Closures loom as factories battle to meet compliance deadlines
Thousands of workers in the clothing industry face losing their jobs in the coming months, thanks to the deadlock over minimum wages.
This after the industry's bargaining council gave non-compliant manufacturers until the end of March to pay outstanding levies and fees and 70% of minimum wages.
But none of the 259 members of the United Clothing and Textiles Association (UCTA) - who employ about 28000 workers - will be able to meet Thursday's deadline, said its chairman, Ahmed Paruk.
About 450 factories are affected, representing nearly half the industry. They are expected to shut down completely, moving to neighbouring countries such as Lesotho and Swaziland. They could also move deeper into the informal sector, where thousands of people, mainly formerly employed workers in the formal sector, are estimated to work from homes and garages.
"This is a very sad situation. We're facing an unmitigated disaster in the clothing industry," said Renato Palmi, director of textile industry research agency The ReDress Consultancy.
"Hundreds of factories will be closed and thousands upon thousands of people's livelihoods will be disrupted."
While moving operations out of the country is an option for UCTA factories, Paruk said his members "will fight here. We want to stay here and we want to keep our assets in the country.
"We want to comply, but the union (Sactwu, the SA clothing and Textile Workers' Union ) and the bargaining council also need to come to the party (with realistic demands). We need to find common ground once and for all."
Despite meeting with the UCTA this week, Sactwu and the bargaining council have refused to budge on minimum wages or a restructuring of the wage model, including lower entry-level wages.
The Apparel Manufacturers of SA (Amsa), which forms part of the council and represents compliant factories, has also pushed for a new wage model, saying present wages are 30% too high.
Sactwu described the phase-in policy, which would require factories to be fully compliant by February next year, as an "important signal that we wish to work together with employers who show goodwill to obey the law".
While non-compliant factories are not eligible for any government support, the governments of Lesotho and Swaziland have been wooing local employers to move their factories across the border with offers that include rent-free premises, significantly lower wages and less union interference.
Many factories have already moved out of the country to Botswana and Mozambique.
Sactwu itself owns a significant indirect stake in Seardel, one of the largest remaining clothing manufacturers, which owns NyeNye Clothing in Lesotho. The UCTA estimates that about 40% of SA's clothing comes from Lesotho and Swaziland.
However, while wages may be significantly lower and more sustainable, there are other challenges, mainly regarding logistics and other infrastructure, said one clothing industry veteran who operates factories in SA and Lesotho.
"The first thing you need to do is find a factory, and that's not easy. You also can't really get customers to come and visit you in Lesotho, as travelling there is time-consuming and not always an easy, convenient trip," said the source.
As Lesotho is rated as a least developed country, it enjoys favourable market access to the US in particular, which can be a lucrative export market.
Swaziland is a more attractive option in terms of location, "but if you fancy exporting to the US, your location might be frowned upon. They don't see the Swazi royal family as the nicest people on earth," the source said. "It's probably the best location if you want to serve the South African market."
He has also investigated setting up factories in Botswana, where productivity can be problematic, and Mozambique, where a shortage of available buildings and the language barrier prevented investment.
However, the biggest threat to local factories comes from Mauritius, the industry source said. "We've seen a big move in local orders going to Mauritius. A lot of their garments are probably outsourced to Madagascar, where wage rates are minimal, but local buyers won't even know that it's not from Mauritius," he said.
"You can set up a compliant factory in SA, but you have to be very streamlined and you must know that you're not going to get rich. If you serve customers like Woolworths, Truworths and Foschini you can keep head above water. But there are other levies and provident fund requirements that place an extra burden on struggling businesses," the source said.
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