W2 Textiles Summary Report by Building Bridges

THE AfCFTA AND TRANSFORMATIVE INDUSTRIALISATION WEBINAR SERIES

BUILDING THE TEXTILES AND CLOTHING VALUE CHAINS SUMMARY REPORT 2021, Cape Town

Linkoping House 27 Burg Road Rondebosch 7700 Cape Town T +27 (0) 21 650 1420 F +27 (0) 21 650 5709 E mandelaschool@uct.ac.za www.mandelaschool.uct.ac.za

Design: Mandy Darling, Magenta Media

Contents Introductory Note........................................................................................................................................... 2 Speaker Bios .................................................................................................................................................... 3 A. Context......................................................................................................................................................... 8 B. Summary of Presentations .................................................................................................................... 10 1.

Introductory Remarks........................................................................................................................ 10

Welcome Address............................................................................................................................... 10

Discussion - Group 1: Transformative Industrialisation and Regional Value Chains ............. 11 Speaker 1: Ms Natasja Ambrosio....................................................................................................... 11 Speaker 2: Mr Hamma KwaJaffa ......................................................................................................12 Speaker 3: Dr Anthony Mveyange................................................................................................... 14 Speaker 4: Mr George Ndira............................................................................................................. 16 Speaker 5: Mr Issifou Dado Doko .....................................................................................................18 Discussants Remarks: Dr Taffere Tesfachew...................................................................................18 Discussants Remarks: Mr Barnabas Jatau..................................................................................... 20

Discussion – Group 2: Industrialisation and Trade Policy............................................................21 Speaker 1: Prof M.T Ladan...................................................................................................................21 Speaker 2: Dr Andrew Mold.............................................................................................................. 22 Speaker 3: Cde Issa Aremu...............................................................................................................24 Speaker 4: Mr Simon Eppel...............................................................................................................26 Speaker 5: Dr Olumuyiwa Alaba...................................................................................................... 27 Discussants Remarks: Dr Taffere Tesfachew..................................................................................28

Closing Remarks..................................................................................................................................29 Ms Mabel Nederlof-Sithole................................................................................................................29

Introductory Note AfCFTA and Transformative Industrialisation Dear Reader, 2020 proved to be a challenging year for people across the world. Of note the impact of the Covid-19 pandemic on families, communities and nations reminded us of the need to strengthen democratic governance and pursue development sustainably. The African Continental Free Trade Agreement presented a unique opportunity to explore the challenges and opportunities for better integration of regional value chains in the pharmaceutical, agricultural and textile industries. Successful delivery of our four-part webinar series was made possible through partnership with the Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg, the Centre for Comparative Law in Africa (CCLA) and the Policy Research in International Services and Marketing (PRISM) at the University of Cape Town, Trade and Industrial Policy Strategies at the University of Pretoria, the Toyota Wessels Institute of Manufacturing Studies (TWIMS) in Durban, the Nigerian Institute of Advanced Legal Studies and the Africa International Trade & Commerce Research in Nigeria. We are especially grateful to our distinguished speakers who shared their experience and recommendations, thereby contributing to

vibrant discussions during our webinar series. We had the opportunity to relay these recommendations to the Secretary General of the AfCFTA Secretariat, H.E. Wamkele Mene, in December 2020. This Summary Report on Building the Textiles and Clothing Value Chains, reveals Africa’s capability in the cotton, textile and clothing sector. It also emphasises the opportunity the AfCFTA provides for coordinating efforts to build regional value chains in this sector. We would like to thank Ms Vuyiswa Mkhabela, a member of our research team on the AfCFTA and Transformative Industrialisation Project, who compiled this summary report. This work forms the foundation in our efforts to build a network of experts working on issues related to transformative and sustainable industrialisation through the Industrialisation and Development Forum. In 2021, we will continue this series to explore digitisation and opportunities for green industrialisation. We hope you enjoy reading this report and look forward to your comments. If you would like to receive more information about this ongoing project, please contact Ms Mabel Nederlof-Sithole, who is leading our Building Bridges Programme (mabel.sithole@uct.ac.za). Click here to view webinar videos. Warm regards, Faizel Ismail

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Speaker Bios (In order of appearance) Ms Mabel Nederlof-Sithole (Programme Manager, Building Bridges) Mabel Sithole is the Building Bridges Programme Manager at The Nelson Mandela School of Public Governance at the University of Cape Town (UCT). She is pursuing a PhD in Political Studies at UCT with a focus on women’s leadership in Southern Africa. She has over 15 years experience working in human rights, public policy and development in Africa. Mabel obtained her first degree in Politics and Administration from the University of Zimbabwe in 2007, where she also served as president of the Model United Nations Club. She obtained an Honours Degree in Public Policy (with distinction for her thesis which analysed public opinion about the role of the police in protecting refugee rights in South Africa) and a Masters in Development Studies, from the University of Cape Town. Her current research interests focus on leadership and governance in Southern Africa. In 2020, she was named one of the top 5 finalists in the Accenture Rising Star Awards in the public/ private service category. She is also an established musician (Mae Sithole), recipient of the ConcertsSA Mobility Fund, and was named one of Cape Town’s Top 5 Innovative Female Musician Innovators by Of Africa Magazine. Prof Faizel Ismail (Director, The Nelson Mandela School of Public Governance) Professor Faizel Ismail is Director of the Nelson Mandela School of Public Governance. He currently teaches at the University of Cape Town, in the School of Economics, the Faculty of Law and in the Graduate School of Business. He has a PhD in Politics from the University of

Manchester; an MPhil in Development Studies from the Institute of Development Studies (IDS), Sussex, and; BA and LLB Degrees from the University of Kwa-Zulu Natal (Pietermaritzburg) in South Africa. He was re-appointed to serve as the Chair of the International Trade Administration Commission (ITAC) for five years (2019-2023). He has served as the Ambassador Permanent Representative of South Africa to the WTO (2010-2014). Prior to this he was the Deputy Director General for International Trade and Economic Development (ITED) in the Department of Trade and Industry (dti). As South Africa’s Chief Trade Negotiator, since 1994, he led the new democratic South Africa’s trade negotiations with the European Union (EU), Southern African Development Community (SADC), Southern African Customs Union (SACU), and several other bilateral trading partners including the US, India, and Brazil. He was also South Africa’s Special Envoy on the South Africa-USA AGOA negotiations between January 2015 and June 2016. Ms Natasja Ambrosio (Head of Sustainability, Mr Price Group) Natasja Ambrosio is the Founder and Director of the Mr Price Foundation. She is a member of the Retail-CTFL Master Plan, the BUSA (Business Unity SA), the Economic Policy Committee and Macro-Economic Task team, and a founding member of the South African Cotton Cluster (SACC) where she serves as a member of the Steering Committee. She is a LINC Fellow, focusing on the Children’s Sector of South Africa. Natasja is also pursuing a PhD with GIBS Business School. She initiated an RSA Small-Scale cotton farmer development programme. 276 farmers produce sustainably grown cotton procured by Mr Price Group. The Foundation also delivers the Youth Manufacturing and Retail Skills Development Program, which equips unemployed youth with skills for apparel and footwear retail and manufacturing. She pioneered the re-introduction of physical education into public schools in RSA and is a recipient of the Mail & Guardian Investment in the Future: Corporate Award (2009) with 3 programs of Mrp Foundation. She was

also a finalist in the ABSA Supplier Development Awards. Mr Hamma A. Kwajaffa (Director-General, Nigeria Textile Manufacturers Association of Nigeria) Hamma A. Kwajaffa has over 30 years of professional experience in human capital management, covering both the private and public sector of Nigeria economy. He is a graduate of the University of Maiduguri (1986) with a PGDE plus many other certification and training both in Nigeria, China and India. An Associate of Chartered Institute of Personnel Management of Nigeria and Member of Biotechnology of Nigeria. In his working career, Mr. Kwajaffa has headed the human capital management function of many organizations covering Ceramics and Textiles. Currently the Director General Nigeria Textile manufacturers Association of Nigeria. He is an accomplished human capital management specialist Dr Anthony Mveyange (Director, Research and Learning, Trademark East Africa Ltd) Anthony Mveyange is a passionate development economist whose research and policy foci include (but not limited to) inequality, poverty, natural resources, international trade, trade policy, economic growth, and development in Africa. Over ten years’ experience in designing and evaluating projects and programmes, policy advisory, designing and overseeing thematic research-related programmes to generate robust and reliable evidence-base necessary for making credible and well-informed policy decisions. As Research and Learning Director at Trademark East Africa (TMEA), based in Nairobi Kenya, Anthony is directing research and learning strategy in ten Eastern African

