by the new investment in the sectors," October added.

He stated that other Southern African Customs Union countries have also incorporated the CTCP concept, while Swaziland was implementing the programme.

"Some less-developed countries have taken full advantage of international trade agreements like [the African Growth and Opportunity Act] to build on their industries. Through these interventions, countries like Lesotho have seen their textiles and clothing sectors growing to the extent that they are now [some] of the biggest manufacturers on the continent both in fabric and garments," October stated.

He further highlighted the importance of trade among African countries, as the industry had growth potential.

"These sectors are labour intensive and have the potential to create large employment, especially in the garment manufacturing sector where the investment is low but the job creation is enormous. The industry has the biggest advantage that the raw materials like fibres, skins and hides are readily available in the African countries and it makes business sense to beneficiate these raw materials instead of exporting jobs by selling these resources to countries outside Africa," October put forward.

He pointed out that South Africa had opened its markets to Africa through the different protocols where rules of origin were respected and the manufacturing sectors of those countries were developed. However, he emphasised that South Africa did not support traders who specialised in trans-shipments and that destroyed the country's manufacturing base.

Opportunities to source textiles, apparel and footwear from Africa are the focus of a special event taking place in Cape Town next year, which brings together producers from more than a dozen sub-Saharan African countries.

The Source Africa fair will take place from 9-12 April 2013 at the Cape Town International Convention Centre.

Its aim is to bring domestic and international buyers and retailers face-to-face with textile, apparel and trims suppliers across the continent.

The event will consist of a two-day trade exhibition featuring African country pavilions - including Lesotho, Kenya, Mauritius, Tanzania, Swaziland and South Africa - showcasing around 100 producers, along with a matchmaking programme that introduces buyers to vendors and can also set up factory visits.

A series of seminars will also explain why sourcing from Africa makes sense - highlighting investment opportunities in the region, addressing compliance issues, environmental stewardship, labeling product safety and preferential trade access.

"In the past decade, trade between Africa and the rest of the world has tripled, private foreign investment has surpassed official aid, and it will surely keep rising," explained Cynthia Brown, public diplomacy officer at the US Consulate General in Cape Town.

"Africa, as our business community is learning, now offers the highest rate of return on foreign direct investment of any developing region in the world. In fact, it's the only developing region where the growth rate is expected to rise this year."

Through the US's African Growth and Opportunities Act (AGOA), Africa's textile and apparel sector has attracted major brands such as Levi's, Wal-Mart, Gap, Old Navy, Victoria's Secret, Target and Calvin Klein, creating around 300,000 jobs in an industry primarily staffed by women.

In Europe, the Everything But Arms (EBA) system of trade preferences allows duty free, quota free access to products from many textile and apparel- producing countries in sub-Saharan Africa, including Madagascar, Lesotho and Tanzania.

The event is being organised by LTE South Africa, with support from the USAID Southern Africa Trade Hub.

South Africa has launched its biggest apparel and textile trade fair, which is set to debut 9 April next year at the Cape Town International Convention Centre in Cape Town, South Africa. The purpose of the event is to create a fair for African-based manufacturers exclusively, to stimulate business between African companies and countries, to introduce participating exhibitors to South African retail chains and to export African products to the US.

Source Africa will consist of a trade exhibition lasting two days, featuring stands from various African countries. The event will also offer a matchmaking programme to introduce buyers to vendors, factory visits for international buyers and a roster of seminars.

Speaking at the event's launch, speaker Johann Baard, executive director of Apparel Manufacturers South Africa (AMSA) said: "It's clear that Africa's time has arrived. For South Africa's clothing industry, after nearly 20 years of decline, there have been encouraging signs of stabilisation following policy interventions by the DTI. The declines haven't yet been reserved, but there is a lot of potential to create jobs and grow again."

The launch's keynote speaker, Cynthia Brown, Public Diplomacy Officer at the US Consulate General in Cape Town, was upbeat about expectations for the African market. "Africa, as our business community is learning, now offers the highest rate of return on foreign investment of any developing region in the world. In fact, it's the only developing region where the growth rate is expected to rise this year," she said.

