Cosmetics Industry Has Job Creation, Export Potential

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More opportunities in the cosmetics sector need to be identified to help support local manufacturing companies, according to the Department of Trade and Industry (dti).

The dti’s Chief Director for Chemicals, Cosmetics, Plastics and Pharmaceuticals Claudy Steyn said the use of natural ingredients for pharmaceuticals and in the cosmetics industry in the country has been identified as a promising sector with job creation opportunities and export potential.

She was speaking at the National Natural Ingredients Conference hosted by the dti on Tuesday.

“The cosmetics industry is a fast changing, cut-throat and harsh business environment which is highly competitive and has substantial endogenous barriers to entry. The industry intrinsically favours larger firms that add value through the development of scientifically validated products, above small and medium firms and new market entrants.

“While this is true of all monopolistically competitive industries, it is especially true in the cosmetics industry due to the importance of reputation and aspiration,” explained Steyn.

She said the South African government and the dti were strongly committed to supporting new market entrants. This includes Small Medium and Micro Enterprises (SMMEs), new black entrepreneurs and local businesses within the context of the goals set out by the National Development Plan (NDP), the National Industrial Policy Framework (NIPF) and Industrial Policy Action Plan (IPAP).

“The cosmetics industry is a particularly hostile and harsh environment for such entrants. This is not a South African phenomenon, but a global phenomenon based on the commercial reality of the cosmetics and personal care market structure and dynamics.

“Opportunities do exist for smaller players, but understanding market and firm dynamics is crucial to understanding where and how such players can operate profitably,” said Steyn.

She said the main driver of cosmetic use was the desire to use natural products that have positive biological effects – this represented a market opportunity for the natural ingredients sector.

“These emerging markets are of strategic importance to the country’s lead manufacturers and the future of the industry, to build the capacity of small and medium-sized enterprises in the sector and to increase exports of locally value-added natural ingredients,” she explained.

The department has developed a cosmetic sector strategy which is aimed at alleviating constraints experienced by local cosmetics manufacturing companies.

“The aim of this intervention is to facilitate safety testing of cosmetic products produced in South Africa, so that products will get tested and certified locally by toxicologists,” said Steyn, adding that products that are tested will be more acceptable in export markets.

At the same time, local certification will greatly reduce the exorbitant costs that companies currently pay to have their products tested overseas.

 

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