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FLOREAL, Mauritius — Nearly two years after the U.S. African Growth & Opportunity Act came into effect, the Mauritius textile industry is facing serious challenges.
Beset by escalating problems with imported labor, political upheavals in neighboring Madagascar, formidable competition from China and Southeast Asia, the fake-but-legal trade in Ralph Lauren and a series of credibility-damaging financial scandals, Mauritius is struggling to remain an attractive and viable manufacturing base for clothing companies throughout Europe and the U.S.
When the Export Processing Zone was set up in the Seventies in an effort to diversify an economy heavily dependent on the sugar industry, companies took note of the preferential access to the European market enjoyed by textile products from Mauritius. Hong Kong entrepreneurs like Esquel, Crystal, Sinotex and Afasia were among the first to take advantage of the situation and quickly established factories on this Indian Ocean island nation.
“Many manufacturers found the local workforce to be very trainable,” explained D.S.S. Pinto, regional manager for Eddie Bauer International (Mauritius). “They absorbed techniques faster. Moreover, Mauritius brought high technology to the industry much earlier than India or Sri Lanka, upgrading from conventional to semiautomated modes of production early on. All these allowed the industry to grow quickly and strongly.”
Indeed, Mauritius has become an attractive manufacturing option — and not just for such diverse European mass-market labels as the French mail-order giant La Redoute or British High Street chains Marks & Spencer and Next. Upscale brands like MaxMara and Hugo Boss are using the area as well. The U.S., in recent years, has become the single-largest market for Mauritian textile products; well-known brands like Eddie Bauer, Gap and The Limited sourcing arm Mast Industries have set up sourcing offices on the island. Last year alone, according to Pinto, 10 million units were produced in Mauritius for Eddie Bauer.
The U.S. government estimated total Mauritian exports last year at $1.6 billion. The nation’s textile and apparel exports to the U.S. last year were $238.3 million. For the first nine months of the year, those shipments were up 6.6 percent.
“Another factor that made manufacturing in Mauritius an attractive option is the fact that many factories are vertically integrated,” says Roger Espitalier-Noel, general manager of Floreal Knitwear Ltd., the premier knitwear maker in the sub-Saharan region and the second-largest Woolmark knitwear supplier in the world. “At Floreal, for instance, we do everything from yarn spinning to finished product piece-dyeing. In fact, we offer a comprehensive range of services, including materials sourcing, design and marketing.”
Verticality of operation has been an important factor in the success of New Island Clothing. Established 10 years ago as a joint venture between Coats Viyella and CIEL, parent company of Floral, to produce clothing for British retail giant Marks & Spencer, NIC initially churned out “very basic T-shirts,” which would retail for about $8, according to general manager Colin Vose. “However, in order to remain competitive, we had to develop facilities to manufacture our own cotton [fabrics]. Today, we produce more upmarket shirts for M&S that now retail for [about $80], using cotton — Oxford and twill, mainly, reflecting fabric trends in American and European markets — from our own mills.
“Labor costs have gone up in Mauritius,” Vose acknowledged, “which is why we need to offer added value in a market that is constantly moving. We now manufacture shirts of a higher quality, featuring bones in the collar, a back yoke in four parts as opposed to two, and finer stitching detail.”
U.K.-based Quantum Clothing Group purchased Coats Viyella’s share in NIC two years ago. NIC’s current production capacity is around 24,000 to 30,000 pieces a week, with an annual turnover of about $12.6 million to $15.8 million. (NIC’s sales figures and prices have been converted from the British pound at current exchange rates.)
Janet Reger is a designer of exclusive, high-end intimate apparel, who divides her time between her eponymous boutique in London’s posh Beauchamp Place and Mauritius. Previously operating from a factory in England, Reger shifted production to Mauritius in 1996.
“My overheads, on the whole, are much lower here compared to England, but it is more expensive to manufacture here compared to China, for instance,” admitted Reger. “However, I do get the level of quality I am looking for.”
