THE Clothing, Textile, Footwear and Leather (CTFL) value chain is a critical part of manufacturing. If Zimbabwe utilises its CTFL sector appropriately, it can create jobs and improve on its export performance.
Zimbabwe's CTFL sector peaked around the year 2001, when it employed 35 000 people and made a significant contribution to both GDP and exports.
It has since fallen from that height. Currently, the value chain employs around 4 000 people. By 2015, it was reported to be operating at only 34% of its available capacity.
In an interview with Newsday Business in 2023, Bhekitemba Ndebele, the CEO of Truworths limited, articulated that over 90% of the country’s formal CTFL manufacturers have shut down. Almost all of the big shoe manufactures have gone out of the country.
In Matabeleland, the province now has only one manufacturer of formal trousers and one suit manufacturer. Ndebele went on to explain that there are only two modestly sized companies, which are capable of manufacturing ladies’ wear.
In essence, Zimbabweans now rely on imports for the majority of their clothing - from shorts, shoes, denim wear, and so forth. Of course, this is not a desirable set of circumstances.
The CTFL sector is dependent on the production of both natural and synthetic fibres such as cotton, wool, silk, linen, flax, hemp fibres, mohair, animal products, polyester, nylon, rayon, etc.
Natural fibres are harvested from agricultural processes such as the cultivation of crops or the rearing of animals. Synthetic fibres are mostly made from the processing of petroleum-based chemicals.
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Once fibres are made available, the value chain processes them into different kinds of fabrics. Thereafter, the fabrics can be sold as intermediate products to other manufacturers or as various end-products such as upholstery fabrics, clothes, shoes, etc.
As for leather, when processed, it is also sold as an intermediate good or various end-products. The aforementioned processes show that the success of the CTFL value chain can also drive the development of other economic sectors such as agriculture, chemicals manufacturing, design, logistics, retail, and so forth.
Emphasis on the CTFL sector is important because a number of Asian nations successfully used it when they began their journey towards broad national industrialisation and economic development.
Countries such as South Korea, Japan, Philippines, China and Malaysia, started out with the manufacturing non-durable consumer goods, such as clothing.
They then moved on to include more durable consumer goods.
Eventually, the Asian countries migrated upwards to include capital goods. As the Asian nations interacted with imported technologies, which they were using along the way, they began to learn from them and developed capabilities in designing similar technologies.
So, for Zimbabwe, the CTFL sector also offers an easy way for the country to strengthen its momentum towards industrialisation and ultimately develop independent capabilities in building various technologies.
The CTFL value chain also offers a great opportunity for the creation of local jobs. This is because the sector is one of the most labour-intensive, of all economic sectors.
Clothing manufactures cannot easily replace workers with robots and computerisation because such technologies cannot handle the flexibility and non-consistency of fabric.
Most of the processes in the sector need human participation and that is not likely to change in the foreseeable future. The sector also has low capital and energy requirements, when compared to others.
In terms of raw materials for the value chain, Zimbabwe has limited production capabilities. There is already an active cotton value chain.
However, the country uses only 30% of locally-grown cotton whilst the other 70% is exported. The bulk of cotton processing companies are either under judicial management (have had solvency issues), or have already been shut down.
There is also a small leather sector. Most other fabric types such as wool, silk, polyester, nylon and rayon, etc, are imported as there is no capacity to produce them locally.
So, local clothing manufacturers are mostly dependent on imports of raw materials so that they can produce end products. The local textile market is therefore dominated by imports particularly from China, Pakistan and India.
For instance, around 95% of textiles which are used locally, are imported. Most clothing and footwear retail shops are also largely packed with imported clothes.
A few local producers do export to countries as far afield as Germany.
This shows that with the right conditions and support, the local value chain can be enhanced to grow further.
Key players in Zimbabwe's CTFL sector include Zimbabwe Spinners and Weavers, David Whitehead Textiles, Paramount Garment Works, Throttle Clothing, Kingsport Investments, Bravette, Selimac, Bata Zimbabwe and Padenga Holdings, among others.
Challenges
A major reason behind the collapse of the local CTFL sector, is the emergence of the importation of second-hand clothing and footwear from the US and Europe.
The government initially banned the importation of second-hand clothing in 2015. After public outcry, the ban was eventually lifted. Strict regulations and customs duties were then introduced around 2017, in order to discourage the inflow of such merchandise.
However, locals have remained notorious for smuggling the imports such that they are not subject to the regulations and duties. The second-hand imports are sold in open spaces at prices below the cost of production of local manufacturers.
Retailers of the used goods have minimal rental charges since they work in open spaces, including on the streets. They also do not pay municipal fees and other government levies because their businesses are informal.