countries (Tanzania, Kenya, Uganda, Rwanda, Burundi, Ethiopia, South Sudan, Malawi, Somaliland and Eastern DRC). Anthony also leads a six-country research initiative funded by Bill and Melinda Gates Foundation through the African Economic Research Consortium (AERC). Before joining TMEA, Anthony worked as a research economist in the World Bank Research Development Group in Washington, DC and he is also one of the founding members of the Network of Impact Evaluation Researchers in Africa (NIERA) based in Nairobi, Kenya. Anthony was recently nominated by the World Manufacturing Foundation as among 12 global experts to produce a White Paper on restoring Global Value Chains in the wake of the COVID-19 crisis, and he is also a contributor to Africa in Focus at Brookings Institute in the United States. In the past, Anthony consulted for the World Bank Group, Strategic Impact Evaluation Fund of the World Bank, United Nations University World Institute for Development Economics Research (UNU-WIDER), and Amref Health Africa. Mr George Ndira (Consultant, former East Africa Community Principal Industrial Economist) George Ndira holds a Masters’ Degree in International Development Studies from University of GRIPS, Tokyo Japan specialization in Industrialization, and a Bsc. Degree in Mechanical Engineering, from the University of Nairobi. He is currently working as a Consultant focusing on Regional Value Chain Development, and Design of effective policy tools for industrial and economic transformation. Previously, George was the Head of Industrialization and SME Department at the East African Community Secretariat for a period of 10 years until 2019. He led the formulation the East African Community Industrialization Strategy and Policy, and the Charter for the SME Development in the EAC. George worked on many development programs targeting regional value chains, key among them include:

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

agro-processing, mining, automotive, cotton & textile, leather, pharmaceuticals. Over last 15 years of work and professional engagements, Mr. Ndira has built extensive networks with key development Partners including World Bank, AfDB, EABC, UNIDO, TMEA, UNDP, GIZ, COMSEC, EABC, UNECA, AUC, EU, ITC, UNCTAD. Previously, George worked as senior manager heading research and planning division, at the Export Promotion Organizations in Kenya, where he led the formulating the national export strategy (NES) for the country. George served as a technical advisor in the formulation of the Kenya Vision 2030 Development Blue Print. Mr. Ndira’s main areas of professional interest include: SME Development; Industrial Policy for economic transformation; and Value Chain Development strategies. Mr Issifou Dado Doko (Agronomist, Rural and Economic Development Expert. former Deputy Permanent Secretary, Cotton Interprofessional Association (AIC); former Executive Manager, National Council of the Cotton Producers (CNPC), Parakou Benin Cotton Association – Benin Republic) Issifou Dado Doko is an Agricultural engineer with more than 25 years of experience in the implementation of agricultural and rural development projects and programs in West Africa.

Prof M.T Ladan (Director General (DG), the Nigerian Institute of Advanced Legal Studies) Prof Ladan is the Director-General of the Nigerian Institute of Advanced Legal Studies (NIALS). He is a Professor of Law with over 33 years experience in teaching and Research in Comparative Jurisprudence, Public International law relating to Regional Economic Integration Law and Practice, Environment, Energy, Natural Resources, Human Rights, Cybercrime, Gender and Sustainable Development laws in Africa. Prof Ladan is a member of many renowned associations including World Jurist Association, Washington DC, USA; IUCN Academy and Commission on Environmental Law; Association of African Environmental Law Scholars; a Hubert Humphrey Fellow, USA, and Member Nigerian Society of International Law. He is also the Deputy Chair, National Committee on the Implementation of International Humanitarian Law Treaties (IHL) and National Committee on the Justice Sector Reform Implementation Committee (2011-to date). Prof Ladan has consulted and served as a technical resource person for many Organizations including UNEP Kenya, UNICRI, ECOWAS Commission, UNDP, UNHCR, and UNICEF Nigeria. He has authored over 18 books, 85 journal articles and over 100 National and International Conference/Seminar Papers written and presented within and outside Nigeria.

Dr Andrew Mold (Chief, Regional Integration and AfCFTA Cluster, Regional Office for Eastern Africa, United Nations Economic Commission for Africa, Kigali, Rwanda) Andrew Mold is Chief of Regional Integration and the AfCFTA for the office for Eastern Africa of the United Nations Economic Commission for Africa in Kigali. His main areas of research are international trade, regional integration, foreign direct investment, and development strategies. Cde Issa Aremu (Vice President, Industrial Global Union; General Secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria) Comrade Issa Aremu is currently serving as the Vice President representing Sub-Saharan Africa on the Executive Committee of IndustriALL Global Union. Other Vice Presidents represent Asia-Pacific, Latin America and the Caribbean, Middle East & North Africa , North America and Europe. With has 30 years of active trade union experience as an organizer, trade union educator, Industrial revival advocacy and the General Secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN) and NEC Member Nigeria Labour Congress (NLC). Comrade Issa Aremu is a strong advocate of re-Industrialization of Africa campaigns. His stance is visible as he co-organizes the annual Africa Industrialization Day (AID) as declared by United Nations Industrial Development Organisation (UNIDO) across different states of Nigeria. Comrade has always been trailblazer as right after his education he was the pioneer Head, Economics/Research Department, Nigeria Labour Congress (NLC), 1987- 1989. He later served as a Two-term elected Vice President, Nigeria Labour Congress (2007 – 2015). In

2005, He is a Member of the prestigious National Institute for Policy and Strategic Studies (NIPSS) of Nigeria. Comrade Issa has served in various labour market bodies: Tripartite Committee on National Minimum Wage, 2000 and 2009-2010, the Board of Michael Imoudu National Institute for Labour Studies (MINILS), – Member, Presidential Committee on the Revival of Textile and Garment Industry, 2002; Kaduna State Government Special Committee on the Revival of Textiles and Cotton Industries, National Labour Advisory Committee (NLAC); and International Committee, Nigeria Labour Congress (NLC). He is an Alumnus of George Meany Labour Centre, Maryland, Washington, USA. He has a number of publications that include: Reflections series on; Labour and Trade Unions; Industry and Economy; Africa and Global Affairs; Good Governance and Democracy among others. Mr Simon Eppel (Researcher, Southern African Clothing and Textile Workers Union) Simon Eppel is a trade unionist and holds the position of Director of Research within the SA Clothing and Textile Workers’ Union (SACTWU). He is involved in a range of policy-related and practical activities that aim to produce more secure, sustainable, meaningful and growing employment for the union’s members based on the principle and practice of decent work, and provides assistance on collective bargaining and membership matters in the union. Simon serves as a COSATU and SACTWU representative on several industry and Nedlac task teams and bodies, including on trade-related matters. He trained as a social anthropologist and received an MPhil in Development Studies from the University of Cape Town (UCT).

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Dr Olumuyiwa Alaba (Trade expert; ITRC and TRALAC Board member) Olumuyiwa Alaba is an economist with specialization in Trade Development. He has about two decades of experience in teaching, research and advisory in Trade Policy, Trade Facilitation and Trade Development. Dr Alaba has been active in providing supports on various donor funded Technical Assistance on Trade to governments at national, regional and continental levels for about two decades. He currently serving as a member of Board of Directors of the Trade Law Centre of Southern Africa (TRALAC) and a member of Board of Trustees of the International Trade and Research Centre (ITRC). He is the current Lead, Trade Thematic Group of the Nigeria Economic Summit Group (NESG). He was a Long-Term Technical Assistant on Trade Policy issues to the Minister of Finance in Nigeria. He has served as the lead and technical advisor on various donor countries and agencies’ supports in Nigeria, Africa and globally on Trade Policy Process, Implementation of Trade Facilitation Agreement, Free Trade Area, Trade Competitiveness and Trade Standards.

Dr Taffere Tesfachew (Advisor, Ethiopian Investment Agency) Taffere Tesfachew, PhD, is an international consultant on trade- and developmentrelated issues. Until May 2016, he was director of the Division on Africa and Least Developed Countries, UNCTAD, where he led a team of economists who conducted research and analysis for two major annual reports, the ‘Economic Development in Africa Report’ and the ‘Least Developed Countries Report’. He has also authored and co-authored articles on a range of topics. Dr. Tesfachew holds a PhD in development economics from the Institute of Development Studies, University of Sussex.

