1. Address to the Portfolio Committee on Trade and Industry Wednesday 7 November 2012 Apparel Manufacturers of South Africa (AMSA) [IPAP 2012/17]

2. State of the SA Clothing Industry Cheapest job creator at R20k per job Employs 57 000 formal employees Represents at least 50% of total clothing jobs in SA Biggest cost components: –Fabric (and other raw materials) 50-60% –Labour 25-35%

3. Cost components 1.Fabric –Only 1% of woven fabric consumption is currently bought locally, and less than 40% of knitted fabric is bought locally –Over 80% of consumption imported, attracting 22% duty –Amortized this adds 15% to ex factory prices –Price differential local vs imports = 15-20% State of the SA Clothing Industry

4. Cost components 2.Labour –New wage settlement for 2013 enables better management of labour costs –Improved relationship with Labour –In spite of some job losses, many companies have stabilised and grown State of the SA Clothing Industry

5. Clothing and Textile Competitiveness Program Customised Sector Program CTCP PICTCIP Fabric Duty Relief SETA’s and Training

6. Clothing and Textile Competitiveness Program Two components: 1.PI - Production Incentive 2.CTCIP - Clothing and Textile Competitiveness Improvement Program

7. Clothing and Textile Competitiveness Program 1.PI - Production Incentive –Grants for training and capital expenditure based on % value-add –Great benefits to many companies –Not translated into job creation yet –Improved competitiveness –Cost reduction –Improved efficiencies –IDC challenges to smaller companies

8. Clothing and Textile Competitiveness Program 2.CTCIP - Clothing and Textile Competitiveness Improvement Program –Cluster or Individual Company improvement projects –75% or 65% subsidy for training and service providers –Many case studies of successes

9. Designated sector for local procurement Great Opportunities for clothing sector – large volumes in government procurement Not aware of any new entrants to state tenders Need improved transparency Need assistance in process to become a supplier through successful tenders

10. Opportunities and challenges 1.Fabric input costs –Duty relief immediately levels playing field to comparative imported clothing –Slow progress – 9 years –Only 30-40% of locally produced textiles goes into Apparel –Only 1% of Apparel’s woven fabric consumption is bought locally, and less than 40% of knitted. –The SA Textile industry is unable to supply the input needs of the apparel sector. –IMMEDIATE relief is needed

11. Opportunities and challenges 2.PI and CTCIP –Real success stories in larger firms –Expand to make more accessible to smaller firms –Red tape re applications and submissions negatively affect the reaching of IPAP milestones 3.Local Procurement –Large volumes available in Government tenders –Assistance needed in order to open up successful tenders to clothing manufacturers who do not currently supply Government

12. Opportunities and challenges 4.Illegal trading and under-invoicing –Lost opportunity for government in import duties –Lost opportunity and unfair competition to formal local manufacturers –SARS Customs and AMSA works closely together on reference pricing and peer group reviews. 5.Other challenges –Utility costs –Infrastructure –Transport –Fuel price –Volatile Rand

13. SUMMARY Clothing jobs stabilized for last year Great opportunities for growth –Affordable job creator –Build on successes of PI and CTCIP –Fabric duty relief –Government tenders –Illegal trading