Alan Peat THE CURRENT strength of the rand is severely affecting the SA clothing industry, according to Jack Kipling, chairman of the Export Council for the Clothing Industry in SA. To be internationally competitive, the clothing industry needs an exchange rate of R8.50ÐR9.00/US$, he told FTW. “However,” he said, “the current negative expectation must be tempered by the fact that it comes after three years of consistent solid growth of exports of apparel in excess of 35% per annum compounded.” While the council does not expect government to manipulate the rand to suit a particular industrial sector or exporters, it did, however, submit “a fully motivated sector-specific proposal” in April. “This,” said Kipling, “would have had the effect of maintaining the export drive and retaining the international market share developed over the past three years.” It was linked to the existing duty credit certificate scheme export incentive, he added, and required that the level of incentive be linked to a theoretical exchange rate of R9/US$ - with the incentive increasing in line with a strengthening rand. “This would have allowed exporters to continue quoting prices for forward contracts by removing some of the risk of a volatile currency,” said Kipling. A key motivation, he added, was that - in labour-intensive industries such as the clothing industry - it is not possible to vary production output considerably without retrenching staff. “And market share, once lost, is not easily regained in a market as competitive as the international clothing industry.” Second to food, the clothing industry is the most global of all industries, he added. “Therefore, international buyers are able to exercise wide choice in sourcing product from various competitor countries. This is a risk that needs to be borne in mind at all times.” SA is still in the process of becoming an export-driven economy, according to Kipling. “Consequently,” he said, “we may not have yet reached the level of sophistication needed to ensure that the currency remains fairly stable - a pre-requisite for successfully retaining and building market share in the global economy. “We have not achieved this and SA will pay the price in the short-term Ð with all export-oriented industries feeling the pinch.”