A. Context The African Continental Free Trade Area (AfCFTA) presents an opportunity not only for boosting regional trade but also meeting the continent’s transformative industrialisation imperative. Currently, with an intra-regional trade of about 17%, the continent lags behind Europe (69%), Asia (59%) and North America (31%). While the reasons for the low intra-regional trade are many and complex, a primary factor underpinning the abysmal performance – despite a long history of efforts to foster regional integration – is the lack of productive capacity on the continent. In light of this shortcoming, the AfCFTA affords an opportunity to rethink Africa’s approach to regional integration by moving away from a linear-based approach that focuses solely on the removal of trade barriers, toward a development-based approach that pays attention to the building of productive capacity through the promotion of economic diversification, structural transformation and technological development. Specific policy tools often identified to foster ‘developmental regionalism’ in Africa include, among others, development of regional value chains (RVCs) that exploit existing complementary features within the region including differentiated labour cost, productive capabilities, natural resource endowment and geopolitical advantages1. Indeed, in the context of the AfCFTA, the development of RVCs holds special appeal as a model for Africa’s industrial development for several reasons. For a start, the development of RVCs constitutes a viable strategy for mitigating negative distributional impacts that Africa’s smaller and more vulnerable economies are likely to suffer under AfCFTA trade liberalisation. Lessons from the European Union, where negative distributional effects have led to scepticism and suspicion among some members are very instructive in this regard. Also, given that individual African countries lack competitiveness in global trade, the prospect of national economic transformation efforts can be enhanced if they are supported

and complemented by regional strategies. RVCs in the context of the AfCFTA will enable African countries to combine forces, organise the regional division of labour, boost their productivity and strengthen their position to climb a specific global value chain as a regional block. The integration of ASEAN countries into the electronics global value chain through the development of RVCs, for instance, offers inspiration in this regard. Finally, RVCs are uniquely well-suited for industrial development in sectors where idiosyncratic factors determine consumption behaviours and market opportunities. Specifically, on the African continent, distinctive regional tastes, cultural preferences and climatic conditions demand building local companies around RVCs in sectors that barely attract the interest of extra-regional companies. The pharmaceutical industry is a typical example where distinctive health problems, including both tropical diseases like malaria, and environmental health challenges like humidity and sun exposure, get the attention of only a few pharmaceutical companies outside the continent. The food industry also offers a good example given unique regional tastes and dietary habits. It is in light of the above that the Nelson Mandela School of Public Governance (School) identified a number of sectors that have high potential for RVC development. The three priority sectors identified were i) pharmaceuticals and healthcare ii) cotton, textiles and clothing iii) agriculture and food processing.

1 Other policy tools often identified are regional industrial development policy, use of development corridors and the establishment of special economic zones

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Subsequently, the School has partnered with the CCLA (UCT Law Faculty), TIPS (Pretoria), CCRED (UJ), TWIMS (Durban), PRISM (UCT School of Economics) and the Africa International Trade & Commerce Research (Nigeria) to launch a webinar series on the theme: “The AfCFTA and Transformative Industrialisation”. The webinar series seeks to provide a platform to address the question of how the AfCFTA can advance transformative industrialisation in Africa, with each webinar focusing on one of the three potential RVCs identified. Insights from the webinars will feed into policy briefs that will be shared with relevant stakeholders including the AfCFTA Secretariat. The second webinar of the series held on 29 October, focused on “Building the Textiles and Clothing Value Chains”. The objective of the webinar was to explore the potential for enhancing the competitiveness of the African cotton, textile and clothing sectors through the development of regional value chains. This report presents the main ideas and key insights from the webinar.

The Nelson Mandela School of Public Governance has identified three priority sectors that were perceived to have high potential for regional value chains (RVCs) in the context of the AfCFTA. They include: 1. Pharmaceuticals and healthcare

2. Cotton, textiles and clothing

3. Agriculture and food processing

B. Summary of Presentations The webinar comprised six sections, featuring an introduction and welcome addresses, and a recap of Webinar 1 followed by discussions organised into two groups. The first group discussed the opportunities for transformative industrialisation in the context of textiles and clothing value chains, whilst the second group looked at trade policy issues. Participants put questions in writing, via the chat and Q&A function of the webinar platform. What follows is a thematic summary of the content of the various presentations.

1. Introductory Remarks

2. Welcome Address

Ms Mabel Nederlof-Sithole (Programme Manager, Building Bridges, Nelson Mandela School of Public Governance, University of Cape Town) opened the webinar by welcoming the audience and the speakers. She expressed gratitude to the participants and highlighted the significance of the expression of interest across the public, private and civic spaces to engage in such momentous conversations as the successful implementation of the AfCFTA. Ms Nederlof-Sithole then proceeded to provide context to the “AfCFTA and Transformative Industrialisation Webinar Series”, outlining the dates for the subsequent webinars under the series and encouraging participants to register and participate. She also indicated that the webinar constitutes a start to an ongoing conversation and opportunities for collaboration and urged participants to use the chat and Q&A functions to post their questions and comments.

Prof Faizel Ismail delivered the official welcome address. He began his address by welcoming the audience and the speakers and thanking Ms Nederlof-Sithole for chairing the session.

Ms Nederlof-Sithole introduced the moderators for the session, Mr Sand Mba Kalu (Executive Director, Africa International Trade and Commerce Research) and Prof Faizel Ismail (Director, Nelson Mandela School of Public Governance, University of Cape Town).

He proceeded to set the context for the webinar by providing a broad background to the webinar series, touching on the success of the first webinar held on 15 October and outlining all partner institutions. Prof Ismail highlighted the need for a developmental regionalism approach to the AfCFTA that facilitates and enables the transformative industrialisation of Africa and spreads the gains of trade and integration to the smaller and more vulnerable economies of Africa. He noted that while the pandemic has slowed down work on advancing the implementation of the AfCFTA, it has not reduced the political commitment of leaders on the continent. Ministers of trade of the African Union met at the end of September and agreed to finalise the outstanding issues to kick off the implementation of the AfCFTA in January 2021. Prof Ismail proceeded to express delight at the overwhelming response to the calls for experts to participate in the webinar series. He indicated the number of registered participants for the webinar to be a little over 100, with representation from across the continent.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

3. Discussion - Group 1: Transformative Industrialisation and Regional Value Chains The welcome address was followed by the first group of presentations. The session began with Ms Nederlof-Sithole introducing each of the five speakers. Prof Ismail and Mr Mba Kalu then moderated the session, posing the guiding question to each of the speakers. Speaker 1: Ms Natasja Ambrosio (Head of Sustainability, Mr Price Group) Ms Natasja Ambrosio was asked to share her view on how the competitiveness and the sustainability of the cotton and textile value chain can be built in South Africa and to highlight some of the opportunities for the sustainable cotton textiles value chain to be extended across the African region. Ms Ambrosio began her presentation by expressing her delight in being part of the conversation. She urged the audience to take note that the journey towards a regional cotton and textile value chain is one which requires patience.

She provided background as to how she got involved in the South Africa cotton industry based off the question: “what is the possibility that T-shirts sold by her retailer (The Mr Price Group) were made with South Africa cotton?”. A feasibility study conducted to answer this question indicated the use of SADC cotton in the retailer’s products. However, South African cotton production was declining, and the industry was struggling. The retailer partnered with the South African cotton industry intending to support local cotton production. Ms Ambrosio shared that in aiding the cotton industry, the retailer has had to focus on building a different business model. Given her experience, perhaps it is time for African countries to create a different model too. The need for a new model in building competitiveness and sustainability in the cotton and textile value chain Ms Ambrosio acknowledged that a lot had been done to increase cotton production in South African, and the industry has implemented a sustainable cotton growing standard. South African cotton is still, however, going offshore and mostly to neighbouring countries as South African lacks the capability and capacity to convert the cotton.