Moreover, they have no obligation to pay income taxes to the government. All these have provided the retailers with a superior advantage in terms of costs and convenience, when compared to formal CTFL manufacturers and retailers.
Imports of brand new CTFL merchandise from China, South Africa, and other countries, have also outcompeted local producers. Foreign producers, particularly from Asia, have superior technologies, advanced skills and manufacture products at an extremely large scale.
This enables them to provide lower priced and more modern goods.
Some of them are also notorious for making counterfeit goods, which mimic popular international brands, such as Nike, Gucci, Louis Vuitton, Hugo Boss and Giorgio Armani, among others.
This also gives them an edge over local producers, who generally produce lesser known brands. Unfortunately though, counterfeit CTFL products end up short-changing the very consumers, who purchase them because they are generally of poor quality and do not live up to expectations when put into use.
Erratic water and energy supplies imply that local production runs are regularly interrupted, unreliable and extremely costly. The small size of producers also means that they cannot hire highly-skilled employees who are critical for success within the industry.
Existing Zimbabwean CTFL factories generally have obsolete or backward equipment. Local banks do not have the capacity to support them either. So, that makes it difficult for them to purchase the latest industrial infrastructure and expand their operations.
Local manufacturers can get rebates (refunds) for some duties paid on imported raw materials, which are not produced within the country.
However, this Clothing Manufacturers Rebate (CMR) still excludes a number of critical imports and it is notorious for being difficult to access. So, for some producers, the rebate exists only on paper, not in practice.
A weakening local economy also means that locals have limited demand for clothes.
Moreover, the widening gap between the formal and informal foreign currency exchange rates has resulted in Zimbabwean exporters in the CTFL sector registering huge losses.
The 25% of their (exporters) revenue which has to be surrendered to the Reserve Bank of Zimbabwe (RBZ) is converted to a ZiG value at a contestable exchange rate, which sometimes results in huge value losses.
Opportunities and solutions
Government ministers in charge of the Zimbabwe Revenue Authority (Zimra) and other agencies, which are responsible for securing Zimbabwe's borders, should admit that they have failed to uphold the integrity of the country's borders.
The regulations, which are meant to manage the importation of second-hand CTFL products (such as import licensing requirements and duties), would have put second-hand CTFL products out of business, if they were effectively enforced.
If the existing regulations were to be followed, there would be no second-hand clothing being sold within the country. Simply put, the regulations make it commercially unviable to import second-hand clothing.
So, the selling of used clothing and footwear in Zimbabwe is a reflection of the failure of key government agencies to secure the country's borders and enforce rules.
In response to the porous condition of Zimbabwe’s borders, the government will need to introduce more anti-smuggling technologies and infrastructure.
The assignment of more personnel and innovative procedures will also be important in addressing this matter.
The elimination of second-hand clothing would give local manufacturers the opportunity to ramp up their production. The government would also not be prejudiced of customs duties, which second-hand clothing importers regularly evade.
In this regard, Zimbabwe needs to emulate Rwanda and Uganda, which banned imports of second-hand clothes in order to protect their local industries.
Anti-counterfeiting strategies will need to be implemented in order to address the issue of counterfeit CTFL imports. If counterfeit products can be blocked from entering Zimbabwe, then the local CTFL value chain can have more breathing space to recover. Examples of anti-counterfeiting strategies are listed in the news article below:
https://www.newsday.co.zw/theindependent/opinion-038-analysis/article/200032255/new-strategies-needed-in-fight-against- fake-goods
The Clothing Manufacturers Rebate needs to be made more transparent and accessible, especially for large businesses which are generally not prone to being fraudulent. Adding more raw materials which can be imported duty-free, would be beneficial, as long as they are not produced locally.
Central government, municipalities and other public institutions should be encouraged to purchase locally-manufactured CTFL products, especially if the premium (additional expense) is not above 10%, of the price of imports.
This means that the police, health workers and municipality officials, among others, should prioritise local products when purchasing their uniforms and other CTFL requirements.
For improved competitiveness of exports, the government may allow local manufacturers to merge and share production runs, specifically for the manufacturing of merchandise for the export markets.
With time, existing producers need to be fully consolidated (merged) so that they can also enjoy the same economies of scale which foreign industries already enjoy.
To ensure that CTFL producers do not abuse the domestic market due to their eventual huge scales of production, the Competition and Tariff Commission will need to implement various innovative measures.
Fully-floating the local currency would limit the losses which local manufacturers make from the differences between the formal and parallel market currency exchange rates.
Large local CTFL retailers may also be requested to make commitments to stock at least 30% of their products, as locally-manufactured goods.
Tutani is a political economy analyst. — [email protected].
