Breathing Space for Clothing Exports
by admin on Nov.29, 2007, under Export Import, Products
STRUGGLING clothing and textile exporters have received some relief, with the government extending the export incentive programme until the end of March 2009, while a review of the programme is imminent.
The extension of the duty credit certificate scheme (DCCS), intended to strengthen the export competitiveness of the industry, will bring certainty for clothing exporters. Thousands of workers have been laid off, as doubts about the future of the programme forced companies to cancel export contracts.
Similar to the Motor Industry Development Programme (MIDP), the textile programme has never enjoyed the high profile of the MIDP. Whereas a review of the MIDP was begun five years ahead of its expiry, the DCCS has continued on an ad hoc basis since its expiry at the end of April, making it impossible for the industry to plan ahead.
The situation has been particularly acrimonious because the beleaguered textiles and clothing industry was singled out by the state as a priority sector for support. A big employer, the sector provides work to 9,5% of the workers in manufacturing, more than the automotive sector, but its key export incentive programme has been languishing in the drawers of the trade and industry department.
The scheme compensates manufacturers and exporters of textiles and clothing with rebates on import duty. It has been a problem for the department, as manufacturers often traded its benefits to retailers.
The credits, which take the form of tradable certificates, were often sold to retailers who used them to offset duties on imports — an unpalatable practice for the state because the credits then benefited a sector for which they were not intended. The sale of duty certificates to retailers has now in effect been banned.
Industry stakeholders yesterday welcomed the extension of the scheme but said the issue of the tradability of the certificates remained a concern.
Mark Bennett, a consultant to the clothing and textiles industry in Lesotho for the UK development agency ComMark Trust, said the instrument remained useless if the tradability of the certificates was not addressed. “The reality is, without the DCCS, Lesotho’s export drive is inhibited,” he said.
Alan Jarvis, CE of Formosa, the holding company for Standard Textiles and Tern Sportswear, said uncertainty about the DCCS over the past 18 months had forced his firms to pay off 900 people at the start of the year.
“At our peak we employed 5000 people, but it is now just dwindling because of the uncertainty.” His firms benefit from the DCCS to the tune of R50m a year.
Jarvis would like to see the reward become a cash incentive, with the Industrial Development Corporation taking on the monitoring of the import duties received. “We don’t want to trade it. It is the tradability that causes all the problems,” he said.
The trade and industry department has finally moved on the review of the programme. A source said a comprehensive development programme for the clothing and textile industry in the Southern African Customs Union was being formulated. This would include a review of the DCCS. The terms of reference for the study had been finalised and the appointment of a consultant was imminent.
But an industry insider was sceptical that the review would be completed before the expiry of the programme in April 2009.
“This will be an extremely complex review. Unlike the MIDP, the DCCS works across five countries. They will have to come up with a recommendation acceptable to all these countries, then budget for it .
“The MIDP review has been ongoing for more than two years now, so I don’t see that it will be completed on time,” the source said.
Moreover, manufacturers finalise export contracts six months in advance, which means they need clarity on the future of the programme well in advance of the expiry of the programme./allafrica.com