AFRICA: Makers face tough times as US demand slows

"Buyers are turning away," said Navdeep Sodhi, a partner with Swiss consulting firm Gherzi.

Factories across southern and eastern Africa are operating at 50-60% capacity compared with the first half of 2008, he added.

In Botswana, "most textile companies have already reduced their workforce and two have closed down," said Krishna Chinniah, managing director of B&M Garments.

Those still seeing strong demand are generating little income.

Profits at Protex Kenya, owned by Taiwanese group New Wide, have been eroded by lower prices, said Samuel Chang, chief company secretary.

Retailers are sourcing in fewer locations and focusing on producers with the lowest costs, according to Sodhi.

While Chinese exporters have benefited from the removal of the last US quotas at the beginning of this year, increasing their share of US imports at Africa's expense, African exporters are seeing rebate schemes reversed.

An import rebate incentive for South Africa Customs Union textile exporters expires tomorrow and the new version of the agreement is "not very advantageous," said Chinniah.

Africa's textile industries are at a significant disadvantage with poor infrastructure, high electricity and water charges, and a lack of locally produced raw materials.

Some exporters had countered those weaknesses by exploiting certain niche categories under AGOA. But Chinniah said this edge has been eliminated by "the current storm of business conditions".

Half of the continent's textile factories could close their doors in coming months, believes Sodhi. "Unless governments do something to help, there'll be no industry left.