United Clothing and Textile Association on TV

South Africa

United Clothing and Textile Association’s (UCTA), Chairperson, Mr. Paruk was interviewed on ETV today in regard to the critical situation South Africa’s clothing sector faces this week.

Renato Palmi, of The ReDress Consultancy was also interviewed about the impact on the industry if Sactwu/ bargaining council follow through with the mandate of shutting down factories who are not compliant at the end of March 2011.

Newcastle signal

 I grew up in a not small but rather unremarkable town in northern KwaZulu Natal called Newcastle. Over the past year it has become the focus of a series of critical developments for the SA labour market. After repeated attempts to get Newcastle-based clothing manufacturers to meet minimum wage requirements, the sheriff of the court moved in to close the factories down last August. Surprisingly this was met by angry workers who stoned the officials’ vehicles and ran them off the properties. Many of these workers agreed they were paid a low wage but said there was no alternative: if they lost their jobs they and their children would starve.

Historically, unions have been instrumental in boosting the wages of exploited workers. This has provided a significant net benefit to society as workers’ living standards and spending power was raised — provided the industry was profitable and competitive.

Unfortunately, the bulk of SA clothing manufacturers are neither. The hollowing out of the industry over the past 10 years proves this. As a retailer recently noted, the SA weaving industry no longer exists. Antiquated production methods coupled with poor productivity growth and a strong rand has led to the shutdown of 50%-70% of SA clothing production. Therefore, the Newcastle clothing manufacturers’ claims that their factories will not be profitable at higher wage rates are entirely plausible. And their threat to close down their factories and move them to neighbouring countries should be taken seriously.

In light of this it is alarming to see the SA Clothing & Textile Workers Union (Sactwu) insist that wages rise from April 1. It looks set to create another 14000-28000 unemployed workers rather than have them be lowly paid “exploited” workers. This outcome should not be surprising. If Sactwu did not act it could see wage rates in the rest of the industry erode . Similarly, its aversion to a wage subsidy for first-time job seekers stems from a concern that existing workers will be displaced by subsidised workers.

These positions reveal two things. First, the deep distrust between unions and management in SA. The 2010/2011 Global Competitiveness Report ranks SA 132nd out of 139 countries for labour-employer relations. This explains unions’ assumption that management always seeks to minimise the size of the workforce and disadvantage workers. This led to the excessive wage demands of 2009 that greatly accelerated job losses. In addition, performance related wages are viewed with scepticism (SA wage flexibility is ranked at 131st out of 139).

Second , it reveals a union belief that workers possess no greater skill than potential new employees and therefore companies will not value their experience. This subconsciously acknowledges SA’s poor educational and labour productivity levels. A skilled or even a semi-skilled worker is not threatened by a cheaper unskilled worker as he knows his extra wage is earned. The poor education system has to shoulder much of the blame. SA’s primary education system is ranked 125th and the quality of the education system 130th in the 139-country survey.

Though the desire to boost workers’ living standards is laudable it cannot be done with current skill and productivity levels as this will simply increase the uncompetitiveness of SA workers and lead to greater unemployment.

Fortunately, the labour department has realised that tightening labour laws will hurt job creation. Since late January, the labour minister has repeatedly stated the proposed changes to the labour laws are negotiable. This is good news. Now if only some flexibility could be applied to the workers in Newcastle, they may be able to keep their jobs. The final outcome of this dispute will send a clear signal of government’s primary aim: better jobs for a few or more jobs for all.

Moola is a director with Macquarie First South

Reference:  Financial Mail. 17 March, 2011