How can a new model be built? • Firstly, work needs to be done to ensure cotton conversion and beneficiation practices are competitive not only from the retailer’s price point perspective but also from the consumer’s changing demand for sustainable production practices. • Secondly, South Africa and Africa can differentiate their value chains based on sustainable production, which could potentially be the continent’s competitive advantage – promoting African clothing and textiles as a sustainable production region. • Thirdly, stakeholder engagements and conversations around the AfCFTA provide an opportunity for various stakeholders from across the value chain and the continent to share ideas on how a different model could be built. She emphasised that the webinar, which connects stakeholders from around the continent with the same goal, is a commendable starting point in identifying how a different model could be built. • Fourthly, there is a need to unpack how the right capabilities can be built, and investments are made, in advanced technologies that are efficient while aligning with environmentally sound practices. Retailers, as the lead firms in the value chain, must be more involved in sharing what their product needs are, and therefore direct the investment. For instance, technology investment in South Africa was based on historical demand and thus became redundant, resulting in a mismatch in what was produced. Speaker 2: Mr Hamma KwaJaffa (DirectorGeneral, Textile Manufacturers Association of Nigeria) Mr KwaJaffa was asked based on his vast experience in Nigeria, what are the main strengths and weaknesses of the cotton, textile and clothing RVC in Nigeria and West Africa. Mr KwaJaffa began his presentation by highlighting that the textile value chain in Nigeria is import-dependent, and cotton production is faced with many challenges which have impacted the quality of Nigeria’s cotton. This was not always the case; however, after decolonisation, government policy summersaults resulted in farmers migrating to the produc-

tion of simpler crops such as maize and soya beans. Mr KwaJaffa proceeded to outline the challenges facing Nigeria’s cotton and textile value chains. Challenges in Nigeria’s cotton production • The first challenge pertained to the lack of soil testing and lack of mechanisation in cotton production, which have impacted Nigeria’s cotton quality and resulted in the textile sector importing cotton from countries such as Benin. • The second challenge pertained to the Nigerian government’s lack of consistent deployment of extension officers. These officers were crucial in providing farmers with technical and scientific production advice. • The third challenge pertained to the incorrect use of land. There is vast land in Nigeria about 83 000 square kilometres of land that is fertile for cotton production. However, cotton production procedures are not followed, and the land is incorrectly utilised.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

tively impacted the manufacturing sector as manufacturers have not been able to compete with the prices set by smugglers due to operational and overhead costs which smugglers do not face. Manufacturers have therefore closed operations as they struggle to make a profit or break even. • The third challenge pertained to business closure. From 1980 to date, approximately 167 textile mills have closed in Nigeria with only 25 textile mills currently in operation. There are now only five manufacturers who are producing textiles from cotton. The other 20 manufactures are producing accessories for the textile mill. Furthermore, most of the industrialists in the industry are foreign investors who leave the country when business and the industry are not thriving. • The fourth challenge pertained to the nonenforcement of governments buying locally. Ministries that produce military uniforms and have not purchased textiles from local manufacturers but rather import textiles from Asia.

Mr KwaJaffa emphasised that unless Nigeria can compete favourably with other countries that produce cotton, it is going to be difficult for the textile industry to thrive. Challenges in Nigeria’s textile sector • The first challenge pertained to Nigeria’s poor infrastructure. Textile production makes use of heavy machinery, which requires a stable electricity supply. However, the low electrical voltage produced in the country cannot accommodate heavy machinery as well as generators. The use of more expensive substitute sources of energy such as gas and diesel put further strain on the textile industry by increasing overhead costs. These costs have contributed to reducing the industry’s competitiveness. • The second challenge pertained to polyester and counterfeit textiles/fabrics flooding the Nigerian market. Customers do not know the difference between Chinese and Nigerianproduced textiles. The consumption of polyester and counterfeit textiles has nega-

• The fifth challenge pertained to loan repayments. Banks require manufacturers to pay loan repayments and interest rates. However, manufacturers are not breaking even or profitable and cannot afford loan repayments. Mr KwaJaffa proceeded to highlight that due to these challenges, the cotton and textile industry has become comatose. Even though Nigeria has the largest consumer market and the opportunity to have more than 200 textile mills in operation, manufacturers have been closing operations. He further indicated that Nigeria had delayed signing the AfCFTA due to the challenges faced by the cotton, textile and garment sectors. Government interventions required Government funding has been instrumental in the retooling of machinery. Machinery has been retooled and is now of a standard that can produce quality and quantity of goods. There is still more that the government needs to do in supporting the industry. Mr KwaJaffa proceeded to suggest the following interventions that need to be undertaken by the government: • Address the infrastructure challenges faced by the textile industry.

• Enforce tariffs to prevent cheap, counterfeit and smuggled goods from entering the country.

• Third, exports are currently projected to increase by US$1.42 billion by 2025 and likely double by 2030.

• Ensure that government procurement is targeted at buying local textiles in the production of government goods.

• Fourth, there is traction in investor operations in East African countries such as Uganda, Kenya and Tanzania, providing an opportunity to build capacity through investments in technological transfer

Mr KwaJaffa concluded his presentation by emphasising that the only hope for Nigeria now is the AfCFTA, regional trade and the enforcement of barriers at customs. Speaker 3: Dr Anthony Mveyange (Director, Research and Learning, Trademark East Africa Ltd) Dr Mveyange was asked to share his view on the challenges and opportunities that are presenting themselves in East Africa for African countries to build their productive capacity in the cotton, textiles clothing value chain. Additionally, he has recommended actions for policymakers to address the challenges which prevent African countries from taking advantage of opportunities. Dr Mveyange began his presentation by providing the following statistics related to the textiles and clothing sector to contextualise the conversation. The global textile and apparel sector generates more than US$1.7 trillion annually and employs 300 million people, but Africa still accounts for less than 1% of global textile and apparel trade. Dr Mveyange emphasised the importance of the AfCFTA in providing opportunities for Africa to expand its share in the regional and global textile and apparel trade. Opportunities for the textile industry in East Africa Dr Mveyange outlined the following opportunities presented by the AfCFTA for East African countries: • First, there is potential for job creation, especially for women and youth. • Second, Dr Mveyange expects there to be a shift in global production from China to Africa, given Covid-19’s disruption of global value chains. He highlighted that about US$20 billion invested in garment sourcing would migrate into Africa in the next seven years. Half of this investment should land in East Africa with the potential of creating 1 million jobs.

• Fifth, there has been political buy-in with governments rallying to support the sector due to the job creation potential the sector offers. • Sixth, there is an opportunity for preferential trade agreements to increases the scope in which countries can trade and exchange knowledge. • Seventh, improvements have been made to infrastructure in many East African countries. Dr Mveyange noted, however, that the pace of improvement has been low. Nevertheless, improvements will have positive spillover effects for the textile and clothing sector. • Eighth, the availability of raw materials in the region reduces the cost of production. To emphasise the importance of the textiles and apparel industry to Africa’s industrial transformation, Dr Mveyange quoted a statement from a 2018 African Development Bank Report: “The textile and apparel industry can drive Africa’s industrial transformation and create millions of jobs required in line with the mandate of the AfCTFA.” Challenges faced by the textile and apparel sector in East Africa Dr Mveyange proceeded to outline the following challenges faced by the textile and apparel sector in East Africa: • The first challenge pertained to the political economy issues across African countries. Countries are at different stages of development and have different political structures. The alignment of these structures has been challenging. There is, however, some momentum in converging countries in terms of a vision that is politically palatable across countries. • The second challenge pertained to the lack of policy harmonisation especially critical for industrialisation policies. For example, each East African country has a Special Economic Zone (SEZ) and Export

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Processing Zone (EPZ) policies. However, these policies sometimes do not speak to each other. There are currently discussions in East Africa focused on striking a balance and harmonising policies at a regional level to ensure that countries derive optimum benefit when engaging in the apparel and textile industry. • The third challenge pertained to competition policy. Dr Mveyange noted that Trademark Africa has been supporting initiatives in the region focused on putting together competition policy that favours and supports an environment which is conducive for general trade in the region. • The fourth challenge pertained to the various challenges faced in boosting intra-African trade clusters. These challenges include: » A lack of infrastructure required for trade facilitation » Identifying ways in which farmer productivity can be enhanced using high-quality inputs and access to technology » The creation of an environmentally friendly textile and garment sector; Trademark is supporting some industrial parks in East Africa and currently developing parks in Kenya and Rwanda » Transport and logistics » Access to essential services and infrastructure • The fifth challenge pertained to the lack of qualified and trainable human capital. The East African business community has indicated that the students produced from the universities do not have the necessary skills required by the industry. Dr Mveyange noted that there is a need to discuss what the government can do to address the skills issue. • The sixth challenge pertained to the increasing importance of e-commerce. How can e-commerce be embedded in the apparel and textile sector and how can countries capitalise on the growing importance of e-commerce. Dr Mveyange has provided some considerations which need to be made when thinking about possible solutions to the challenges outlined: • How can countries work together to create a supportive and aligned political environment?