Reger’s is a relatively small operation, with a production output averaging 1,000 pieces a week and an annual wholesale turnover — the London flagship excluded — of $1.5 million, but her designs, which involve intricate lace appliqués, embroidery on silk and delicate button detail, are extremely labor-intensive. As a result, Reger said, “the minute-per-garment rate is a good double that of the U.K., but the workmanship is beautiful, and all other costs are considerably low.”
Pinto concurred, saying that “labor is quite expensive, but it gives better return in the end. The consistency of workmanship is there.”
Reger’s labor situation is unusual in that her workforce of 50 factory workers is wholly Mauritian. Other companies have had to import workers to keep up with production, often from China and India. Many of these same companies also have established factories in Madagascar as a way to keep production costs under control.
“Factory work is becoming less and less appealing to Mauritians,” according to Espitalier-Noel of Eddie Bauer. “The trend, as a result, has been the importation of labor and the delocalization to Madagascar, which is [435 miles] away.”
Last year, Floreal Knitwear produced more than 3.6 million pieces with a wholesale value of $6 million, and counts among its customers Gap, Eddie Bauer, Esprit, Next, La Redoute, Marks & Spencers, Abercrombie & Fitch and American Eagle Outfitters.
Espitalier-Noel estimates that 15 percent of parent company CIEL Group’s 20,000 employees are foreign laborers, while half of production is based in Madagascar. These statistics, though, reveal little of the attendant problems.
The group’s huge exposure to Madagascar, along with many other Mauritius-based textile companies like Novel Denim, World Knits, Tara Group and Compagnie Mauricienne de Textile, has made it particularly vulnerable to the island’s recent political woes. Business in that country virtually came to a halt for the first seven months of the year, after a close December presidential election led supporters of both candidates — one the incumbent, the other the mayor of the capital city Antananarivo — to mount demonstrations, shutting down transportation systems. Most companies were forced to shut down, some permanently.
Sanjay Matadeen, research analyst at the Mauritius Export Processing Zone Association, reckoned that the combined losses due to the Madagascar crisis could “well be in the region of $18 million, with the Floreal Group alone registering a loss of $16 million.” In total, the 18 Mauritian enterprises operating in Madagascar employed about 25,000 Madagascan people and produced annually 21.3 million T-shirts, 20 million pullovers, 6.9 million trousers and 3 million shirts.
Faced with mounting losses and late deliveries —”the production delays meant that shipments would have to be airfreighted to the markets, at the manufacturers’ expense,” said Matadeen — some companies hastily relocated production back to Mauritius. Others, like Novel and Esquel, rapidly set up factories in South Africa and Lesotho, and are presently considering Namibia and Senegal as possible production venues.
The AGOA trade bill, which allows apparel manufactured in sub-Saharan Africa and Mauritius to enter the U.S. free of duties and quotas, has benefited much of the region. In the first seven months of this year, Africa supplied 1.56 percent of U.S. textile and apparel imports, up from 1.27 percent in the comparable period a year earlier, 1.1 percent in 2000 and 0.95 percent in 1999.
For the first nine months of the year, shipments from sub-Saharan Africa rose 17.4 percent, to $854.7 million, according to U.S. government data.
However, Mauritius’ 6.6 percent growth rate over that period, which brought its shipments to a second-ranked $196.1 million, lagged behind the mainland African countries. Lesotho’s shipments shot up 64.2 percent, to $250.7 million, putting it in the number one position. Kenya, a smaller exporter, saw its shipments pop up 88 percent, to $88.6 million, while Swaziland’s rose 70 percent, to $64.6 million.
Largely as a result of its civil turmoil, which left its main port closed for much of the year, Madagascar’s shipments fell 38.6 percent, to $79.3 million.
