Zim clothing sector urge for an all-inclusive rebate scheme

Zimbabwean Finance and Economic Development Minister Patrick Chinamasa in the 2018 National budget proposals although highlighted positives with the removal of various barriers to trade and investments which were stifling the growth of the economy, there is still room for improvement, said Mr. Jeremy Youmans, chairman of Zimbabwe Clothing Manufacturers Association (ZCMA). The clothing manufacturers have urged Government to institute an all-inclusive rebate scheme for the sector.

The budget had a positive focus with particular reference to removing some of the barriers to trade and investment which are encumbering the local economy. As long as the interventions are implemented, it will be up to all stakeholders to ensure that growth potential can be realized.

Youmans said that it was pleasing to note that the Clothing Manufacturers Rebate (CMR) was extended for a further two years, along other manufacturers’ tax refunds but hinted that there was a need to have an all encompassing CMR, which accommodates all players in the clothing sector.

This is a key support measure for the sector. However, theywe have been lobbying for four years now for reform of the current CMR to enable full inclusion of the sector in the rebate scheme.

When CMR was implemented the Zimbabwe Revenue Authority (Zimra) imposed punitive conditions, which made it difficult for small players which make up the majority in the sector to participate and enjoy the benefits of the rebate scheme.

They had thought that the Ministry of Industry and Commerce and the Ministry of Finance had understood the necessity for these reforms, but they have included no reforms in the Budget statement. Basically, the lack of reforms means that only the manufacturers with larger resources participate in the scheme.

The majority of clothing manufacturers are SMEs who do not have the resources to meet the onerous rules. This prevents the support measure from having its full effect and retards economic growth, higher employment and value addition which would be created in the sector if the scheme was made more inclusive.

The proposed increase of Customs Duty on Cotton Fabric from 10 percent to 30 percent plus $2,50 per kilogramme (kg), with effect from 1 January 2018 was likely to increase the cost of manufacturing a garment locally by over 50 percent.

In the National Budget proposals announcement Minister Chinamasa said that the proposed increase of Customs Duty on Cotton Fabric was aimed to protect the textile manufacturing industry from unfair competition due to an influx of cheap imported fabrics.

Notwithstanding support measures availed by Government to the textile manufacturing industry, the sector continues to face competition, due to the influx of dumped cheap imported fabrics. This has been compounded by limited administrative capacity to identify the various types of fabrics.

Importers have, thus, used the capacity gap to declare imported products under tariff codes which attract lower rates of duty.

Apart from proposing for an increase of Customs Duty on Cotton Fabric, Minister Chinamasa further proposed to introduce a Fabric Specification Declaration Form that would be used in the verification of fabrics to minimise false declaration.

However, Mr Youmans said that the country’s clothing sector was experiencing a growth though it was being severely weakened by lack of adequate raw materials locally as well as lack of allocations of foreign currency to import the same.

The clothing sector employs around 2 500 people but less than 800 of these are involved in making products which are then utilised in the clothing sector. The rest make a wide range of finished goods, such as blankets, nets and ropes, twine and cordage, elastics and tapes, socks and jerseys among others.

Youmans said that the textile industry was very capital intensive and for it to be competitive there was a need for it to be capacitated so as to re-equip with latest machinery since most of it was now archaic.

Most of the cotton yarn produced is exported, with the remaining being used to make some knitted and woven fabrics, which are then sold into the clothing sector but deliveries are poor and quality is inconsistent and unreliable. Prices are high and are increased regularly.

ZCMA supports the Cotton to Clothing Strategy, which was premised on developing a cotton value chain based on high quality cotton lint value added through the various stages of the value chain to supply niche markets.

Zimbabwean manufacturers can compete in these niche international markets but need the quality raw material to do that. Quality garment cannot be made from poor quality fabric from poor quality cotton lint. So the focus on quality must start with the farmer.

Youmans said that for the farmers to produce quality, they need to be able to utilise a full package of inputs and get a viable return from the crop they produce. So they welcome plans to grow the crop, but this must include plans to focus on quality to ensure the maximum value addition and yield to ensure viability to the farmer.

The Association of Cotton Value Adders of Zimbabwe formed to implement the Cotton to Clothing Strategy and oversee a lot of interventions in the cotton value chain, was currently incapacitated.

Given a full range of high quality cotton fabrics made from high quality ecological cotton, being available to the clothing sector, they could market garments in numerous niche international markets. A large crop of quality cotton lint will also be an attraction to investors in the textile sector

Moreover, correct mix of support measures for the clothing sector will be a significant driver of economic recovery in Zimbabwe.