Supply crisis spurs South Africa retailers to end Asia reliance

China Cultural Tourism and Agriculture

22/11/2021 11:01

* Fashion retailer TFG going local for furniture, jewellery
    * Edgars-owner says China power woes added 2-week delay
    * Pepkor, Woolworths also said accelerating local sourcing
    * Imports more than 50% of shoes, clothes, mostly from China

    By Nqobile Dludla
    JOHANNESBURG, Nov 22 (Reuters) - Spiralling shipping costs
and COVID-19 supply chain disruptions are accelerating a shift
by South African retailers to end their heavy reliance on Asia
and move to source products locally.
    More than 50% of South Africa's clothing textiles, shoes,
and leather products are imported, mostly from China, putting
Africa's leading economy and its retailers at the mercy of
forces beyond their control such as Chinese power shortages.
    While the government launched a programme in 2019 offering
tax incentives to source goods locally, the recent spate of
problems arising out of Asia has added urgency to what had been
a slow shift, four top retailers in South Africa told Reuters.
    "Most furniture in South Africa is currently imported, we
are looking at various options to manufacture more here,
particularly at the moment when shipping costs are up 400%. So
it's even more of a reason if you needed one," TFG  TFGJ.J 
Chief Executive Anthony Thunström said in an interview.
    TFG, which sources 72% of its clothes locally, said earlier
this month it wants to locally manufacture 30 million pieces a
year within four years, up from 11.5 million currently, and is
adding furniture and jewellery to its growing local list.
 urn:newsml:reuters.com:*:nL1N2S20CV
    Thunström said a lot of TFG's jewellery is already made in
South Africa, but he wants to further increase local sourcing.
    The owner of British women's wear brands Hobbs and Whistles
and South Africa's @Home homeware brand wants these products to
be manufactured on a quick turnaround basis to improve lead
times and be competitive against global chains such as Zara,
owned by Inditex  ITX.MC  and Swedish rival H&M  HMb.ST .
    TFG said on Nov.11 it will spend a further 575 million rand
($37 million) over the next three to five years to build local
manufacturing capability.
    South African retailers are not alone in looking local as
constraints expose the vulnerability of globe-spanning supply
chains and low-cost manufacturing hubs which have led to an
over-dependence on imports, particularly from Asia. 
    Italy's Benetton and Hugo Boss, have already indicated they
are sourcing clothes closer to home. urn:newsml:reuters.com:*:nL8N2QQ3N0 urn:newsml:reuters.com:*:nL4N2RV2IM
    
    POWER CUT IMPACT
    Norman Drieselmann, CEO of South Africa's Retailability,
which owns the Edgars department store chain, said that China's
power cuts have added a two week delay to clothing on top of
four weeks due to COVID, ahead of the critical festive season.
    Woolworths  WHLJ.J  told Reuters it expects the power cuts
will impact its orders for March next year. The retailer, which
sources about 30% of its fashion, beauty and home products from
China, said it is making arrangements to buy more locally.
    Retailers who spoke to Reuters did not share potentially
competitive information about who would be producing goods for
them in South Africa or exactly where in the country.
    But budget clothing and electronics retailer Pepkor  PPHJ.J 
did say it wants to work with existing and strategic suppliers
to manufacture easy to make clothing like t-shirts and shorts
and provide financial capital to buy machinery.
    "We've now identified some vendors that we want to work
with, now the next thing is to develop the further capacity for
them," Pepkor CEO Leon Lourens told Reuters.
    However, South Africa will not provide all the answers.
    Industry has suffered in a country itself long blighted by
power shortages and prone in some sectors to labour disputes,
while raw materials such as fabrics are sourced by South African
suppliers from Asia.    
    Retailability's Drieselmann said that while it is looking to
grow its local vendor base by placing more orders from local
manufacturers instead of abroad, it is also shifting sourcing
from China to other existing offshore suppliers.
    The company has "started to engage more actively with India
as an alternative, particularly from a fabric sourcing
perspective," Drieselmann added.
($1 = 15.7250 rand) 

 (Reporting by Nqobile Dludla; Editing by Promit Mukherjee and
Alexander Smith)
 ((nqobile.dludla@thomsonreuters.com; +27103461066;))