Jeopardising Second-Hand Clothing Sector in Mozambique Could Have Repercussions on Those Living in Poverty

POLICY RECOMMENDATIONS FOR THE SHC SECTOR: The recommendations below capture the perception of current and future challenges. The recommendations are in two sections: for European policymakers, and for African politicians and development economists.

1. For Europe: Sustainability is not mutually exclusive with the needs of others.

i. The EU ought to maintain a distinction between second-hand clothing (“Used Textile and Apparel”) under category 6309 and category 6310 (“Used or new rags, scrap twine, cordage, rope and cables, and worn-out articles of twine, cordage, rope or cables, of textile materials”).

• This may have to include both creation a new category for “waste” (which currently does not exist on a standalone basis) and harmonisation of national definitions.
• On the latter, for example, in Germany, any apparel earmarked for disposal is deemed waste, which complicates downstream legislation relating to SHC exports.
• With respect to concerns that material under Category 6310 is still being exported and ending up in landfills, tighter screening and export controls ought to be implemented as the more sustainable solution.

 ii. The EU may be designing policy based on contentious research. Their current guiding advise which quotes from papers by Köhler et al., (2021) and Fashion for Good, (2022) suggests that 40% of EU SHC exports to Africa end up in landfills. This has been barely substantiated and disputed by recent research from Kenya, Ghana, and this report on Mozambique.

• The report proposes robust and comprehensive studies for the EU to be fully acquainted on the SHC value chain in recipient low-income countries. The experience of African countries with SHC also varies; it is not a one-size fits all. EU policy deliberations should tread carefully and mind the information gap.

iii. SHC export bans are unlikely to work. At best, they help the Europe’s collective conscience on sustainability. However, it is extremely unlikely that other major jurisdictions will follow suit. More likely is that China will capture the ensuing market share.

• The US’ response to EAC’s plans to ban SHC also sets the tone: there is no intention to ban SHC exports and the normal rules of trade should apply. Beyond that, SHC bans will likely create a supply void, which will most likely be filled by new, cheap low quality and non-durable fashion. This will be counter-productive to the global sustainability initiatives.
• Finally, data suggest that import bans merely push supply into other jurisdictions; a zero sum game of sorts. For example, in 2016, Rwanda’s near total ban on SHC resulted in a 23% surge in Kenya’s SHC imports.
• The lack of harmony in global policymaking creates arbitrage opportunities, including for SHC dealers.

iv. SHC sector needs to be approached with care and diligence. The sector may be insignificant from a European perspective, but critical to sustenance of communities living in poverty. It is a source of clothing and income, transforming future fortunes. Banning SHC would be extremely damaging to communities.

• The discourse on sustainability and waste management ought to be counterbalanced with the impact on societies directly dependent on SHC.
• Efforts to increase accountability of the clothing industry should be coupled with enhancing waste management practices in importing countries. It is a collective responsibility.

b. For Africa’s governments and policymakers. Aspirations should be anchored in pragmatism. The desire to move the continent up global manufacturing value chains is indeed important, including on clothing. However, policymakers should equally appreciate the millions of people dependent on SHC. 

i. To boost the local textile industry, consider strategic cross-country collaborations. This will improve prospects of capital mobilisation. Since countries cannot produce everything for themselves, such strategic cooperation allows for focus into areas where countries and the continent can gain edge as they push for higher economic development. 

• This may include defining strategic initiatives at the ACFTA level. 

ii. Competitiveness is key. In the long run, competitiveness is the key driver of long-term success of an industry. For apparel, Africa will be up against established and competent low-cost producers such as India, Bangladesh and China. It will benefit from cheap stock of labour and local cotton production, but will also need strong investment in capital stock, at competitive levels, to succeed. 

• Therefore, in defining the long-term development strategy, it is important to also evaluate the opportunity cost of picking one value chain over another.

iii. The impact of China on the domestic textile industry is arguably more challenging than SHC. China’s penetration into African apparel markets is underappreciated. 

• Consequently, it is also the most under-estimated hurdles to Africa’s textile renaissance. It is now the largest apparel exporter into the continent; 18% of its nearly $270bn in global apparel exports lands on African shores. 
• The gain in China’s market share has been equally phenomenal. For example, export growth into the EAC exceeded 300% between 2012 and 2016, far ahead of the 200% growth of global clothing imports into the region over the same period. Given China’s manufacturing prowess, it is most likely that these gains were both in SHC and new, cheap low-quality clothing. 
• Currently, most African countries do not seem to be adequately capturing clothing trade with China. For example, as of 2015, China’s records of clothing exports into EAC were at least 10-fold higher than imports reported by the EAC56. Consequently, there is significant under estimation of how much market share China controls and would capture if SHC trade between EU and Africa were to be significantly restricted or banned. 
• This should be a critical consideration for both European and African policymakers. 

iv. There is an opportunity to formalise SHC markets, increase tax revenues and use them for development initiatives. This would be through remodelling markets and enhancing market organisation by creating actual sales stalls with vendors paying due rents and taxes to local governments. 

• The government of Mozambique is already trialling this initiative, but under the broader auspices of ‘formalising informal traders’. This would probably be optically challenging, but still view it as a pragmatic way of improving the structure and revenue collection from a sector that continues to grow within the broader economy.

v. SHC market is also a source of upskilling the labour force. There are several trades skills within the SHC value chain, including trading, transportation, sorting and marketing. These skills can be transferred to the formal job market, where the need and opportunity for such skills exist.

ABOUT: The report, commissioned by ADPP Mozambique, has been publsihed by Consulting For Africa (CFA) and Abalon Capital Limitada, 

• CFA Services was established in 2007 specialising in monetization and Food Aid programmes: working with the US Government propelled food aid commodities in very challenging and developing market locations around the world, particularly Africa. CFA has led post-monetisation market impact studies, evaluating the impact of food commodity sales on local food production, impact on price development, assessment of trade displacement, impact on availability and overall utilisation of local logistic capacity. 
• Abalon Capital LDA is a professional services organisation that provides advisory services in market assessments, agricultural development, business structuring and SME business design and financial advisory. Its focus areas include value chain analysis and development, capacity building, rural development, operational excellence, business analysis and re-modelling, and developing strategic investment plans. Its clients include corporates (including SMEs), governments, development banks, foundations, local investors, communities and broader civil society. 
• ADPP Mozambique is a Mozambican non-governmental organisation working in the areas of quality education, health and well-being, sustainable agriculture and the environment. Created in 1982, the organisation has grown steadily, expanding its interventions throughout the country with the implementation of various projects. It currently employs around 3,300 people and implements more than 60 projects in all the country's provinces, benefiting around 8.2 million Mozambicans every year.