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December 14th, 2011 WW Staff | NikeLeaks Cables: Africa and Middle East
 

Senegal: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS AND PROJECTION OF FUTURE COMPETITIVENESS

     
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Reference ID: 06DAKAR2571
Created: 2006-10-23 11:33
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Embassy Dakar

VZCZCXRO7217
PP RUEHMA RUEHPA
DE RUEHDK #2571/01 2961133
ZNR UUUUU ZZH
P 231133Z OCT 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6695
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0095
RUEHLM/AMEMBASSY COLOMBO PRIORITY 0028
RUEHRB/AMEMBASSY RABAT PRIORITY 0791
RUEHOT/AMEMBASSY OTTAWA PRIORITY 0117
RUEHON/AMCONSUL TORONTO PRIORITY 0007
RUEHLMC/MCC WASHDC PRIORITY

    UNCLAS SECTION 01 OF 04 DAKAR 002571

SIPDIS

SIPDIS
SENSITIVE

STATE FOR EB/TPP/ABT - THOMAS LERSTEN, AF/EPS AND AF/W
STATE PLEASE PASS TO USTR - EYLIGER
STATE ALSO PLS PASS TO EXIMBANK
USDOC FOR ITA/OTEXA MARIA D'ANDREA

E.O. 12958: N/A
TAGS: ETRD, ECON, KTEX, EINV, AGOA, SG
SUBJECT: SENEGAL: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS
AND PROJECTION OF FUTURE COMPETITIVENESS

REF: A. STATE 138090

B. DAKAR 01970
C. STATE 131825

DAKAR 00002571 001.2 OF 004


Sensitive but unclassified; contains proprietary information from a
non-U.S., but Mission-valuable company which is not public.

SUMMARY AND OVERVIEW
--------------------
1. (U) In response to Ref A request, post provides the following
information on Senegal's textile and apparel industry. This expands
upon information provided in Ref B.

2. (SBU) Senegal's textile industry produces limited volumes of
domestic cloth and finished apparel. Despite being highlighted by
senior GOS officials as a strategic sector for the country's
Accelerated Growth Strategy, Senegal's apparel and textile producers
are inefficient and potential growth is hampered by a range of
obstacles: obsolete equipment, poor management, overstaffing,
erratic and expensive electricity supply, limited and expensive
credit, uncertain commercial real-estate laws and rigid labor laws.
The GOS views the sector as a vital component of its accelerated
growth policy. Senegal's Agency for Investment and Export Promotion
(APIX) is pursuing incentives and strategies to attract foreign
direct investment in the sector and to organize the apparel
sub-sector. AGOA preferences remain key to current and future
textile/apparel exports from Senegal. A recent, significant
Canadian investment in a Senegalese firm is designed to take
advantage of AGOA access to the U.S. market. Senegal's
textile/apparel sector would likely be uncompetitive for the
foreseeable future should AGOA's third-country fabric provisions end
in 2007.

3. (U) Many of Senegal textile and apparel factories are in
financial difficulty and in need of investment for new equipment.
In recent months, five factories have suspended their operations, at
least temporarily, while they search for additional financing. A
few, more competitive operators are in the process of expanding
their productions lines. Work uniforms, medical "scrubs," t-shirts,
sportswear and towels are the most prominent products for Senegal's
industrial apparel and textile sector. Almost all fabrics for mass
production are imported from Asia. The majority of higher end wax
cotton fabric is imported from Europe and Cote d'Ivoire. Much of
this fabric is transformed locally with dye and print in traditional
African designs for sale in domestic and regional markets. END
SUMMARY AND OVERVIEW.

NEW INVESTMENT TARGETING AGOA
-----------------------------
4. (U) Dakar-based INDOSEN, a Senegalese-Indian-Moroccan joint
venture (40 percent owned by Nouvelle Societe Textile du Senegal -
NSTS), has long been one of Senegal's largest apparel manufacturers.
The company's main factory is located in Louga, approximately 100
miles north of Dakar. The company spins, weaves, knits, dyes,
finishes, prints and manufactures work wear. Its equipment includes
18,000 spindles, 160 rapier looms, 12 circular and 2 flat knitting
machines, 190 sewing machines, 140 specialized sewing machines
(non-digital) and 120 cut sewing machines. INDOSEN's current
production capacity is 5 million pieces per year.