• How can countries work together to achieve supportive and harmonised regional regulatory frameworks (including environmental and sustainability frameworks, legal reforms and so forth)? • Government needs to think about how investment can be created in critical infrastructure systems. • How can institutional capacity be enhanced to manage what is going on in the production and policy environment? Speaker 4: Mr George Ndira (Consultant, former East Africa Community Principal Industrial Economist) Mr Ndira was asked to share his insights on how Kenya. as the largest exporter of garments from East Africa to the U.S. could strengthen the cotton, textile and clothing value chain and thus increase the value of its exports. Furthermore, how can this value chain be extended to the rest of East Africa. Mr Ndira began his presentation by providing some context on how the cotton and textile industry is operating in Kenya. Mr Ndira shared his gratitude for the selection and inclusion

of the cotton, textiles and apparel value chain in the webinar series. He highlighted the uniqueness of the cotton, textile and apparel value chains as one of the industries that are a steppingstone for industrialisation in most countries. He noted, however, that Africa has not optimised on the value and opportunities that can be derived from the cotton, textiles and apparel value chains. The importance of the discussion around the cotton, textiles and apparel value chains Firstly, there are important lessons that can be learnt from the disruptions caused by Covid- 19 and the need for Africa to build strong RVCs. Mr Ndira expressed his belief that if Africa had strong RVCs, the impact of Covid-19 on the cotton, textile and apparel sectors would not have been as severe as it has been. Secondly, the changes happening in China and East Asia require Africa to be strategic in how it finds ways to tap into the opportunities that are unfolding. Manufacturing as a priority sector: what this means for the cotton, textiles and clothing value chains Manufacturing has been identified as a priority sector by the Kenyan government. There are

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

plans to support the industry to increase its contribution to GDP by up to 15% and build more than 1 million jobs. The cotton, textile and clothing value chains provide the opportunity for this growth in manufacturing to be realised. There are towns in Kenya that have evolved due to the cotton, textile and clothing sector in those regions. A large part of Kenya’s economy is semi-agrarian and in those areas, cotton has done well. More than 200 000 farmers use to benefit from cotton production. Unfortunately, historically the Kenyan cotton, textile and apparel industry was heavily affected by structural adjustments programmes. Mr Ndira stated that the good news is that Kenya’s cotton, textile and apparel industry has made a turnaround. He proceeded to outline ways in which Kenya’s cotton, textile and apparel industry has been revived. The revival of Kenya’s cotton, textile and clothing industry • First, the export of apparel has increased through AGOA. Since the enactment of AGOA in 2000, the apparel industry has experienced phenomenal export growth. African countries such as Lesotho, Mauritius and Madagascar used to be the leading exports of apparel under AGOA. However, Kenya has taken over as the leading exporter of apparel to America. Mr Ndira indicated that Kenya today is exporting more than US$500 billion worth of products to America. • Second, the apparel industry has gained a competitive advantage due to investments into infrastructure and government support which have enabled investments towards processing zones. Mr Ndira explained that the government has invested in the creation of a textile city in Naivasha which is 600 km from the port of Mombasa. The textile city will gain access to the port, and hence the global market, through the railway link being built between Naivasha and Mombasa. • Third, there are efforts to revive cotton production in Kenya’s cotton-growing regions. The Kenyan government has identified farmers who will receive the country’s first genetically modified cotton seeds, which will improve farmers output and income. • Fourth, there are efforts to revive some of the textile mills which collapsed during the

structural adjustment process. Rivertex was once a household name from the 1970s to the ’80s. However, the mill collapsed about 25 years ago. The government has invested more than 600 billion Kenyan shillings into the revival of Rivertex. The mill now has state-of-the-art machinery and can produce fabric from spinning to apparel. The government has plans to develop five similar integrated operations in Kenya. • Fifth, Kenya’s productive capabilities and higher levels of productivity lie in the apparel segment of the value chain. However, there are efforts to develop the whole value chain from cotton growing to textile and apparel production. Extending the value chain into the rest of East Africa Mr Ndira acknowledged that even though the cotton, textile and apparel value chains are faced with many challenges, there is still scope for Kenya and East Africa to benefit more from the sector. He proceeded to outline ways in which the value chain could be extended into East Africa. • First, there is a need to build up the value chain ecosystem. The cotton, textile and apparel industry ecosystem is not complete as many of the inputs for textile and apparel manufacturing are sourced from East Asia, which is impacting the industry’s competitiveness. There is, therefore, a need to ensure that inputs such as fabrics, accessories and trims are sourced from Kenya, East Africa or the other African regions, which will ensure timely delivery of inputs required for production and positively impact on the industry’s productivity and efficiency. • Second, Africa needs to develop integrated value chains, and the starting point towards that is to fix existing gaps in the value chains. A critical gap is building productive capability for fabric production. Furthermore, the textile and apparel sector require a mix of fibres; however, synthetics are not produced in Africa. There is, therefore, an opportunity for Africa to develop capacity in the production of synthetics as well as trims. • Third, SMEs in Kenya and Africa should be supported in manufacturing trims, accessories and inputs required for apparel, which will ensure that the industry is integrated and embedded in the local economy.

Mr Ndira concluded his presentation by emphasising that opportunities for the growth of the cotton, textile and clothing value chain and intra-African trade can only be achieved if capabilities and capacity issues are addressed. Speaker 5: Mr Issifou Dado Doko (Cotton Association – Benin) Mr Dado Doko was asked to share his insights on how Africa can become a competitive producer of sustainable cotton and how Benin can cooperate with other countries in West Africa and the rest of Africa to build cotton, textile and clothing RVCs. Mr Dado Doko began his presentation by thanking the organisers of the webinar and expressing his delight to join the conversation. He proceeded to discuss challenges faced in cotton production in Benin. Challenges to building a competitive and sustainable cotton value chain • First, the cotton value chain is faced with many production constraints mainly due to the value chain’s dependence on imported inputs such as pesticides and fertilisers, which are imported from Europe and China. This challenges the competitiveness and sustainability of the value chain. There is, therefore, a need to obtain inputs that are locally produced. • Second, in Benin, 98–99% of cotton is exported to China or Europe due to the lack of cotton transformation and conversion capabilities in the country. The cotton sector is, therefore, vulnerable to exchange rate fluctuations. Mr Dado Doko suggests that there is, therefore, a need to transform 25–30% of cotton locally to build a sustainable value chain. • Third, as mentioned by the other speakers, Mr Dado Doko acknowledged the challenges that require government intervention. Specifically, he highlighted energy constraints and the need for the technological and human capital investment to build up conversion, transformation and beneficiation of cotton. Achieving a sustainable and competitive value chain • First, to have a sustainable and competitive value chain, there is a need to train people

on conversion and transformation practices in the cotton industry and to have locally produced inputs such as pesticides and fertilisers. • Second, consumption habits are a challenge. People in West Africa like wearing clothing from Europe despite the availability of local cloth from Nigeria, Ivory Coast and other countries. There is, therefore, a need to change consumption habits. Mr Dado Doko concluded his presentation by emphasising that a sustainable and competitive RVC can only be realised through building up cotton conversion and transformation capabilities in the industry. Discussants Remarks: Dr Taffere Tesfachew (Advisor, Ethiopian Investment Agency) Dr Tesfachew was asked to share his insights on how transformative industrialisation and cotton, textile and apparel RVCs can be built across the continent. Dr Tesfachew began his presentation by thanking Prof Ismail and the Nelson Mandela School for a much-needed discussion around some of the issues that governments and policymakers will need to face as the AfCFTA is implemented, and in understanding how to use the AfCFTA to boost intra-African trade. Dr Tesfachew acknowledged that there were many important points made by the speakers, and he would provide insights on several issues discussed. He proceeds to highlight a very wise and vital point made by Ms Natasja Ambrosio – stating that building RVCs take time and therefore there is a need for patience. Dr Tesfachew expressed his concern over Mr Hamma KwaJaffa’s assessment of Nigeria’s deindustrialisation. He highlighted that Nigeria now imports US$4 billion worth of clothing, secondhand clothes and textiles from outside the region, which is concerning as there are many companies in the region which could supply some of these imports.

He proceeded to provide insights on how transformative industrialisation and cotton, textile and apparel value chains can be built across the continent.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Limitations of export-led industrialisation Many African countries such as Kenya and Ethiopia have adopted export-led industrialisation. This approach has been followed by countries in order to integrate into global value chains, access preferential free trade agreements and to take advantage of the rising labour cost in East Asia. However, Covid-19 and its impact on global value chains have shown the limits of this form of trade. The era of fragmented production is now in question, and big companies are rethinking this model of production, which is a good reason for thinking in terms of regional value chains. The drivers of global and regional value chains Regional value chains should be built off the global value chain model. Therefore, in building RVCs, one needs to think of the global value chain model of having lead retailers organising and supporting production in different parts of the region. Dr Tesfachew posed a question: “do such lead retailers exist in Africa?”. He noted that the only region where a cotton, textile and clothing RVC is working is in Southern Africa, mainly due to South African firms and retail capacity to source inputs from other regions. Including labour issues in the AfCFTA The managment and coordination of industrial, labour and trade policy are essential for building RVCs. Labour policy is critical as the AfCFTA does not yet handle labour issues. What could happen, as seen on a global level, is that firms in the region will seek inputs from countries with low wages and working standards. The role of the private sector in advancing the AfCFTA The role of the private sector is critical. To boost trade, the government needs to realise there is a need for an enabling environment in which the private sector can produce goods to trade. Furthermore, the private sector should be part of the negations on technical issues such as the rules of origin. Dr Tesfachew closed off his presentation by stating that intra-African trade is still relatively low when compared to other regions. It is, however, rising and half of that growth is in manufacturing, which indicates that African countries are trading value-added goods.

