Value chain dynamics, local embeddedness, and upgrading in the clothing sectors of Lesotho and Swaziland

Abstract

This paper assesses the implications for upgrading of integration into two distinct clothing value chains in Lesotho and Swaziland − the value chain characterised by Taiwanese investment and feeding into the US market under the African Growth and Opportunity Act (AGOA) and the value chain characterised by South African investment and feeding into the South African market. These value chains differ with regard to ownership patterns, end markets, governance structures, retailers' demands, and investors' motivations. These different characteristics have crucial impacts on upgrading possibilities, including functional, process and 'local' upgrading. Thus, from the perspective of upgrading and sustainability, ownership patterns, local embeddedness and market diversification matter. The emergence of South Africa as an alternative end market and the different value chain dynamics operating in the South African retailer-governed value chain opens up new opportunities from those of the AGOA/Taiwanese-dominated value chain.

Global value chains in a post-Washington Consensus world

“…In sub-Saharan Africa, for instance, the recent entry of South African clothing manufacturers in neighboring countries such as Lesotho and Swaziland has led to the rise of regional value chains driven by South African retailers. Compared to the US buyer-driven chain, these regional chains focus on shorter production runs and quick response with higher fashion content, and are based on direct relationships to large South African clothing retailers (Morris et al, 2011). Similarly, South African supermarkets are expanding via regional supply chains and spearheading the rise of supermarkets across sub-Saharan Africa (Weatherspoon and Reardon, 2003).…”

Local Embeddedness and Economic and Social Upgrading in Madagascar's Export Apparel Industry

“…However, there are important exceptions; in particular, LICs have often been integrated into apparel value chains through FDI and triangular manufacturing networks (Gereffi 1999;Morris et al 2011;Pickles/Woods 1989;Staritz 2011).…”

“…These firm variations refer to differences with regard to ownership, end markets and export products. Ownership dynamics manifest themselves in significant disparities in levels of local embeddedness, with important implications for economic and social upgrading, as well as the sustainability of apparel-exporting operations (Morris et al 2011;Staritz/Frederick 2012;Staritz/Morris 2012).…”

“…This is different from Kenya, Lesotho and Swaziland, which have overwhelmingly exported to the US under AGOA. However, while Kenya remains concentrated solely on the US market, since 2006 Lesotho and Swaziland have increasingly diversified exports to South Africa (Morris et al 2011). …”

“…Asian transnational producers, European (mainly French) residents and regional (Mauritian) and indigenous Malagasy investors have played an important role in the Madagascan apparel industry since the 1990s. In Lesotho and Swaziland, alongside Asian (largely Taiwanese) transnational investors, regional investors from South Africa re-emerged in the late 2000s, although there are still no local indigenous investors (Morris et al 2011). In Kenya, there are no regional investors in the export-oriented EPZ industry, and only one local investor, although there are some more embedded Indian resident investors, besides largely Asian transnational producers (Staritz/Frederick 2012).…”