Trade negotiations at the WTO summit in Hong Kong will put pressure on countries to open up their manufacturing sectors. Is this good or bad news for the textile industry in Zambia?
Edward Naik* stands outside his textile store in the heart of Lusaka, worrying about how long he can keep his business open. He manufactures, distributes and sells mutton cloth – a multi-purpose, durable fabric for cleaning, widely used in factories, households and offices.
But in the past few years his company, JANVI Industries, has been experiencing extensive loss of business. Although the local demand for mutton cloth and other textiles is high, the Zambian textile industry is dwindling. What was once a vibrant sector in Zambia is almost non-existent.
Boyd Zulu worked in a textile factory for most of his life but lost his job when production costs soared and the company couldn't compete with imports from Asia that were beginning to flood the market. He opened his own tailoring business but found that Zambians were choosing to buy imported suits, as it was cheaper than having one made locally by a tailor.
"The cost of production for a single Zambian-made shirt is four to five times higher than a shirt from China. Even though the quality of locally-made clothes is better, a customer will still opt for the cheaper products, because of low wages that the majority of people in Zambia earn," says Zulu.
Naik and Zulu's situations are symptomatic of a wider trend throughout Africa, where local products cost too much for local people to buy, and factories and entrepreneurs are forced out of business.
The local manufacturers are also facing competition from textiles, clothes and cleaning cloths smuggled in from neighbouring countries. Zulu says that mutton cloth coming from Zimbabwe is sold more cheaply because the smugglers don't pay any VAT. He blames the Zambian government for his loss of business because it fails to clamp down on these illegal goods.
As well as having to compete with imports from Asia, the textile industry in debt-burdened Zambia has also suffered from a lack of investment in infrastructure, as Siazongo Siakalenge, a director in the Ministry of Commerce Trade and Industry (MCTI) explains.
"Zambia had close to 250 firms producing different types of garments and employed close to 25,000 people," he says. "But towards the end of the 1980s foreign exchange became very scarce and, as a result, many firms could not purchase spares or upgrade technology in order to compete with imports coming from outside Zambia."
"To date, there may be fewer than 20 textile firms in the country employing less than 2,500 people," says Siakalenge. "The government is trying very hard to reverse the situation by addressing the general investment climate in the country and particularly the need to reduce the cost of production."
The government has acknowledged that Chinese textile exports are a great challenge to economies of the developing world. An officer in the Zambian trade ministry hinted that the government was concerned at the upsurge of imports which were "killing" local industry, and was working on drawing up legislation to safeguard the industry.
But how realistic is the government's ambition to support the sector and attract investment in the future? A central focus of the sixth ministerial conference of the World Trade Organisation in Hong Kong this week is the non-agricultural market access (NAMA) negotiations, which include the textile sector.
Critics of NAMA say the current thrust of negotiations is to reduce or even eliminate import tariffs. If so, NAMA will expose local Zambian manufacturers and businessmen like Naik and Zulu to more competition from foreign imports. NAMA critics warn that without any flexibility to protect their products from imports, local industries will not be able to develop to international levels of competitiveness.
In November 2005, many African organisations took part in a meeting in Accra, Ghana, to discuss the challenges posed to African countries by the ongoing WTO negotiations. Participants demanded that their governments should not be pressured into accepting proposals from the rich industrial countries to fix maximum ceilings on tariffs, but instead should be allowed to determine their own tariff policies and how they are implemented.
But, according to the Zambia Association of Manufacturers' (ZAM) vice-chairman, Oswald Mwewa, the textile sector may benefit from reduced import tariffs. If production costs are lowered because imported raw materials, spare parts and equipment are cheaper, then the manufacturing industry could recover and expand enough to attract foreign investment.
"We are demanding a reduction in duty on raw materials to zero per cent without discrimination. We are calling on the Ministry of Finance to align activities with a broad view of developing manufacturing capacity [with…] the government's vision on which way to go in terms of creation of wealth; therefore, do all that is necessary to promote growth in the manufacturing sector," says Mwewa.
The Commission for Africa, an initiative founded by UK Prime Minister Tony Blair, published a report earlier this year – Our Common Interest – pushing for Africa to increase its capacity to trade through investing in its manufacturing infrastructure.
It warned that: "Africa will fail to achieve sustainable growth and poverty reduction, and fail to meet the Millennium Development Goals, unless it increases its diminishing share of world trade. Growing global competition makes this even more challenging than in the past."
But, the Commission for Africa says, developing countries like Zambia should have the flexibility to adopt trade policies that are more nuanced. It says that historically Europe and North America, and more recently the Asian 'tiger' economies, have shown that a mix of openness and protection provides a managed path to global integration.
If Zambia, one of the poorest countries in the world, is able to implement policies which pursue this recommendation, there may be some hope for businessmen and manufacturers to survive, Naik and Zulu say.
Both hope the Zambian government will protect them at the WTO this week and safeguard measures to create a flourishing local textile industry.
*Edward Naik's name has been changed.
Mildred Mpundu is a freelance journalist in Zambia.