Source Africa, the biggest textiles and apparel trade event in Africa, has been launched in Cape Town, South Africa. The trade fair, which will take place from 9 – 12 April 2013 at the Cape Town International Convention Centre, will provide regional and international buyers with an unrivalled opportunity to explore Africa's sourcing opportunities.

The event comprises a two-day trade exhibition featuring African country pavilions, a matchmaking programme that introduces buyers to vendors, facilitated factory visits for international buyers to countries in the region, and a series of professional seminars explaining why sourcing from Africa makes sense, highlighting investment opportunities in the region, addressing compliance issues, environmental stewardship, labeling product safety and preferential trade access.

At the launch held to announce the event, Cynthia Brown, Public Diplomacy Officer at the US Consulate General in Cape Town said in her keynote address:

"This is the perfect time to inaugurate Source Africa. In the past decade, trade between Africa and the rest of the world has tripled, private foreign investment has surpassed official aid, and it will surely keep rising."

"Africa, as our business community is learning, now offers the highest rate of return on foreign direct investment of any developing region in the world. In fact, it's the only developing region where the growth rate is expected to rise this year."

Through the US's African Growth and Opportunities Act (AGOA), Africa's textile and apparel sector has attracted major brands such as Levi's, Wal-Mart, Gap, Old Navy, Victoria's Secret, Target and Calvin Klein, creating around 300,000 jobs in an industry primarily staffed by women.

In Europe, the Everything But Arms (EBA) system of trade preferences allows Duty Free, Quota Free access to products from many textile and apparel producing countries in sub-Saharan Africa, including Madagascar, Lesotho and Tanzania.

The Southern Africa Trade Hub and the U.S. Embassy in Gaborone, Botswana supported a   delegation of eight renewable energy companies from Botswana, Zambia, Namibia,  Mozambique and South Africa to attend the Annual Solar Power International 2012 Conference on September 10-14 in Orlando, Florida. Solar Power International (SPI) is the premier global solar energy conference and expo, designed to serve and advance the solar power industry.

These companies joined more than 21,000 attendees at the industry's largest, most comprehensive solar energy event in North America. The keynote speaker at this weeklong event was former U.S. President Bill Clinton, who expressed his commitment to supporting the expansion and use of solar and renewable energy—both in the U.S., and
in the world's emerging and frontier market regions.

The Southern Africa delegation included Solar Power, the oldest company dedicated to natural resource development in Botswana; BPC Lesedi, which removes barriers to the utilization of renewable and clean energy in Botswana; Energy Systems Group, a prominent supplier and installer of solar systems in Botswana, Alternative Energy Systems,  one of the leading suppliers and installers of solar electrical systems in Namibia;  and AE-AMD Renewable Energy, a South African company that identifies, evaluates, develops and operates renewable energy power plants. AE-AMD is currently building 10-megawatt and 20-megawatt plants in South Africa and has an over 60-megawatt pipeline for the next three years.

During the conference and exhibits, the executives from Southern Africa met with U.S. suppliers, distributors and manufacturers of solar energy products. Specifically, the executives met with Quanta Power Generation Group, which has resulted in discussions with AE-AMD for engineering, procurement, and construction services. In addition, discussions are already underway with ASP, a PV module manufacturer in the U.S. The Southern African executives identified suppliers of solar storage and are in advance discussions with Africa Energy Group in the U.S. to procure the solar systems. The executives also met in a special session with the U.S. Department of Commerce's International Trade Administration and the U.S. Export-Import Bank.

There are many resources available to U.S. firms that are interested in exploring untapped market opportunities in Africa. For example, recently OPIC approved up to $250 million for the agency's first solar power project in South Africa, a 60-megawatt plant that will help diversify the country's electricity generation beyond its heavy coal concentration and in the process displace approximately 140,000 tons of greenhouse gas emissions in its first year alone. The OPIC financing will enable two U.S. companies, MEMC Electronic Materials and its subsidiary SunEdison, to construct and operate a solar photovoltaic plant in South Africa's Free State province. All electricity generated by the plant will be sold to the national grid through a power-purchase agreement. Coal-fired plants currently produce 84 percent of South Africa's electrical generation capacity. MEMC, based in St. Peters, Missouri, is a major global manufacturer of PV wafers and related products for the semiconductor and solar industries. Through its SunEdison subsidiary acquired in 2009, MEMC is also a developer of solar power projects and is a leading solar energy services provider.

