Abstract
The aim of the article is to perform a comparative competitor benchmark analysis of the level of competitiveness of the South African clothing and textile industry (CAT industry). The article employs both Revealed Comparative Advantage (RCA) indices and fixed-effect panel data estimates in order to perform an analysis of the level of competitiveness of the South African CAT industry. The study includes export data from 1990-2013 for 18 sample emerging markets. The RCA indices indicate that the South African CAT industry has comparative disadvantages in both the clothing and textile sectors. Asian CAT industries are inclined towards a more dominant comparative advantage when compared to other emerging markets in both the clothing and textile sectors. The indices indicate a large and widening gap between the levels of competitiveness of the South African CAT industry and the CAT industries of sample countries (especially India and China). The fixed-effect panel data estimates suggest that increasing unit labour costs and declining export shares can be viewed as major determinants of the increasing lack of competitiveness of the South African CAT industry. The results of this article point to a mounting crisis in the South African CAT industry, most especially in terms of job losses and declining exports markets. Proper policy responses from the government, industrialist, retailers, labour unions and other stakeholders within the economy (such as banks and development finance institutions) are required.
Highlights
The aim of this article is to perform a comparative competitor benchmark analysis of the level of competitiveness of the South African clothing and textile industry (CAT industry).The CAT industry plays an important role in the manufacturing sector of the South African economy in the sense that it is labour-intensive and makes job opportunities available to unskilled labour
In order to determine the actual performance of the South African CAT industry relative to other emerging markets and trade partners, Revealed Comparative Advantage (RCA) indices are calculated according to Revision 3 of the SITC
The RCA indices are calculated for aggregate and for selected subsectors of the South African CAT industry for the period 1990-2013
Summary
The CAT industry plays an important role in the manufacturing sector of the South African economy in the sense that it is labour-intensive and makes job opportunities available to unskilled labour. The CAT industry accounts for close to a fifth of the total manufacturing employment in the South African economy (IDC, 2014). Due to its vulnerability to the world markets the South African CAT industry has been challenged by stagnating competitiveness and the loss of jobs. There is evidence of a decline in the production volumes and utilisation in the South African CAT industry. The South African CAT industry was structured during a period of political isolation, when domestic production dominated the market (Barnes, 2005). The South African CAT industry was unable to obtain economies of scale, and, the industry is characterised by import substitution protection and it is finding it difficult to compete internationally due to a lack of investment capital and an inadequate technology base. Barnes (2005) further observes that in the 1990s, the adoption of trade liberalisation and restructuring in the South African CAT industry led to a rise in unemployment in the industry, whereas productivity increased purely due to cost-minimisation and downsizing, rather than production growth
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