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World Bank Study
and Port Elizabeth to Maseru are almost as high as shipping costs from China to South Africa (FIAS 2006). Rail transport is generally cheaper but it can take considerably longer to deliver goods via rail than on the road. Moreover, as most trade in SSA is international and not regional, transport is outward-oriented and relies heavily on ports and shipping issues. The lack of sufficient regional transport networks, poor quality, high cost, and common delays impedes regional integration and imposes considerable extra costs that strangle regional and international trade. Investments, ideally via a regional fund, and changes in regulation to improve intraregional transport infrastructure and logistics processes would be central preconditions to increased regional trade in T&C. The weak link
The weak link in regional production networks and also for quick-response supply to South African retailers is the textile sector—yarn spinning and fabric kni ing and weaving. Clothing firms need a large variety of yarns and fabrics and buyers often demand certain types of inputs or nominate mills located in third countries. Thus, it is neither possible nor useful to produce all types of inputs needed by clothing firms in SSA regionally and the elimination of duties on imported inputs is central. There are strong opportunities in co on-based yarn and fabric production in SSA. However, there are important challenges to developing a competitive textile sector in SSA, which are related to the capital and skill intensiveness of the textile sector, the importance of low-cost and reliable infrastructure (in particular electricity and water), the importance of scale and reliability, and the uncompetitive nature of existing textile mills in SSA (see above for a more detailed discussion on challenges). Due to scale requirements and competitive advantages in different stages of the co on-textile-clothing value chain, a regional perspective is central to build a competitive textile sector. This is in particular relevant for South Africa, the country that has the most developed and largest textile sector in SSA and would need to play a central role in regional production networks. South Africa’s textile sector will not be competitive if the focus is only on the local market and if there is no regional coordination. A dramatic shift in South Africa’s policies at the levels of government, associations, and firms away from the traditional protectionist to a regional perspective is a crucial precondition for developing a regional textile sector. Such a shift would include eliminating regional trade barriers, increasing competitiveness, and coordinating with other SSA co on, textile, and clothing producer countries. Foreign ownership
As discussed above, with the exception of Mauritius (and South Africa) the large majority of clothing firms in SSA is foreign-owned and part of triangular manufacturing networks. Hence, the decision power within these foreign-owned firms in SSA is limited with regard to buyers, end markets, and input suppliers. With regard to end markets parent companies are generally not interested in entering regional end markets and thus adapting their global strategy and they have no knowledge about the South African market.46 Furthermore, in general, firms in SSA are only in charge of manufacturing and sales and merchandising departments are located overseas, which makes relationships with South African retailers more difficult. Only a few, more embedded, Taiwan, China-owned firms with more decision-making power in Lesotho and Swaziland have started exporting to the South African market. In Mauritius the majority of firms is locally owned and sales, merchandising departments, and decision powers are located in