5. (SBU) On September 28, Stafford Textiles, Ltd, a Toronto-based
company, announced its formal partnership with INDOSEN, with the
goal of exporting apparel to the U.S. under AGOA, and also to
Canada. According to the company's owner, Mick Stafford, his firm
is the "front end" partner who will provide fabric, mostly
poly-cotton blends, to INDOSEN, secure large volume buyers in Canada
and the U.S. (including Cabela's, Dick's, NIKE, Billabong, etc,) and
provide technical assistance in the beginning of the production.
Providing technical expertise is not a usual practice of Stafford,
but the company's Director of Operations plans on spending 4-5
months helping update the Louga factory. In addition, three
technicians from a Stafford factory in Sri Lanka will be permanently
relocated to Louga to control quality.
6. (SBU) INDOSEN is the "back end" partner who will use Stafford
fabric to produce a weekly volume of 10,000 units of medicals
"scrubs," 5,000 polo shirts, 20,000 factory work shirts, and 15,000
pairs of work pants. The first container of fabric is expected to
arrive in Dakar by the end of October. In outlining his company's

DAKAR 00002571 002.2 OF 004


plans, Stafford expressed his confidence in INDOSEN's production
capacity and technical competency. Stafford has invested USD 3
million to increase INDOSEN's production capacity by providing 200
new sewing machines from the U.S. as well as CAM/CAD design
equipment. Stafford foresees transferring more textile
manufacturing equipment in the future including a "vat-dye" line to
manufacture the highly specialized poly-cotton fabric.
7. (SBU) With this added investment, INDOSEN plans to employ 448
sewers in 2007, 805 in 2008 and 963 in 2009. Estimated sales
projections for the next three next years are USD 8 million in 2007,
USD 15 million in 2008 and USD 20 million in 2009. (COMMENT: While
INDOSEN represents the "high-end" of Senegal's apparel/textile
production, it has a mixed record of meeting its supply deadlines,
and is currently in default on an ExImBank-guaranteed loan estimated
at USD 3 million. END COMMENT.)
IMPORTANCE OF THIRD-COUNTRY FABRIC PROVISION
--------------------------------------------
8. (SBU) Senegalese textile and apparel producers and investors
remained deeply concerned about the negative impacts that would
result if AGOA's third-country fabric provision isn't extended.
Stafford's leadership stated that its partnership with INDOSEN would
collapse, and its new investment in Senegal likely fail if they are
unable to import specialized Asian fabrics while maintaining AGOA
preferences. According to Stafford, "the most dangerous and
frightening" part of the venture is the possible loss of the third
country provision. In Stafford's case, it takes the Chinese factory
18 months to produce this special fabric - a poly-cotton blend that
can be industrially washed 50 times per year with steel balls in a 2
percent chlorine bath without changing color. Stafford's projected
garment sales from INDOSEN are based on utilizing this particular
fabric.

9. (SBU) INDOSEN, and probably all Senegalese apparel
manufacturers, rely on the duty differential from AGOA preferences
to remain even marginally competitive with Asian producers.
According to Stafford, not only does Senegal, and most of Africa,
remain weak on productivity, but Asian governments' subsidies for
their domestic industries (he claims at 15 percent), make African
producers uncompetitive on price. Citing textile industry lobbyists
in the U.S., Stafford expects congressional action on the third
country fabric provision by April 2007.

10. (SBU) On the positive side for Senegal, Dakar is only 10 days
from NY via maritime transit and only 8 hours from NY via direct,
non-stop commercial flights. Maritime transit from Asia to NY is
30 days and flights can take 20 hours. (NOTE: In early December,
Delta Airlines is planning to begin new daily non-stop return
service between Atlanta and Dakar, with continuing service to
Johannesburg. END NOTE.) Acknowledging that Senegal needs to
become a fabric producer, Stafford said that in the future his
company hopes to import specialized fabric weaving machines from
China to enhance INDOSEN's production, but would need additional
financial support to do so.
TRENDS IN 2006
--------------
11. (SBU) Many local producers have lowered their price due to
heightened international competition, and, in general, manufacturers
have received fewer orders than in years past. There have been
lay-offs in the sector and some smaller factories have closed in the
past year. (COMMENT: 1996-1998 was a high-point for textile-related
employment in Senegal with more than 7,000 workers in the sector.
END COMMENT.) Export prospects for local manufacturers are not
affected by U.S. and E.U restrictions on certain exports of textiles
and apparel from China. Senegal is not implementing any measure to
reduce growth of imports of Chinese textile and apparel products.
Increased global competition has not affected local labor conditions
which remain rigid and constraining. Though Senegalese companies
continue to make efforts to modernize in order to enter the U.S.
market under AGOA, Senegal has yet to create a significant new
export textile/apparel market via the U.S. High production costs
and rigid labor laws will continue to hinder Senegalese
competitiveness for the coming year and likely much longer.

