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Supply crisis spurs South Africa retailers to end Asia reliance -Breaking


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© Reuters. FILEPHOTO: Shoppers walk past Foschini stores at Lenasia’s shopping mall, south of Johannesburg. August 28, 2013. REUTERS/Siphiwe Sibeko

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By Nqobile Dludla

JOHANNESBURG – Rising shipping costs, COVID-19 supply disruptions and spiralling shipping prices are accelerating a South African shift to reduce their dependence on Asia. They want to be able to source local products.

South Africa imports more than half of its clothing, footwear, and leather products from China. Africa’s top economy is left vulnerable and the retailers are at the mercy Chinese power shortages.

Four top South African retailers told Reuters that while the government had launched a program in 2019 to provide tax incentives for local suppliers, recent problems arising from Asia have made it more urgent.

We are currently looking into various manufacturing options here to make more furniture, especially at a time when shipping costs have risen 400%. So it’s even more of a reason if you needed one,” TFG Chief Executive Anthony Thunström said in an interview.

TFG sources 72% its clothing locally. It announced earlier this month that it plans to local manufacture 30,000,000 pieces per year in four years. This is up from the current 11.5 million.

Thunström said a lot of TFG’s jewellery is already made in South Africa, but he wants to further increase local sourcing.

To improve lead times and compete with global brands like Zara and Hobbs, the owner of British women’swear brands Whistles and Whistles and South Africa’s @Home homeware company wants these products manufactured quickly. Inditex (MC:) and Swedish rival H&M.

TFG stated on Nov.11 that it will invest an additional 575million rand ($37 Million) over the next three years and five years in order to develop local manufacturing capacity.

South African retailers don’t look far when it comes to looking locally.

Hugo Boss and Italy’s Benetton have both indicated that they will source clothes from closer to home.

POWER CUT EFFECT

Norman Drieselmann (CEO of South Africa’s Retailability), said that China has added two weeks to the delay in clothing due to power outages. The COVID-related delays are occurring ahead of Christmas.

Woolworths stated to Reuters that it anticipates power outages will affect its March orders next year. It sources 30% of its clothing, beauty, and home goods from China. However, Woolworths said that it has made arrangements to purchase more local.

Reuters spoke with retailers who did not disclose potentially competitive information regarding who might be manufacturing goods in South Africa for them or where they would be located.

Pepkor is a retailer of budget clothes and electronic products. However, it stated that they want to partner with current and strategic suppliers to create easy-to make garments like shorts or t-shirts as well as provide capital to purchase machinery.

Leon Lourens, CEO of Pepkor told Reuters that he had identified vendors with which he wanted to do business. Now the company must build the additional capacity.

South Africa won’t be able to provide the complete answer.

In a nation that has long been plagued by power shortages, and which is also prone in other sectors to labour dispute, the country’s industrial sector suffered. Meanwhile in South Africa, suppliers of raw materials from Asia such as fabric have sourced them.

Drieselmann, Retailability said that it wants to increase its local vendors by placing more orders with local producers instead of ordering from overseas. However, the company is shifting sourcing away from China and to existing offshore suppliers.

Drieselmann stated that India has been “engaged more actively by the company as an alternative”, particularly in terms of fabric sourcing.

($1 = 15.7250 rand)

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.