States Plan to Beef up Textiles!-by Business Day

AN ACTION plan to recapitalise and upgrade the clothing and textiles sector is to be launched in November, just a month before quotas on Chinese clothing and textiles imports expire.
Industry sources said details of the plan were unveiled to the industry by trade and industry department officials at a meeting last week . They will bring the long-awaited customised sector programme for the industry to implementation level .

Trade and industry chief industrial policy director Nimrod Zalk earlier detailed key aspects of the plan, which include broadening the incentive pool . An incentive is on the cards for capital upgrading that will be dispensed through the development programme for small businesses, relaunched as the Enterprise Incentive Programme last month.
The department plans to fund research and development and upgrading skills, and the state will step up efforts to curb illegal imports, which many manufacturers consider the biggest threat to the industry.

The department has initiated a plan to improve the clothing industry’s competitiveness by beginning a review of import duties on textiles that will rid the tariff book of redundancies.
Duties on fabric not produced in the Southern African Customs Union would be eliminated and duties on textiles not produced in sufficient quantities would come under scrutiny .
With fabric making up nearly half the cost of making clothes, a more streamlined textile tariff regime will rationalise input costs. Central to the action plan would be the launch of a new productivity-linked incentive programme to replace the export-based Duty Credit Certificate Scheme (DCCS).

The DCCS is the only significant incentive programme now available to the industry. Akin to the Motor Industry Development Programme (MIDP), the scheme compensates exporters with rebates on import duty.

However, the clothing and textile scheme has not enjoyed the same level of success as the MIDP. Few manufacturers in SA are competitive enough to export, so few take advantage of it, and the tradability of the credit certificates has been a persistent problem in the past.

Moreover, the programme — like the MIDP — is incompatible with World Trade Organisation rules. Both programmes are being changed from an export-linked to a volumes-based incentive.
While the broader clothing and textiles action plan will be launched in November, the DCCS replacement scheme is set to be implemented only by May next year.

The DCCS expired in March this year, but the International Trade Administration Commission gazetted its extension only last month, with retrospective effect from April 1 until the end of March next year.