Africa's economic potential as the next leading source of global economic growth could remain unfulfilled if the barriers to international and interregional trade were not addressed, Trade and Industry Minister Dr Rob Davies said last week.

Speaking at the Southern Africa Trade Facilitation conference, in Johannesburg, he pointed out that, despite Africa's position as the second-fastest-growing continent after Asia, inadequate infrastructure, the limitations of small and fragmented markets and the inadequate diversification of industrial structures were responsible for the low levels of trade.

The World Bank's 'Trading Across Borders' indices ranked Southern African countries in the lowest quartile, between 136 and 164, among 183 countries.

The high costs and lengthy duration of movement of goods over Southern African borders, which reduced commercial and industrial competition and discouraged trade, needed to be mitigated through efficient trade facilitation and cost-effective transport services, logistics and customs reforms.

Davies commented that the Southern African Development Community (SADC) free trade agreement (FTA), which was expected to be implemented this year, would boost interregional trade, as almost all tariff lines would be duty free.

The SADC FTA, incorporating the East African Community and the Common Market for Eastern and Southern Africa, would extend across 26 countries, comprising a combined population of 600-million, and open up markets reaching a gross domestic product (GDP) of about $1-trillion.

The SADC FTA could also form the basis of an Africawide FTA, which would also open a market reaching a GDP of $6-trillion, deal with the small and fragmented economies, enhance the interest in foreign investment in Africa and further boost trade.

World Customs Organisation capacity building director Erich Kieck said constraints could also be mitigated through trade facilitation tools, like the national single window (NSW), customs connectivity, coordinated border management, one-stop border posts and customs modernisation tools.

ORLANDO -- Eight solar power firm owners and operators from five Southern African countries attended the Solar Power International (SPI) conference in Orlando, Florida last week. Firm owners from Botswana, Zambia, South Africa, Mozambique and Namibia met with potential U.S. technology and investment partners, heard from industry experts on the state of the industry, and checked out the latest products on the market from the more than 1,200 exhibitors at the conference. Working with Maryland-based Elan International, the delegates' attendance at the conference was facilitated by the U.S. Embassy in Botswana and the U.S. Agency for International Development's Southern Africa Trade Hub.

For the U.S. Embassy in Botswana, getting the delegates to the conference was a win-win: southern African firms are increasingly seeking to grow their industry in their home countries, and at the same time, the solar industry in the U.S. — and America's economic recovery — is being driven in large part by exports. Africa is an open market for U.S. goods and services, and American firms are keenly interested in finding the right contacts with potential African partners.

The African delegates went to SPI ready to find U.S. partners and make new deals. Tamuka Kaseke, of South Africa's AM-AMD Independent Power, for example, has recently been licensed by the South African government to develop a 30-MW solar project with other projects in the pipeline, and he's now looking for an opportunity to buy solar components for his solar parks. Clearly impressed with American design, technology, and yes — prices — Kaseke has talked with dozens of exhibitors and learned about financing options from The U.S. Export-Import Bank, among others. "I love what I'm seeing here," he said.

The three delegates from Botswana were equally impressed. Felix Chavaphi, who owns the Botswana firm, Energy Systems, observed, "At this conference I'm seeing the state of the art." But he qualified the remark: "I have been surprised at how few Africans are here. Africa represents a new, potentially important market for solar products. Many African governments and private sector partners are ready to buy, and policies such as feed-in tariffs are being developed. Yet it doesn't seem the solar industry here has many African partners yet. I feel privileged because I'm getting a lot of attention here."

The group was the first U.S. Government-sponsored delegation to attend SPI from the Southern African region, which represents a market of more than 277 million people.