Adjusting to Trade Liberalisation: The Case of Firms in the South African Textile Sector

Abstract

This paper examines the responses of firms in the textile industry of South Africa to that country's rapid liberalisation of trade since the early 1990s. The data reveal that there have been increased exports accompanied by reductions in employment and contraction of production of yarns and fabrics. Drawing on a survey of companies, followed by interviews, it documents how competitive pressures from imports have led firms to increase their exports. Exporting is not, however, directly associated with better performance. This is due to its being a response by many firms to weak domestic demand and the need to maintain production capacity. But, liberalisation has also been accompanied by much upgrading of equipment and by increased specialisation and vertical disintegration in order to develop competitive niches despite South Africa's manufacturing wage levels being higher than those of many of its international competitors. Firms focusing on non‐price factors of export competitiveness have been better performing. Firms have also been most successful where technological capabilities based on the domestic market provided a foundation for export competitiveness. There are indications that with the restructuring induced by liberalisation the sector is in a position more effectively to exploit its competitive strengths in international markets. In addition, the United States' African Growth and Opportunity Act (AGOA) offers some stimulus for the textile industry to supply fabrics to firms in the export garment sector which previously imported them.

Citation

Roberts, S.; Thoburn, J. Adjusting to Trade Liberalisation: The Case of Firms in the South African Textile Sector. Journal of African Economies (2003) 12 (1) 74-103. [DOI: 10.1093/jae/12.1.74]

Adjusting to Trade Liberalisation: The Case of Firms in the South African Textile Sector

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