Textiles and Apparel
High input costs. Input costs are high largely because of the absence
of competitive input industries. In the case of polo shirts, for example, raw materials such as fabric, collars, thread, and buttons account for more than 70 percent of production costs. Although Zambia produces high-quality cotton, this does not translate into lower input costs for Zambian producers of textiles and apparel. The domestic price of cotton is high; the spinning and textile industries are weak; and all of Zambia’s cotton is exported as lint.14 There are significant inefficiencies in the cotton-to-apparel value chain, and Zambian apparel producers are forced to import most of their inputs from Asia at high cost. They pay well above world market prices due to cash constraints, and they have to pay premiums to cover the storage costs and the holding risk of the ginners (World Bank 2003). A quantitative survey of small and medium firms found that few manufacturers import inputs directly; the vast majority of imported inputs are provided through local importers (Fafchamps and Quinn 2012). The poor trade logistics thus reinforce the disadvantage of high input costs. The Role of Government The dependence of the Zambian economy on copper has led to frequent external shocks. As a resource-based economy, Zambia is at risk of both currency volatility (which makes investment and operational decisions by businesses more difficult) and long-term currency appreciation (the Dutch Disease, which hinders the competitiveness of non–resourcebased export sectors).15 In this environment, government economic policies swung from complete control over the economy through protectionist policies in the 1970s and 1980s to complete liberalization in the 1990s. Neither extreme helped the country diversify the export base away from copper to agriculture and manufacturing goods, and the economic context remains volatile. In recent years, the macroeconomic situation has improved considerably in response to the government’s more prudent fiscal and monetary policies. Over time, this more stable macroeconomic framework, if accompanied by structural measures resulting in a more viable cost structure, can enhance the conditions for the textile and garment sector. The competitiveness of Zambia’s apparel sector could be improved by reducing production costs and increasing productivity. Among
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