Ripples of concern spread over Africa after the US punished Rwanda for banning import of used clothing from Washington.
The US announced a 60-day suspension of Rwanda’s AGOA duty-free privileges on clothing and footwear.
The Rwandan government is of the view that a prohibition of second-hand clothes is crucial for its economy. The argument is simple — that a ban on all imports of second-hand clothing is necessary to strengthen the textile industry.
With textile and apparel a key component of its industrialisation strategy, the move seeks to tap into domestic demand for clothing.
The view here is that the ban is a bad idea. Not so much because of the ire it will draw from the US but because it’s bad economics.
First, used clothing allows Africans to buy a wide range of clothes and shoes affordably. At the moment, the price point at which local manufacturers sell their clothes and shoes are too high, particularly for low-income Africans who have very limited funds.
With a poverty rate of 35.6 per cent, the reality is that many Kenyans have to pinch their pockets to clothe themselves.
The used clothing market allows millions of Kenyans to buy clothes for as little as Sh30. These price points do not exist in the clothing produced by the domestic textile industry.
Thus, in banning used clothing, government would essentially be imposing a fine on the poor, forcing them to put even more of their limited income to basic items such as clothing.
Second, local clothes and shoes manufacturers do not have the capacity to meet the demand for clothing and shoes in the domestic market. Thus, a ban presents the very real risk of excess demand pushing the price of new clothing even higher.
Third, a ban on used clothing in a context where used clothes are the most cost-effective and preferred way of clothing will create a black market.
This shadow market will operate outside legal parameters and will penalise consumers in terms of price point because the risk of peddling contraband will have to be priced into the clothing on sale.
Thus, there is the risk that a ban will create a shadow market from which many will be forced to buy their clothing, because it will likely still be the cheaper option. But at a price point higher than when the sale of used clothing was legal. Thus again, the poor will be unnecessarily fined due to government policy.
What would make sense is to start a gradual ban on new clothing imports and encourage local manufacturers to make clothes for domestic new clothing market segment first.
This should be coupled with government support to local manufacturers so that the companies can make a wide variety of clothing and shoes available at reasonable prices.
A ban on used clothing would only make sense when local manufactures are able to produce clothing and shoes at a price point similar to that in the used clothing market.