OTHER SIGNIFICANT PRODUCERS
---------------------------
12. (U) Senegal's other important textile and apparel producers
include:


DAKAR 00002571 003.2 OF 004


-- "La Nouvelle Societe Textile Senegalaise" (NSTS/FTT): Partial
owner of INDOSEN. It produces large-gauge thread and unbleached
fabric; has 148 Sulzer looms (110 to 130 inch), 12,000 spindles and
648 open-end spinning RU 14 rotors.

-- EGA CONFECTION: a manufacturer of uniforms, "scrubs" and men's
wear. It has modern, digital equipment with a production capacity
of 1,200 pieces per day. The company imports fabric from Morocco
and Asia, and has 22 full-time and 89 part-time employees.

-- ETS SOLU: manufactures sportswear using 75 non-digital machines
and one electric embroidery machine. Its monthly production
capacity is 30,000 pieces, and its fabric originates in Asia. The
company has 48 full-time and 15 part-time employees.

-- Nouvelle Sotiba: a printing company that uses non-digital,
printing and dying equipment to produce a monthly output of
approximately one million meters of "fancy cloth," which is mostly
sold in the local market. It imports cotton from India and has 300
full-time employees.

-- COSETEX: a printing and dying company with two lines of
non-digital machinery. The company produces one million meters of
"fancy cloth" per month. It imports cloth from India, Benin,
Nigeria, and Mali for domestic sales and for exports to West Africa,
Europe, and the U.S (in 2001 and 2002). The company employs 80.

-- "Societe de Developpement des Fibres Textiles" (SODEFITEX): a
ginning/cotton fiber company with ISO 9001 certification. The
company has five factories in eastern Senegal, and produces annually
a total of 56,000 tons of cotton fiber. It sells in Senegal and
exports to Asia, South America and Europe. It sources raw cotton
mostly from Senegal and employs 460 full-time and 4,000 part-time
persons.

-- "Cotonnier du Cap Vert" (CCV): Merged with the former SOSEFIL.
Activities including ginning, spinning, weaving, knitting, dying,
and manufacturing to produce approximately 1,200 tons total of
thread, dishtowels, and t-shirts per year; equipment includes 28
non-digital sewing machines; 5 knitting machines; and 3 cotton
spinning machines. It sources cotton in Senegal, uses its own cloth
for t-shirts and dishtowels, sells in Senegal, exports to the
sub-region, and has 250-300 staff.

TRADE DATA
----------
13. (U) Senegal's Department of External Trade and the National
Agency of Statistics at the Ministry of Finance provided the
following data:

-- 2005 Total textile and apparel imports: USD 60 million, a 7
percent increase from 2004 (USD 56 million);

-- 2006 Total (mid-year) imports of textile:
USD 22 million, a 3 percent decrease from the 2005 midyear figures
of USD 32 million;

-- 2005 Total textile exports: USD 29 million;

-- 2006 Total mid-year textile exports: USD 1.5 million, a slight
decrease of 0.6 percent from the midyear 2005;

-- 2005 Total textile imports from the U.S.: USD 13 million,
compared to USD 7.5 million in 2004, an increase of 7 percent;

-- 2005 Total textile exports to the U.S.: USD 3 million, compared
to USD 2.2 million in 2004, an increase of 3 percent (midyear 2006
figures are not available);

-- 2006 number of companies in textile industry: 24;

-- 2006 approximate number of employees in textile industry: 2,000;

-- 2006 estimated number of tailors and artisans in the clothing
sector: 100,000.

COMMENT
-------

DAKAR 00002571 004.2 OF 004


14. (SBU) It is widely recognized, by industry insiders, investors
and GOS officials that Senegal needs to move quickly towards
producing its own fabric. Senegalese trade and investment officials
routinely present a vision of a vertically-integrated supply chain
that includes Senegal's cotton fields, enhanced ginning capacity,
fabric production, and transformation. To date, there has been
little actual movement in policy or improved business climate to
encourage a private-sector-driven realization of this vision.

15. (SBU) We are hopeful that the confluence of Stafford's timely
partnership with INDOSEN, and enhanced transport linkages to the
U.S. as a result of the Delta Airlines' new route, will create a new
momentum for Senegal's potential as a textile and apparel exporter.
However, we are still waiting for the convening of the first meeting
Senegal's AGOA Steering Committee, announced by the Minister of
Commerce in August. END COMMENT.

JACOBS

 
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