Cape Town is a city of incredible opportunity.

Located at the tip of African continent, Cape Town plays a crucial role as the world’s doorway to Africa and the start of the West African Atlantic channel to the European Union. The city is renowned for its natural beauty, social scene, and culture of work-life balance, ranking at the top of international benchmarks for Quality of Life[1][2].

Furthermore, Cape Town is the home to most South Africa’s retailers. In clothing, the Foschini Group, Woolworths, Truworths, PepKor, Cape Union Mart International, Pick n Pay Clothing and Ackermans. In food: Pick n Pay, Shoprite and Woolworths Food and in fast-moving consumer goods (FMCG): The Clicks Group. Furthermore, it is home to the Takealot Group, the largest e-commerce retailer in Africa, whose products expand into food, fashion and FMCG. The Mr Price Group have also noted an intent to open a satellite office in Cape Town to focus on their aspirational value businesses[3] while Amazon, the global e-commerce giant, has announced their new African headquarters in the city.

These Retailers, as the lead firms in extensive, global value chains offer an incredible opportunity for economic multipliers within the city.  Lead firms are consumer facing, controlling the distribution channels, and branding of the apparel. Lead firms control the greatest value segment of the supply chain- product design and marketing while setting the standards, price, and demand of the manufactured goods either through inhouse manufacturing capabilities or outsourced manufacturers and their upstream suppliers. All clothing retailers have signed up to the Retail-Clothing, Textiles, Footwear and Leather (R-CTFL) Masterplan, committing themselves to increasing local supply, which may provide an opportunity for new demand and partnerships for manufacturers in Cape Town. Furthermore, the attractiveness of the city should be a drawing card to entice the best talent, both locally and internationally.

These sectors, Food, Fashion[4] and FMCG account for an estimated 127 274 manufacturing jobs in Cape Town[5].

Yet despite the concentration of buying power in the city and existing employment base, the development of these value chains have been deprioritised in public policy, in favour for business processing services (call centres), tourism and oil & gas which are believed to be more significant growth drivers in the economy.

This reprioritisation is a missed opportunity to leverage the potential of these sectors to generate manufacturing jobs in Cape Town.

But why care about manufacturing?

Manufacturing growth and development is recognised as a key driver of structural transformation within middle income economies. Compelling evidence is presented in UNIDO’s Industrial Development Report of 2013 showing that that manufacturing has been key to the raising of productivity in the early to mid-stages of economic growth, especially as economies shifted their per capita incomes to levels above US$14,000[6].

The UNIDO report argues that manufacturing is key to economic transformation as jobs in the sector have strong economic multipliers. Fundamentally, it provides direct economic activity and employment while also supporting value adding activities that stimulate further economic activity, and productivity raising employment.

The generally non-dynamic nature of the South African manufacturing sector is therefore broadly recognised as a key reason for the poor performance of the broader South African economy, and a major reason for continued high levels of unemployment, low levels of investment, and unsustainable societal dependence on state welfare grants[1].

Importantly, buyer-led manufacturing industries offer work opportunities for the most marginalised in our society. Individuals with no matric certificate and low skills can be easily absorbed and upskilled. For example, the clothing manufacturing industry is a prime sector for coloured women who make up most of the labour force.

Cape Town’s location also supports competitive shipping lead times (should the Port be working efficiently) with shipping times from Cape Town to the United Kingdom (UK) ranging between 17-19 days, only 6-8 days longer than Turkey to the UK, a best practice clothing comparator economy and a large exporter to the EU and UK.

So, what is the opportunity?

Research conducted for the R-CTFL Masterplan identified that South African retailers support 160 000 jobs outside of South Africa. In clothing manufacturing alone, Cape Town is well positioned to attract investment and deepen local sourcing, supporting the onshoring of at least 20 000 (12.5%) of these jobs. Given the employment rate of 21.9%[2] there is clearly an imperative to create jobs, particularly for low and semi-skilled workers who are often left behind as economies transition to services.

International best practice from Turkey and Morocco highlights the possibility of public-private partnerships in driving buyer-led value chains within sub-national regions. For example, in Istanbul, Turkey, international Retailers are provided free rental for buying offices for up to 5 years, encouraging sourcing from the region. Industrial parks are set up close to labour supply and the public sector supports raw material collective purchasing. In Morocco, industrial infrastructure is set up in and around the port of Tangiers- the country’s gateway to the EU. Investors are given free or subsidised rental on the building, with the firms responsible for the equipment[3]. In both case studies national and municipal governments have supported skills development, in partnership with industry and educational institutions.

Supporting growth and the related job creation, innovation, and dynamism in Cape Town’s buyer-led value chains requires a multi-fold approach, with the City of Cape Town partnering with Retail and their key suppliers, unions and supporting institutions.

With the right partnerships, Cape Town could be Africa’s advanced, agile, ethical and green manufacturing city, supporting 250 000 manufacturing jobs by 2032. 

Imagine the impact of that on the city and its people? Indeed, Cape Town is a city of incredible opportunity.

 

[1] Barnes, J. (2019). Developing Manufacturing Leadership in South Africa (And regionally): The role of monozukuri. Prepared for the South Africa-Japan University Forum Conference, Pretoria, South Africa, 23-24 May 2019

[2] State of Cape Town Report (2020). Available: https://www.capetown.gov.za/Family%20and%20home/Education-and-research-materials/Data-statistics-and-research/State-of-Cape-Town-Report.

[3] B&M Analysts (2018). International Comparator Economies. Report 2 of 4 for the R-CTFL Masterplan.

[1] Cape Town ranked 1st in the 2019 Telegraph Travel Awards for Best City. Source: The Telegraph (2019). Travel Awards Winners Announced. Available: https://corporate.telegraph.co.uk/2019/11/20/2019-telegraph-travel-awards-winners-announced/.

[2] Cape Town ranked 28th in Deutsche Bank’s Quality of Life Index ahead of New York, Paris, and London. Source: Deutsche Bank (2019). Mapping the World’s Prices 2019. Available: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000494405/Mapping_the_world’s_prices_2019.pdf?undefined&realload=nDvdRJTGQjcTEscD7FNoxrzqLZraPgt7Vpp4e1/BUDyrFumxBc5~C/mTy47bPbv/. Page 7.

[3] Mr Price Group (2021) Annual Report 2021. Available: https://www.mrpricegroup.com/MrPriceGroupCorporate/media/mrpgcorp/SiteAssets/2021/Mr-Price-Group-Annual-Results-2021.pdf ; page 42.

[4] Important to note that we refer to fashion or clothing as the industry linked to retail, not haute couture.

[5] IHS (2020)

[6] United National Industrial Development Organisation (2013), Sustaining Employment Growth: The Role of Manufacturing and Structural Change, Industrial Development Report 2013, UNIDO, Vienna.