Dr Tesfachew introduced Mr Barnabas Jatau as co-discussant to share his perspective on the challenges and opportunities for fostering productive capacity and building RVCs in the context of the cotton, textile and apparel value chains. Discussants Remarks: Mr Barnabas Jatau (Deputy Director Federal Ministry Industry and Investment) Mr Jatau began his presentation by sharing his delight in participating in the webinar and seeing how Africa is moving together in addressing issues and unpacking opportunities related to the AfCFTA and RVCs. He emphasised that the issues raised by the previous speakers are fundamental and should be explored further. He proceeded to provide the following insights.

Opportunities exist for Africa to produce what it wears and wear what it produces • First, the market exists in Africa for the consumption of locally produced textiles and clothing. Mr Jatau shared the following slogan: we need to produce what we eat and eat what we produce. Based on this slogan, there is a need for Africa to produce what it wears and wear what it produces. • Second, based on his experience, there is scope for developing the cotton, textile and clothing sector RVCs in Africa. In West Africa, the climate provides an ecosystem conducive for the development of cotton. However, in Nigeria, one of the problems pertaining to cotton production relates to the type of cotton seeds used. • Third, the cost of production can be lowered. Africa’s wages are competitive and cheaper than wages in Europe and Asia. However, there is a need to develop skills and a workforce required by the industry to increase productivity and output. Mr Jatau emphasised the need to address infrastructure issues related to the supply and cost of electricity. • Fourth, Nigeria is in a similar position as Kenya, in that it is exploring ways in which an integrated industrial park can be developed. • Fifth, Nigeria had approximability 167 textile mills; however, due to policy inconstancy, the number of textile mills in operation has declined. The AfCFTA provides an opportunity to rebuild the industry. There is a need, however, to ensure that borders are adequately controlled, and rules of origin are appropriately applied. • Finally, Nigeria and other African countries have unique fabric designs which are locally and internationally admired. Intellectual property rights should be developed to protect these designs and prevent the spread of counterfeit fabrics. Mr Jatau closed off his presentation by emphasising how important it is for Africa to wear what it produces and to produce what it wears. The value chain is vast with US$2.3 trillion in the fashion value chain; however, Africa is only taking a small portion. There is, therefore, a need for Africa to increase this portion.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

Discussion – Group 2: Industrialisation and Trade Policy The first group of presentations was followed by a brief three minute break, after which the second group of presentations was kicked off. As in the first group of presentations, this section began with Ms Nederlof-Sithole introducing each of the five speakers. Prof Ismail and Mr Mba Kalu moderated the session, posing the guiding question to each of the speakers. Speaker 1: Prof M.T Ladan (Director General, the Nigerian Institute of Advanced Legal Studies) Prof Ladan was asked to share his insights on the role and experience of the RECs in building productive capacity in the cotton, clothing and textile RVC and how the AfCFTA can harmonise the different standards, rules of origin, and customs regulation between the RECs. Prof Ladan began his presentation by noting that the eight RECs (SADC, ECOWAS, EAC, COMESA, ECCAS, AMU, CEN-SAD and IGAD) were envisioned to be the building blocks of Africa’s integration as far back as the 1980s. The main role of the RECs on the continent RECs have critical roles to play in two areas: first, to promote intra-African trade and second, to fast-track the harmonisation of pan-African industrial frameworks for Africa’s economic integration. The latter role is of importance as Africa’s manufacturing base has remained small since independence and its global share of manufacturing exports is less than 1% compared with 16% for East Asia. Prof Ladan proceeded to provide an overview of the constraints and opportunities experienced within and amongst the REC cotton, textile and clothing sectors. Experiences within and amongst the REC • First, the cotton, textile and clothing sectors in SADC, ECOWAS, COMES and EAC are similar in terms of their competitive constraints and challenges. Furthermore, these RECs have similar experiences with regards to the divergences in trade and industrialisation policies in matters related to rules of origin, treatment of goods produced in SEZs, and incorporating and

implementing regional trade and industrialisation policies into member state’s national frameworks. These divergences create a challenge in Africa’s capacity to contribute meaningfully in the global value chain. • Second, Nigeria, Kenya, Uganda, Rwanda and Burkina Faso have similar experiences regarding competitive constraints that affect the cotton, textile and clothing sector. These constraints are as follows: » Supply-side issues related to the skills gap across the value chain, outdated machinery, limited availability of cotton and poor quality of yarn for textile production » Business environment issues across the value chain related to organisational structure, trade facilitation, infrastructure, access to financing for textile industries and the cost of doing business » Market access across the value chain related to access to trade information and trade promotion » Developmental issue across the value chain related to corporate social responsibility and the textile industry’s massive water pollution crisis • Third, Nigeria, Kenya, Rwanda, Ethiopia, Tanzania and Ghana have upgraded along the global value chain from yarn to the fashion industry. • Fourth, even though ECOWAS is the one of the oldest RECs, it does not have a common, comprehensive trade policy. An ECOWAS trade policy was drafted in 2014 but could not be validated in 2018, and today efforts are being made to finalise the draft. Furthermore, one of the largest ECOWAS members, Nigeria does not have a national trade policy. Therefore, trade policy issues are emanating from member states into the RECs and affecting the continental efforts. AfCFTA has provided the platform for relevant provisions for transformative industrialisation in Africa • Firstly, by providing a bases for challenging the RECs to embark on aggressive efforts in the harmonisation of the trade and industrialisation policies by removing the divergence, realigning various interests and ensuring issues are addressed in the best interest of the sector.

• Secondly, by highlighting how African RECs have a fragmented pattern of integrating Africa into the cotton, textile and clothing global value chains. The largest and smaller exporters are confined to the production of cotton fibres or exports of intermediate inputs mainly with Asia and Europe. SADC is an exception because Zambia and Zimbabwe are exporting cotton fibres and Mauritius, Lesotho and eSwatini are trading in cotton yarn and fabrics. Mr Ladan concluded his presentation by emphasising his concern that intra-African trade accounts for 15% of cotton export and 12% of imports in the cotton, textile and clothing sector, which underscore the shallowness of regional integration in the cotton, textile and clothing sector in the continent. Speaker 2: Dr Andrew Mold (Chief, Regional Integration and AfCFTA Cluster, Regional Office for Eastern Africa, United Nations Economic Commission for Africa, Kigali, Rwanda) Dr Mold was asked to share his insights on the impact of second-hand clothes on the production capacity of Rwanda and East African countries in the cotton, clothing and textiles value chain. Furthermore, he discussed the role external trading partners such as the US (AGOA) and the EU (EBA, EPAs) play in supporting African countries to become competitive producers of textiles and clothing, rather than undermining their productive capacity. Building “Factory Africa” Dr Mold referred to a comment made by Dr Tesfachew when he stated that there is a lot more known about global value chains than RVCs. He proceeded to note that there is, however, an essential misnomer in understanding what global value chains are. Dr Mold referred to an article by trade economist Richard Baldwin which pointed out that global value chains are an exception, and most value chains are regional. For instance, most of the trade undertaken in Asia is within the region, and China is at the centre of sourcing intermediate goods in the Asian region, referring to this as “Factory Asia”. A similar production system exists in Europe with Factory Europe and in North America with Factory North America. Baldwin analysis has highlighted that Africa is lacking a Factory Africa, as the continent does

