The demise of the cotton industry along with the rest of the South African textile industry as a result of cheap imports from the East has been well documented.

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In the late 1980s the country produced about 80 000 tons of cotton, but in 2013 it was only 5 200 tons.

The turnaround has however started and is gathering momentum, with a harvest of 17 000 tons this year, and 40 000 tons projected for next year. Local beneficiation has grown from 7% in 2013 to 42% currently.

The turnaround already benefits the whole supply chain from farmer – some small-scale and some commercial – to retailers like the Mr Price Group, Woolworths, Ackermans, and Edcon.

It is a direct result of the Department of Trade and Industry’s (dti) Clothing & Textiles Competitiveness Programme (CTCP) that was developed in response to the crisis that cost the industry 101 000 jobs between 2002 and 2010.

It started in 2013 when the dti approved a plan, submitted on behalf of Cotton SA, to fund an industry forum representing role players in the land based textile industry, says Heinrich Schultz, spokesperson of the Sustainable Cotton Cluster as this forum is now known.

The Sustainable Cotton Cluster is a multi-stakeholder initiative, and the first cluster in the SA textile industry that is operating nationally.

The aim of the Cluster is to create an enabling environment along the whole supply chain for the entire industry to grow.

To that end, the stakeholders include suppliers of agricultural inputs, small-scale as well as commercial farmers, agro-processors, textile and clothing manufacturers, retailers and consumers.

The manufacturing phase includes ginning and spinning to process the cotton fibre to yarn, then knitting and weaving to produce fabrics, then dying, printing and cut, make and trim to finish the product.

The success so far is the result of a number of interventions at different stages of the supply chain, says Schultz. In one such intervention, the Cluster researched and demonstrated cotton stripper harvester technology to farmers to improve dry-land cotton production yields. This enabled the revival of dry-land commercial cotton farming, which used to be the backbone of cotton production in the 1980s, but became all but non-existent due to the high cost of harvesting.

Other interventions include the innovation of business processes to ensure the industry continuously improves its competitiveness, the introduction of a cloud-based IT platform to ensure traceability of the product and the development of financing and insurance products.

Each intervention is contracted with clearly defined key performance indicators. The Industrial Development Corporation (IDC) manages the financing for these Cluster interventions on behalf of the dti.

One of the Cluster’s key successes is that it is able to obtain a legal commitment from the retailer to purchase the cotton fibre 12 to 18 months in advance. On the basis of these retailer commitments, the whole supply chain is contracted right back to the farmer, who has a buyer for his product before he has planted or completed his harvest.

This legal commitment unlocks new financing options, especially for small-scale farmers who do not own the land they cultivate, Schultz says.

It works as follows: The farmer plants his cotton around October/November. During this period or in the preceding months, the retailer issues his promissory note, which is his legal commitment to buy the end-product and confirms the quantity of cotton needed.

The cotton is harvested in April and the ginning process follows from May. Spinning takes place from June and July typically follows with the knitting and weaving processes. By August and September, the final product is manufactured and in October it should be in the retailer’s distribution centre.

The full cycle takes 12 to 18 months, which means the Cluster is able to integrate retailers’ 18-month trend forecasting into the supply chain. The Cluster develops the integrated supply chain plan for the retailer and ensures costing at every stage in order to ensure a competitive price point.

The Cluster has so far concluded 11 such integrated supply chain programmes and has contracts with the Mr Price Group, Ackermans, Woolworths and Edcon.

Each programme is ring-fenced to ensure the retailer’s confidentiality.

The product range includes underwear, sleepwear, general knitwear; including T-shirts, toweling and jeans and chinos.

In fact, if all the cotton currently in the supply chain is expressed in T-shirts, the industry is now producing R2.4 billion worth of T-shirts per annum and the target by 2018 is to produce R4.2 billion per annum.

Schultz says the market potential in South Africa is 300 000 tons of cotton, compared to the 17 000-ton harvest this year. Cotton supply chains can later be expanded into the region, he says.

He says cotton is a known cash crop for small-scale farmers. It is drought resistant and serves as a valuable nitrogen-fixer in crop rotation. In fact, in commercial production the maize and wheat yield increase by about 10% if it is preceeded by planting cotton, he says.

It is therefore one of the Cluster’s objectives to stimulate cotton production among small-scale farmers.

The early legal commitment of retailers has unlocked off-balance sheet financing for farmers and other stakeholders in the supply chain.

Schultz says while traditional financial institutions initially gave “the glazed doughnut look” when we asked for off-balance sheet financing, the Gro-Capital division of Afgri made a revolving facility available that currently stands at R25 million, but will total R75 million over five years.

The Cluster facilitates the financing agreements and has also developed insurance products with underwriters such as Swiss RE and Guard Risk to mitigate the finance risk.

The Cluster has also facilitated the financing of the investment in new capacity at one of the gins to accommodate the growing harvest.

The four spinning plants (down from 22 in 2000) are currently operating at almost full capacity and represents the biggest industry bottleneck, Schultz says. The Cluster is currently investigating options to address the expansion of spinning capacity.

“If only 50% of the T-shirt, towelling, chino and underwear market is localised, there will be an interim capacity gap, but with the potential to create 75 000 jobs,” he says.

The current five-year agreement with the dti Cluster funding continues until March 2019, but indications are that it could be extended for a further five years.