South African clothing union says not all is gloomy

Press Statement from Sactwu

8 NOVEMBER 2011

CLOTHING INDUSTRY STRATEGY STARTING TO WORK

On 5 November 2011, the Mail & Guardian published an article on the changing fortunes of the local clothing and textile industry, written by SACTWU's Research Director, Etienne Vlok. (The piece was in response to an article that appeared in the same edition of the newspaper.) However the published

article was a shorter version of our initial submission to the newspaper and hence we provide a copy of the original article below:

Clothing Industry Strategy Is Starting To Work

All is not gloom in the local clothing and textile industry. Clothing industry employment is stabilising, according to the job loss database of the SA Labour Research Institute (SALRI), which records actual industry retrenchments, liquidations and factory closures. Stats SA too shows that in the last three quarters, 2,500 jobs were lost in the industry - significantly lower than before when considering that Stats SA also recorded clothing employment dropping from 120,000 in 2002 to 52,400 currently.

We also receive increasing reports of factories hiring new workers and even of new factories in the pipeline. This was unimaginable a few years ago.

The industry strategy - forged in 2007 between the SA Clothing and Textile Workers' Union (SACTWU), clothing and textile businesses and government - was finally implemented in 2009. It is starting to pay off. It includes significant new programmes to upskill workers and managers, to replace old machinery, to reorganise work processes and to increase productivity.

Support is also available to companies needing working capital to fulfil orders. SARS is targeting customs fraud more aggressively too. The strategy's aim is to stabilize (and even grow) employment by re-engineering companies to be more competitive in relation to imports. It may even create the basis for exporting in future - as was seen in the industry's last boom in the early 2000s.

The strategy seeks three key outcomes: to make price less significant by exploiting the locational advantage of manufacturers to local retailers: in other words, more quickly delivering orders to customers; to move the bulk of production to higher value added products which do not compete with the mass of cheap imports; and respect workers' rights and their need to earn a decent wage.

A rough analogy for the vision exists in Germany, where a high wage economy still supports a substantial manufacturing sector because of high productivity and high value added products.

State intervention is crucial in the game of international competition and industrial development. However SACTWU also recognises that industry stakeholders themselves must play their part. We do this through our 'Jobs Campaign'. It includes local procurement advocacy with government and retailers, and monitoring relevant tenders advertised by the State, bringing them to the attention of local manufacturers. At factory level we actively participate in mergers and acquisitions, factory rescues and training layoff schemes. On the trade front, we have secured increased duties for certain finished products following an application to government, and we monitor WTO and bilateral trade negotiations to ensure optimal outcomes for the industry.

We also play our part in the fight against customs fraud. We continuously monitor monthly trade data and alert SARS to under-invoicing problems. Through extensive engagement at Nedlac, we've also introduced many amendments to the latest customs legislation - strengthening it in relation to illegal imports.

With government support measures, we analyse their impact and advocate for changes to their rules where this ensures the best benefit to workers and the industry. Bizarrely for a trade union, we market the incentives to companies through e-mails and fax shots, and regularly advise companies on the support measures that would best suit their circumstances.

We've focussed on improving productivity too - though not in the narrow sense which simply squeezes workers. We have helped craft a piece-rate productivity system for the industry, designed for non-metro areas. It works in the same way as Lesotho's system: piece work is allowed but a minimum income must be assured. We have also trained workers on methods-time measurement (MTM) and general sewing data, piloted performance improvement projects with the ILO in the Western Cape and KwaZulu-Natal, and proposed and adopted a wage-linked productivity incentive scheme in 2009 at the clothing bargaining council.

Our efforts have complemented those of the State, helping to shift the fortunes of the industry. Admittedly much still needs to be done. For instance few companies have taken advantage of the productivity incentive schemes, and many companies remain non-compliant. These non-compliant companies employ the minority of workers in the industry - 36% of total workers now. Nevertheless their levels of employment are still significant, as is the problem they pose for the industry's development strategy.

Instead of moving forward, these companies are immobilised by their determination to fight to pay workers less money. Their argument is that local wages are too high, that they cause job losses and must decrease. They cite the deluge of jobs in the industry over the last decade as their evidence.

If these people were right, one would assume that higher wage factories would experience greater job losses than low wage factories. This is not the case. In fact proportionally, there are more job losses in non-metro areas where wages are lower than in metro areas where they are higher. Non-metro areas employ about a third of total workers, yet jobs losses from these areas in the past 9 years constituted almost 45% of total job losses.

The extreme vulnerability of non-metro areas is not primarily wage related. It is due to companies in these areas being overwhelmingly low-margin manufacturers producing low-value products, which are more easily exposed to mass-produced cheap imports. They compete with imports from highly subsidised countries or countries that peg their currencies to weaken them to make their exports cheaper. They previously blossomed in a context of support by the Apartheid State but then became vulnerable when that support

was rolled-back in the 1990s and an expedited tariff phase down was later embarked upon.

Botshabelo illustrates well the point that jobs have been lost primarily due to falling State subsidies, decreased tariffs and higher levels of imports. Many of the companies which closed in Botshabelo were not clothing companies and were therefore not affected by the apparently 'high' wage demands of SACTWU and those stipulated by the clothing bargaining council, yet they closed anyway.

Another challenge for companies has been increasing local municipal and rental costs.

The demand for lower wages in South Africa ignores these critical factors. It also ignores the fact that we cannot win at the low-wage game when countries like Bangladesh pay workers as little as R75 a week. Practically and morally, we believe, we should not even try. A race to the bottom is not sustainable.

The industry's strategy recognises these facts. This is why it seeks to steer the industry towards competitiveness not primarily based on low wages.

The strategy is currently benefiting most of the workers in the industry. It would benefit workers at non-compliant companies too, which is what we want, if those companies become compliant, accessed the incentives and re-organised themselves in line with the industry's plan.