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

not have enough inter-regional production networks. It is hoped that the AfCFTA will be able to provide such networks. Under preferential free trade agreements, Ethiopia and Kenya have both targeted their apparel exports to the European market and the US, respectively. Under AGOA, Kenya is the only country in East Africa which has been able to export textiles and apparel to the American market successfully. Countries such as Uganda, Tanzania and Rwanda have not been able to do so. Kenya has exported around US$350 million worth of textile to the US market. Dr Mold, however, believes these trade agreements have the potential to cause issues for the development of a RVC. Adverse impacts caused by targeting exports outside of the continent AGOA has proven an unreliable agreement to a certain extent. For instance, Madagascar in the late 1990s and early 2000s had some success in promoting textile and appeal exports; however, when it faced political problems around 2008, it was suspended from AGOA, which resulted in a collapse of Madagascar’s export of textiles and apparel. Dr Mold provided Kenya as another example, stating that Kenya has been put in a difficult situation because of the AGOA arrangement and the import of second-hand clothing. He proceeded to provide the following account of Kenya and the region’s difficulties under AGOA. How AGOA has undermined the apparel regional value chain Dr Mold began by quoting a rhetorical question by Secretary-General – AGOA is premised on the idea that Kenya will export new clothing to the US market. Americans are going to wear this clothing and once worn, it will be sent back to Kenya as second-hand clothing. Wouldn’t it be more sensible to make the clothing for our citizens? This question leads one to think about the second-hand clothing issue. There was a joint agreement in 2016 amongst EAC member states to put prohibitive tariffs and restrictions on the import of second-hand clothing. The agreement was reached collec-

tively by EAC member states; however, pressure was placed on Kenya by the US because of its AGOA exports to not follow through with the EAC policy of prohibiting second clothing. The US claimed it had 40 000 jobs at stake if Kenya and other East African countries were going to prohibit the import of second-hand clothing. However, second-hand clothing is not produced but instead collected and often on a fraudulent basis. Uganda backed down from the agreement and Rwanda was the only country under AGOA to enforce the prohibition of second-hand clothes from the US. Rwanda got suspended from certain AGOA provisions for its decision to implement the EAC policy of prohibiting second-hand clothing. Rwanda did not have many exports at stake. The suspension had an impact on one Chinese company which had invested in the apparel industry to exploit the advantages under AGOA. The Rwandan government made concessionary provisions to help the manufacturer adjust. Rwanda’s experience highlights the difficulties of having external trading relationships and how they can distort what might be a promising regional market. Secondly, there must be a common position on the issue of secondhand clothing, especially since in the ’60s and ’70s there was no second-hand clothing. Mitumba2 is undermining productive capacity and the development of regional value chains The second-hand clothing industry has boomed in the past last few decades. The patterns of consumption seen in East Africa are not traditional and have resulted from the impact of structural adjustment programmes that came about in the 1990s and 2000s. These adjustments resulted in a surge of imported clothing and second-hand clothing into the region. It is difficult for regional industries to compete with the second-hand industry, which has zero production costs. It is estimated that currently, global imports of second-hand clothing are around U$4 billion. In countries such as Uganda, 80% of clothing purchased is estimated to be second-hand clothing. It is therefore difficult for regional producers to compete with second-hand clothing.

2 Mitumba is a Swahili term, literally meaning “bundles”, which refers to plastic-wrapped packages of used clothing donated by people in wealthy countries

The role RECs can play in driving the AfCFTA The RECs are in the driving seat of the AfCFTA, and the AfCFTA can unblock some of the impasses seen in regional agreements. For example, Ethiopia and Kenya both have textile industries, but there is negligible trade between the two countries. This is partly because Ethiopia is not a signatory to the COMESA FTA; however, both are signatories to the AfCTFA. Dr Mold proceeded to explain that a decline in tariffs in the two countries would create a conducive environment for cross-country sourcing. Which he emphasised is vital for the development of the textile and clothing sectors. Speaker 3: Cde Issa Aremu (Vice President, Industrial Global Union; General Secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria) Cde Aremu was asked to share his insights on what opportunities exist to create more decent jobs in Africa. He also discussed the main policy challenges and how the African clothing and textile trade unions across Africa can work together to find a mutually beneficial solution for these policy challenges. Cde Aremu began his presentation by extending his complements to all the other panellists. He proceeded to emphasise a point made by Dr Tesfachew – the need to factor labour dimensions into the discussions around trade and industrialisation in Africa. He proceeded to provide an overview of the five main goals of the Industrial Global Union, noting that the goal pertaining to the promotion of sustainable industrial development is of great importance to the union. Cde Aremu emphasised the importance of partnering with the Nelson Mandela School, the African Development Bank, governments and industry to make sure that industrialisation and trade discussions include labour dimensions. The importance of the conversation around the AfCFTA and industrialisation in addressing labour issues Cde Aremu outlined the following reasons as to why the conversation around the AfCFTA and industrialisation is essential: • There are concerns as to how policy choices will make provisions for the upskilling of labour. • There is a need to promote more benefi-

ciation and value addition along the value chain, which will provide job opportunities. • There is a need to raise the issue of employment creation in Africa. He noted the youth revolution that took place in Nigeria and the COSATU strike in South Africa, which were both sparked by issues of unemployment. He pointed out that the Nigerian unemployment rate is close to 50% and the continental average will mostly like be comparable to that too. Trade unions support value addition trade The union supports trade and the need for intra-African trade rather than a reliance on foreign aid. However, there is a need to be cautious when talking about trade. Cde Aremu noted Africa’s trade history – slave trade replaced by extractive resource trade – stating the need to move away from that model of trade. There is a need to make sure intra-African trade is focused on the trade of manufactured products which will create jobs. Challenges faced by the Nigeria’s cotton, textile and clothing sector In Nigeria, the cotton, textile and clothing sector kick-started the possess of decolonisation. Before decolonisation, Nigeria was exporting cotton, and after independence, the founding fathers saw a need to add value and beneficiate cotton resulting in the emergence of the textile sector. By 1980, Nigeria had become the leading textile producer in Africa after Egypt and South Africa. Nigeria has therefore had a textile industry which produced jobs which means it can have one again. Reviving the Nigerian cotton, textile and apparel sector Cde Aremu outlined the following ways in which the Nigerian cotton, textile and apparel sector can be revived: • First, Nigeria can leverage its extensive domestic market and regional market. • Second, taking account of Nigeria’s negative experience with trade liberalisation, which led to an inflow of imported goods, a transitional approach to trade liberalisation needs to be applied. This does not undermine the local manufacturers and ensures countries are producing goods that can be exported. • Third, the outstanding issues around the rules of origin need to be addressed.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

• Fourth, in Nigeria, electricity is a constraint on production. However, countries across the contentment such as South Africa have found solutions in dealing with electricity constraints. The AfCFTA thus provides an opportunity for countries to learn from each other’s experience in addressing constraints. • Fourth, there is a need to retool the workforce by addressing the skill gap that exists in the cotton, textile and clothing value chains. • Fifth, public budget and procurement should be used to buy local products. The government should therefore launch, and support buy Africa and buy local campaigns. The role the Industrial Global Union has played in maximising the benefits of trade within the context of the AfCFTA Every year since 2017, the union observes Africa Industrialisation Day with the aim of promoting the importance of industrialisation on the continent. The union promotes the day and has taken steps to include counterparts from the continent, such as Zimbabwe and South Africa. UNIDO has set aside 20 November 2020 as Africa Industrialisation Day. Cde Aremu emphasised that the union can play a central role in advocating for the beneficiation of products within the continent, highlighting the need for

industrialisation to be a trade union issue. Upskilling unions to advocate for industrialisation in trade policy Before the unions can play a role in advocating for trade and industrialisation, there is a need for unions to gain literacy on the issues pertaining to trade and development. Cde Aremu suggested that the Nelson Mandela School should expand its curriculum to accommodate union members and assist with basics and technical issues pertaining to trade. Cde Aremu concluded his presentation by providing the following points: • The textile sector has the potential to create more jobs and the only way to promote inclusive development in line with SDG Goal 9, which focuses on building resilient infrastructure, promoting sustainable industrialisation and fostering innovation. • Experience in textile production exists, and all that is needed is to reactivate this sector and ensure that Nigeria and other African countries leverage the opportunities which are available to add value and grow the manufacturing sub-sector’s contribution to GDP. • Unions need to be partners in the development process, a process which needs to be

inclusive with unions interest factored in. In the case of the AfCFTA, the union agrees that intra-African trade is necessary and should be used to revive production on a sustainable basis and reindustrialise the continent. • The Union had an industrialisation manifestation launched in 2017 which talks about the link between continental trade and productivity and can be shared with participants. Speaker 4: Mr Simon Eppel (Researcher, Southern African Clothing and Textile Workers Union) Mr Eppel was asked to share his insights on what key trade policy challenges are facing African countries and how these challenges can be addressed in order to create a mutually beneficial, inclusive and developmental AfCFTA for African countries. Mr Eppel began his presentation by thanking fellow panellists who have provided insightful inputs. He proceeded to emphasise the need for a different trade model as discussed and highlighted by the pervious speakers. Stating that there is a need to undertake a trade arrangement that is different from what has previously been done – moving away from

extractive neo-colonial trade and towards a different trade arrangement based on a different set of principles and ideals. There is general agreement in that industrialisation is necessary. However, there are different views on what type of industrialisation approach should be followed. He emphasised that industrialisation, labour issues and supportive institutions should be at the heart of trade policy. He proceeded to discuss these issues from a trade policy perspective. Industrialisation needs to be at the heart of trade policy Industrialisation is considered differently; in some instances, some countries want to trade on the bases of the status quo, focusing on trading what is currently manufactured. Counter to this position are countries who wish to build industrialisation and trade based on what is currently manufactured and what can be manufactured in the future. These positions differ in the following ways: • Countries which currently import cotton, textiles or yarn may want a trade agreement in which they can trade products which comprise of imported inputs duty-free. • On the other hand, countries which are not producing inputs but want to produce specific inputs in the future will wish to have trade agreements which allow them the opportunity to trade locally-produced inputs in future. There is a need to ensure that trade agreements enable and incentive local value addition, even on products which countries cannot currently produce but in fact, may have capacity to do so in the future. A fundamental principle of the trade policy for the AfCFTA should be ensuring that the rules of origin speak to beneficiation, industrialisation and value addition. Parallel to that, there needs to be functioning, articulate and clear industrial policies rolled out amongst the member states of the AfCFTA. Job creation, retention and decent work should be at the heart of the trade policy An essential feature of the AfCFTA is that trade is required based on its ability to create jobs, income and enhance the wealth of the people on the continent. Mr Eppel outlined the following labour considerations that need to

