Quota transfers on the cards

22 January, 2007 at 11:22 am | Posted in Economy | Leave a comment

Import agents with spare quotas for imports of clothing from China are trying to profit from their surplus allocations.
They are offering to use their spare capacity under the quota system imposed by the government on January 1 on behalf of retailers willing to pay R3 extra on an item of clothing, a practice that will have inflationary consequences.

Quotas for imports of clothing and textile items have been granted on the basis of import quantities over the past three years. And some agents do not require the quantities needed in previous years.

There is a fine line between this practice, which can be viewed as an abuse of the system, and the practice of transferring quotas.

Iqbal Sharma, an acting deputy director-general at the department of trade and industry, said transferring quotas was illegal in terms of the agreement signed with China. As it stood, he said, any deals between importers and retailers would “fly in the face of the spirit of the quotas, which were introduced for two years on 200 items, to boost local production and create jobs”.

Truworths deputy managing director Tony Taylor said the system was helping the import agents rather than the clothing manufacturers – the people it was designed to benefit.

A large import agent, who said he was not involved in the practice and asked to remain anonymous, said the government had been warned the system would be abused.

Michael Lawrence, the executive director of the National Clothing Retail Federation of SA, said the government had been warned that artificial solutions would not create jobs; healthy economies would create jobs, not managed environments. But Sharma said the deals being offered to retailers would not have much impact on the quota system as importers were not exceeding their quotas. This view was confirmed by the industry.

Bernard Bossy, a Durban clothing manufacturer, said the quotas were designed to reduce textile and clothing imports from China by 30 percent and, even if retailers accepted the agents’ spare capacity, the limits would not be exceeded.

The director of a large clothing company in Durban agreed.

So did Sadek Vahed, the executive chairman of Kingsgate Clothing, formerly listed firm AA Moolla.

He said his company would have a crisis of turnover in the middle of the year, as it had only been allocated 42 percent of last year’s imports, but the company would try to compensate by increasing local production. Where this proved impossible, the company would look to imports from other countries.

“While we only import what we cannot make competitively, imports account for about one-third of our sales,” Vahed said.

None of the import agents contacted admitted that they were involved in the practice, but Martin Deall, the merchandise logistics executive at Edgars Consolidated Stores (Edcon), said that the figure had been “fairly freely bandied around” in the industry and that Edcon’s buying department had been approached.

“However, Edcon would not agree to pay the extra on items imported on spare quotas,” he said.

The Southern African Clothing and Textile Workers’ Union could not be contacted for comment.

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