• back
  • 6.6.4-MARKET PROFILES-EXPECTED MARKET DEVELOPMENTS

  •  
  • Expected market developments

    Chapter 6 - Market profiles - South Africa 

     
     
    The outlook for the South African cotton industry is generally not very positive. As shown in figure 20, local production and overall consumption have been in decline for the last 10 years and local production levels are not expected to reach significant levels again. Given recent announcements by the large retailers such as Woolworths, there is likely to be a move towards the use of organic cotton although this will simply be a substitution as opposed to growth in the size of the market.

    On the supply side, cotton is competing with maize as a crop which is generally much easier to grow. Currently, the maize price is high so farmers have opted to plant maize ahead of cotton which requires a far higher level of management input and effort. A further factor are the cotton subsidies offered in the USA and the EU to cotton farmers which makes it very difficult for African producers to compete in an international market given that the South African government offers no support to local cotton farmers.

    On the demand side, the South African textile and clothing industry is facing increasing pressure from cheap Chinese imports and the industry is currently struggling to remain competitive. The last five years have witnessed a consistent decline in local production of clothing and textiles matched by unprecedented increases in imports from China. Early in 2007, the South African government placed a quota on textile and clothing imports from China but this has merely forced retailers to look for alternate sources of supply such as Vietnam and India.

    The cotton spinners who are the users of lint cotton are also under pressure and a number of mills have closed in recent years. De-Nim Textiles closed in 2006 and one of the long-term players in this industry, SBH Milling, will be closing their spinning plants in 2008 as the company no longer finds local yarn production viable. Given the demand locally for a wide range of fabric and therefore yarns to produce the fabrics, coupled with the ease with which product can be sourced competitively on the international market, this company will now source their requirements through imports. This is a trend which is likely to continue as local spinners find that they are not in a position to match local demand and are unable to compete on a price level with imported yarns. Currently competitive cotton yarn is being sourced from Zambia and Zimbabwe at zero rates of tariff and from India and Pakistan.