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

be made in trade policy: • First, trade policy needs to recognise that there are people employed in the cotton, textile and clothing value chains. These jobs need to be protected; therefore, trade policy should not undermine jobs or lead to job loss. • Second, there is a need to ensure decent jobs are created along the value chain. Countries cannot have jobs at any cost or they will race to the bottom. • Third, there needs to be a social clause in the AfCFTA which recognises that there should be certain rights, duties, minimum thresholds and benchmarks which are required for enforcing labour standards on the continent. • Fourth, countries are viewing the AfCFTA as presenting a set of export opportunities into the African regions. However, the challenge with this view is that even though the continent has around 1.3 billion people, those with the purchasing power of a minimum threshold of say US$8.5 (to define middleclass income) only amount to about 36 million people on the continent. • Fifth, 50% of African retail falls under five countries and 90% of retail on the continent falls in the informal sector. As part of a developmental trade policy, the AfCFTA needs to speak to job creation and address the nature of the market on the continent, to ensure market development and the banning of the second-hand market. Institutions which support the integrity of trade There are practical ways in which challenges such as customs fraud and the undermining of rules of origin can be addressed. The following recommendations were provided: • First, the establishment of an independent body which moves throughout the continent, similar to the body which exists under AGOA, is needed. This independent body will ensure that: » The right products and rules of origin are being adhered to at factories around the continent » There is proper customs integrity, enforcement and data collection across the continent and all customs authorities

• Second, there is a need for a handbrake mechanism that allows the prevention of trade if there is a breaching of customs integrity. Speaker 5: Dr Olumuyiwa Alaba (Trade expert; ITRC and TRALAC Board member) Dr Alaba was asked to share his insights on central issues that still need to be resolved for the agreement to be concluded and advise policymakers on how to solve these issues. Outstanding issues and leveraging the complementary relationship between the AfCFTA Secretariat and RECs • The first issue pertained to tariff liberalisation schedules. No country has moved forward in presenting their tariff schedules. Advice to the policymakers: The best route to go is to review schedules of commits already made at a regional level and update schedules based on the assessment of implementation in the past. That should form the basis on which commitments are made. • The second issue pertained to rule of origin. Advice to the policymakers: The continental agreement should be built organically from work already undertaken by the REC. Countries should review, improve on and reconsider existing rules of origin which are already outlined in the various REC agreements and negotiate on these rules at a continental level. • The third issue pertained to the development of guidelines on infant industries. Advice to the policymakers: Countries have agreed that there will be 90% liberalisation of goods, 7% liberalisation of sensitive products and 3% liberalisation of special product. Countries should go back to commitments made at a regional level and then review what commitments can be made based on existing commitments. • The fourth issue pertained to Special Economic Zones (SEZ). If a good is produced in an SEZ, it has had some advantages compared to goods produced outside of SEZs. In terms of competition, goods produced outside of SEZs cannot compete with goods produced in SEZs. Advice to the policymakers: There should be a special rule of origin given to goods

produced outside SEZs, so there is no competitive advantage given to goods produced in SEZs.

• Inward-oriented market-driven regional value chains which are similar to import substitution but at a local level.

• The fifth issue pertained to the issue of potential job losses. Advice to the policymakers: If AfCFTA is adequately undertaken, job losses should not be a significant issue. Free movement will guarantee that goods can be produced anywhere, and the mobility of labour allows people to work within the region.

Each type of RVC will necessitate a different policy approach and direction. • First, in the outward-oriented global market-driven RVCs, African countries will be coordinating production across the region based on which countries can supply inputs to produce the final product to penetrate the global market. This type of value chain still requires rethinking as it will still be exogenously driven and controlled by multinational corporations.

Regional value chain models exist on the continent Ghana and Côte d’Ivoire have collaborated in the production of chocolate. The partnership has provided both countries with the opportunity to dominate cocoa and chocolate production in Africa and outside the continent. Dr Alaba concluded by emphasising that these are the types of models that countries should be thinking about instead of seeing the AfCFTA as non-beneficial or threatening jobs. If the AfCFTA is implemented correctly, it should be beneficial to all countries. Discussants Remarks: Dr Taffere Tesfachew (Advisor, Ethiopian Investment Agency) Dr Tesfachew was asked to share his insights on the discussions presented by Group 2. He began his presentation by highlighting the usefulness of the discussions in identifying policy challenges and policy options available for African countries moving forward. He emphasised how policy implementation is always a challenge on the continent and should be noted as the AfCFTA is in the process of being implemented. There are nearly 30 countries which have signalled their willingness to undertake the economic reforms and various adjustments required at a national level to implement the AfCFTA, which should assist in advancing the negotiations on outstanding technical issues. The type of regional value chain approach countries undertake matters In building RVCs, African countries will have to choose between the following models: • Outward-oriented global market-driven where countries are focused on building capabilities to export through global value chains. However, this is done collectively as a region.

• Second, in the inward-oriented marketdriven RVCs are aimed at producing products from regional markets. This type of model required interventions to be undertaken to prevent the smuggling of clothing and import of second-hand clothing. • Third, countries will need to think of policy co-ordination and harmonisation of rules depending on the model undertaken. For instance, investment policy to prevent countries from competing against each for investments, customs, industrial and trade policies coordinated across countries. • Fourth, the need to ensure that the trade policy undertaken to develop the AfCFTA is one that creates jobs, value addition and allows countries to benefit from exports. Dr Tesfachew concluded by stating that it is crucial as the implementation of the AfCFTA begins, that countries think of which models will best suit their trade and industrial objectives. These models are not exclusive and can be adopted jointly. Dr Tesfachew noted that Africa could learn from research undertaken on how Asia has developed capacity to develop RVCs.

Building the Textiles and Clothing Value Chains • SUMMARY REPORT

4. Closing Remarks Prof Ismail delivered closing remarks thanking all panellists and the audience. He proceeded to highlight that global trends are changing and some of those are moving in Africa’s favour. Africa has built up some capability in the cotton, textile and clothing sector and some African retailers now have the vision to build RVCs and be drivers of these chains. The possibilities of domestic drivers are thus very high, and the AfCFTA provides the continent with the opportunity to coordinate efforts in building RVCs. Prof Ismail proceeded to outline the following proposals: • First, what the Nelson Mandela School of Public Governance seeks to do is create a platform such as this webinar for dialogue and conversations. Depending on the interest of participants, the School could facilitate the creation of a continent-wide network of experts committed to finding solutions and accelerating the process of industrialisation and the implementation of the AfCFTA. • Second, participants are encouraged to take the discussion further by writing policy briefs and op-eds based on the webinar presentations and discussion. Individuals in

academia are welcome to submit work to the School for further exploration of any of the research and policy issues pertaining to the AfCFTA and the building of the cotton, textile and clothing RVCs. • Finally, Prof Ismail thanked Cde Aremu for suggesting that the Nelson Mandela School should get involved in the training and capacity building of trade unionists. The School is open to participating in training and capacity building ventures with other partners on the continent. Prof Ismail then called on Ms Mabel NederlofSithole to deliver the final closing remarks. Ms Mabel Nederlof-Sithole Ms Nederlof-Sithole thanked the speakers and all participants for attending and contributing to the discussion, noting that their contributions have added greatly to the debates and key considerations, moving forward, especially in bridging policy and practice. She emphasised the Mandela School’s role as a bridge between the different constituencies that have a role to play in bringing life to the AfCFTA and the number of initiatives around the transformation within the industries in Africa.