South Africa's neighbors eye clothing firms

Exodus feared as textile companies scout Swaziland

South African-based textile firms had begun approaching Swaziland with the intention of relocating to that country, Phiwayinkhosi Ginindza, the general manager of the Swaziland Investment Promotion Authority, said yesterday.

However, Ginindza could not confirm if these companies were the Chinese-owned firms based in Newcastle, KwaZulu-Natal that, earlier this year, threatened to leave the country if they were forced to comply with the minimum wage of R324 a week.

Ginindza said the reasons cited by some of the companies was that they wanted to tap into Swaziland’s preferential market access to the US under the African Growth and Opportunity Act, as well as seeing a strategic expansion of their operations from South Africa.

“I would not be too sure if it’s the same companies, but we too have laws and regulations, companies can’t avoid paying minimum wages through us,” he said.

Ginindza conceded that regionally, Swaziland’s labour rates were slightly lower than South Africa’s though they were higher than Lesotho’s. He said the kingdom had not been approached by any formal textile organisation, but by individual companies.

The factories in Newcastle employ about 8 000 people. Seven months ago, the clothing manufacturing bargaining council began closing down factories that were not complying with the minimum wage in the Free State and KwaZulu-Natal.

The minimum wage is expected to increase to R336 a week by the end of this month before rising to R465 by the end of the year and then topping R516 by April next year.

The Newcastle Chinese Chamber of Commerce had said this would be unsustainable for members and instead proposed that entry-level wages be lowered.

Despite reports earlier this week saying Lesotho was also talking to these companies, yesterday Lesa Makhoalibe, the public relations manager for the Lesotho National Development Corporation, said it had not been approached by any South African-based company, nor was the corporation pursuing any firms.

“There is no cheap labour in Lesotho. Wages in Lesotho are regarded as cost-competitive and cannot be compared with wages in South Africa, which is much more economically strong than Lesotho,” he said.

Alex Liu, the chairman of the Newcastle Chinese Chamber of Commerce, said the chamber was committed to the country and it was still trying to resolve its differences with the bargaining council. “As the chamber, we are encouraging our members to stay, but we cannot dictate or intervene in their businesses,” said Liu.

Renato Palmi, a researcher in the clothing and textile industry, said that although firms were talking to Swaziland, he did not believe that they would suddenly leave South Africa.

Palmi said: “How much homework these companies have done is questionable. You are not only talking about moving machinery, these are people’s lives. These are people whose livelihoods are entrenched in South Africa. And are your clients going to follow you to Swaziland?”

Palmi said South Africa used to be an attractive investment destination for clothing companies because its labour regime was relaxed.

“All the other issues (such as tax breaks, import duties) are important, but not like labour because it is a labour-intensive industry and it is about productivity, how quickly you can get your garments through.

“I do think that union imposition in Swaziland would not be as stringent as it would be in South Africa."

Reference:

Business Report

March 17 2011
By Slindile Khanyile and Banele Ginindza