Stories

What executives say about the global value chain for garments

From Chapter 5 of the African Transformation Report

To find out more about Sub-Saharan Africa’s prospects in the global value chain for garments, ACET surveyed senior executives from eight companies in the industry and conducted more extensive interviews with three of the companies.

Of the three, one is a very large U.S. retail chain that sources its own brand garments from suppliers in several countries. The vendors are outside Africa, but some have factories in Sub-Saharan Africa. Two other companies are brand manufacturers that have manufacturing plants in several countries. Both had plants in Sub-Saharan Africa at one time but have since pulled out.

The retail company’s project design and development group decides on the apparel (and accessories) product, including design, sizing, and colors. It then decides which of its approved vendors to place orders with. Vendors are in charge of production decisions, and the product may be manufactured in several vendor or vendor- affiliated factories in different countries. The retailer inspects the factories periodically for quality and social compliance.

The main criterion for vendor selection is execution, including time to market. As the executive noted, “A vendor needs to be late in delivery only once to be dropped from the list.”

When the MFA came to an end, the African countries became uncompetitive.

The vendors are mainly in the United States (with overseas representatives), South Korea, Hong Kong SAR (China), Shanghai, and Taiwan (China). The factories are mainly in China (a majority of factories), South Korea, South- East Asia, the Indian subcontinent, Egypt, Turkey, and Central America.

To take advantage of quotas during the MFA period, the retailer sourced from Sub-Saharan Africa through vendors in Hong Kong SAR (China) that had factories in Kenya, Lesotho, and Namibia. But when the MFA came to an end, the African countries became uncompetitive.

The main reason for dropping them was their difficulty in meeting the time-to-market requirement. Usually, the agreed date is around 90 days. Within that time, fabric must be sourced and garments made, packaged, transported, cleared through customs, distributed to the stores, and put on store shelves.

Sub-Saharan countries have had difficulty meeting the timeliness requirement—for four reasons. The majority of fabric and other inputs (zippers and buttons) were imported from China, adding to long lead times. If there were last minute changes in design by the retailer after the fabric was shipped, it was difficult to change production. Difficulties in the domestic environment added to production times. And shipping times were long because of poor logistics. The other companies surveyed also identified the same main obstacles to their sourcing from Sub-Saharan Africa.

Separately, one of the other executives surveyed indicated the need to air-freight garments from Sub-Saharan Africa in order to meet deadlines, adding considerably to production costs.

The retailer experience is mirrored by that of the brand manufacturers. One, a pioneer in “fast fashion” clothing (inexpensive, designer-mirrored, and ready-to-wear), set up operations in Sub-Saharan Africa before AGOA was launched in 2000 and advocated strongly for that program. But its operation failed, mainly because of political instability and political interference that made it difficult to meet cost and timeliness targets. The company is now looking to set up production in India, saying that Sub-Saharan Africa is “no longer on the radar screen.” The other manufacturer cites difficulties with the “low productivity of the unskilled workforce.” Its operation failed, but it is considering setting up again on a “very small” scale, mainly for reasons of corporate and social responsibility.

Source: ACET interviews with senior executives of multinational garment companies.

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