by Chengetai Madziwa – SANF 05 no 63
Southern African countries are optimistic that increased domestic investment and production competitiveness will boost their economies, which have been negatively affected by a slowdown in the textile industry.
With the phaseout of the World Trade Organisation (WTO) quota system at the beginning of this year, textile firms in the Southern African Development Community (SADC) have begun to seek measures which promote investment within the region.
“We need to look within the region for investments which require that we have our own mills. For such investment to come, security, macroeconomic stability, good governance and labour issues need to be addressed,” says Agrina Mussa, President of the Association of SADC Chambers of Commerce and Industry.
The region was benefiting from the Multi-Fibre Agreement (MFR) of the WTO, which protected the textile industries in developing countries from those in developed nations.
Through benefits from the MFR, Lesotho’s textile industry emerged as the biggest sector in the country. It is estimated that 83 percent of Swaziland’s exports are textiles. Malawi and South Africa also have huge textile industries, which were all making use of the WTO rules.
The WTO rules have spurred debate, with business people arguing that the rules protect the domestic interests of giant producers in developed countries. The business community in the region feels that it is time for African countries to seek protection of their own industries and seek to develop their economies without a heavy dependence on developed countries.
In order to strengthen their position in the textile industry, the region’s firms plan to form a regional trade association.
Companies in the textile industry have been urged to work hard to improve productivity in the face of stiff competition from clothing and textile powerhouses in Asia. According to the business community, this can be done more efficiently through the creation of dynamic incentives by governments for investors in the clothing and textile industry.
Asian countries have been enjoying unlimited access to the duty-free American market after the quotas were lifted. The removal of the quota restrictions under the MFA means that African producers are no longer protected from the competition presented by Asian mass producers.
“What we need now are strategies that will prepare us for drastic changes in the future,” said Martin Kansichi, Malawi’s Minister of Trade.
The slow down in the textile industry in the region has also affected social development especially where families have been left with limited income due to loss of employment where textile companies have closed down. The region is therefore calling for WTO rules that consider the welfare of the people in developing countries.
The most affected countries in the region, such as Lesotho and Swaziland, are now working on diversifying their economies in order to create employment and boost economic growth.
Lesotho has already begun revamping its industry, which is paramount to the country’s economic stability. The government announced that it will open some of its closed factories in an effort to create more employment opportunities for its people.
“We are also trying to help at least two other factories through export incentives to reopen,” said David Rantekoa, Permanent Secretary in Lesotho’s Ministry of Trade and Industry.
At the regional level the implementation of the SADC Trade Protocol which envisages a Free Trade Area by 2008, is expected to bring about strong economic ties between member states.
Coupled with the development of a positive macroeconomic environment increased intra-regional trade will go a long way in achieving the goal of poverty eradication. (SARDC)
