Monday, January 24

Supply crisis prompts South African retailers to end dependence on Asia


Rising shipping costs and supply chain disruptions from Covid-19 are accelerating a shift by South African retailers to end their heavy reliance on Asia and shift to sourcing products locally.

More than 50% of South Africa’s clothing, shoes and leather products are imported, mainly from China, putting Africa’s main economy and its retailers at the mercy of forces beyond their control, such as the energy shortage in China.

Moneyweb Insider Gold

Join heated discussions with the Moneyweb community and get full access to our market indicators and data tools while supporting quality journalism.

R63/month or R630/year

SUBSCRIBE NOW

You can cancel anytime.

While the government launched a program in 2019 that offers tax incentives to source products locally, the recent spate of problems emerging in Asia has added urgency to what had been slow change, four of South Africa’s top retailers told Reuters.

“Most of the furniture in South Africa is currently imported, we are looking at various options to make more here, particularly as shipping costs are increasing 400%. So it’s a bigger reason if I needed it, ”TFG CEO Anthony Thunström said in an interview.

TFG, which sources 72% of its clothing locally, said earlier this month that it wants to make 30 million pieces a year locally within four years, up from 11.5 million today, and is adding furniture and jewelry to its growing local list.

Thunström said that many of TFG’s jewelry are already made in South Africa, but he wants to further increase local sourcing.

The owner of British womenswear brands Hobbs and Whistles and South African home goods brand @Home wants these products to be made quickly to improve lead times and be competitive against global chains such as Zara, owned by Inditex and its Swedish rival H&M.

TFG said on November 11 that it will spend another R575 million ($ 37 million) over the next three to five years to develop local manufacturing capacity.

South African retailers are not the only ones looking local, as constraints expose the vulnerability of global supply chains and low-cost manufacturing centers that have led to an over-reliance on imports, particularly from Asia.

Benetton and Hugo Boss from Italy have already indicated that they are buying clothes closer to home.

Power outage impact

Norman Drieselmann, CEO of South Africa’s Retailability, which owns the Edgars department store chain, said China’s power outages have added a two-week delay to clothing in addition to four weeks due to Covid, before the criticism. festive season.

Woolworths told Reuters that he expects the power cuts to affect his orders for March next year. The retailer, which sources about 30% of its fashion, beauty and home goods from China, said it is making arrangements to buy more locally.

Retailers who spoke to Reuters did not share potentially competitive information on who would produce goods for them in South Africa or exactly in which part of the country.

But budget electronics and clothing retailer Pepkor said it wants to work with existing and strategic suppliers to make easy-to-make clothing like T-shirts and shorts and provide financial capital to buy machinery.

“Now we have identified some suppliers that we want to work with, now the next thing is to develop more capacity for them,” Pepkor CEO Leon Lourens told Reuters.

However, South Africa will not provide all the answers.

The industry has suffered in a country long ruined by power shortages and prone in some sectors to labor disputes, while raw materials, such as fabrics, are sourced by South African suppliers from Asia.

Retailability’s Drieselmann said that while it seeks to increase its local supplier base by placing more orders from local manufacturers rather than abroad, it is also shifting sourcing from China to other existing offshore suppliers.

The company has “begun to interact more actively with India as an alternative, particularly from a fabric sourcing perspective,” Drieselmann added.


www.moneyweb.co.za

Leave a Reply

Your email address will not be published. Required fields are marked *