Shibani Knitting Co. is one of the few manufacturers in Mauritius with virtually no exposure to Madagascar. A relatively small company producing mid- to high-end knitwear, Shibani employs 2,000 workers, 10 percent of whom are imported from India and China.
“We comply with the labor laws,” declared managing director Sunil Hassamal. “We look after our foreign workers well. They are provided with accommodation, medical benefits, and a cook to prepare their meals, as their dietary requirements are often different from the local population. We also guarantee them a minimum salary plus a piece rate.”
Other factories have been mired in labor controversies with imported labor from China. World Knits, in particular, has been crippled by striking Chinese laborers — 200 in all — who are clamoring for better pay, improved living conditions, production bonus and an increase in piece rate. The workers claim they were promised $333 a month in pay, but actually receive $67. The remaining $267 goes directly to the employment agencies that sent the workers to Mauritius from China. (Salary figures converted from the Mauritian rupee at current exchange rates.)
The Mauritian government has not shown much sympathy for the plight of these workers. Labor and Industrial Relations Minister Showkutally Soodhun was quoted as saying that these Chinese workers were violating the terms of their employment contract, and that their protest actions were “unacceptable.” He said: “Those who wished to work could stay, while those who had no wish to work should return to China.”
He also said that it was the government’s intention to “gradually reduce the Chinese workforce by 50 percent over the next [few] years. We shall ensure that Mauritian workers are adequately trained in the EPZ sector so that they can replace the imported labor.”
Harmonious labor relations have apparently worked to Shibani’s benefit. In 2001, the company produced 1.5 million pieces of knitwear with a value of $20 million for such customers as Galeries Lafayette, Printemps, Le Bon Marché, Claudie Pierlot and Cachemire & Creme. Hassamal says this year he expects production of 2.2 million pieces, with a value of $23 million. Shibani’s knitwear is of fine quality, and Hassamal continues to source yarn principally from Europe. Hassamal is especially proud that his factory is among “two or three factories in the world producing the finest 16-gauge sweaters…. This is exceptionally fine and featherlight cashmere, weighing a mere 100 grams.”
Hassamal expects AGOA to assist in increasing his exposure to the American market. He said clients include such well-known personalities as Madeleine Albright, Michael Douglas, Catherine Zeta-Jones and Whitney Houston, who all stocked up on Shibani cashmere sweaters during visits to Mauritius.
But Mauritius’ industry still faces two major hurdles. In the words of Musa Rubin, a locally based textile and garment consultant, the island’s business is “facing a double whammy in 2004.” Part one comes in September of that year, when the provision of AGOA that allows nations to import fabric from other countries expires — that will be a problem to companies that currently import textiles from China or other sources outside Africa.
Part two comes on Dec. 31 of that year. When the clock ticks down to midnight that day, quotas on all textile and apparel products will be dropped among World Trade Organization nations. That will reduce the advantage provided by AGOA.
Rubin said Mauritian manufacturers will have no choice but to “find sources of African yarn and fabric to stay competitive.” The solution, he suggested, is “delocalization, but not necessarily in the way Mauritian manufacturers have looked at it in the past.” Instead of adopting a delocalization strategy in order to maximize garment production capacity, manufacturers should look at delocalization with a view to improving supply chains.
“In the past, individual manufacturers competed mainly on price,” he said. “The apparel market now consists of supply chains competing on four dimensions: price, quality, response time and product. A delocalization strategy that fails to take this into account will miss much of the potential benefit.”
The global market is indeed in a state of flux, said Maurice Vigier de la Tour, president of the American Chamber of Commerce in Mauritius. He said he believes the local textile and garment industry needs to go through “the necessary reengineering and readaptation in order to remain competitive on an international level.”
He said that AGOA has been beneficial to Mauritius.
“It has provided the industry with the impetus to diversify in order to meet the changing needs of the global market,” he said. “The industry has gained a lot of momentum in the last year, despite all the difficulties it has encountered. The textile and apparel industry is definitely here to stay.”