Textiles - between a Rock and a Hard Place: South Africa's Clothing and Textile Industry Is Being Caught in a Squeeze between the Country's Diplomatic and Trading Ties with China on the One Hand, and the Wholesale Shedding of Jobs with the Closure of Mills and Factories Because of Them on the Other. Tom Nevin Reports
Nevin, Tom, African Business
Floods of Chinese-made clothing are turning the screws on South Africa's high-volume trade and investment with the eastern giant - and soon-to-be biggest commercial partner.
Now Africa's biggest economy must find a way out of the impasse as local producers are increasingly shut out of their own market amid a flood of cheap Chinese-made goods. Official figures reckon about 150,000 jobs have been lost in South Africa's textile industry over the past 10 years while clothing imports from China are estimated to have surged 110% since 2003. Industry sources gauge the numbers much higher.
The Department of Trade and Industry announced earlier this year it plans to impose quotas aimed at protecting the local textile industry for two years. China and South Africa agreed in June on a cap on China's textile and clothing exports to South Africa to allow the local industry to develop. The issue is simple in fact, but complex by definition. Simply put, South Africa's clothing factories cannot afford to pay its workers a minimum wage and stay afloat while trying to compete with the rock-bottom prices of Chinese imports.
The detail is mind-blowing in its complexity and brings into play the effect of sanctions on the industry pre-1994; defunct legislation; ageing machinery and hopelessly antiquated technology; the cosiness of South African and Chinese diplomacy, investment and trade; and the livelihood of over half-a-million textile industry workers and their families.
South Africa is in the grip of an unemployment crisis with the formal jobless rate close to 30%, and probably double that number when the informal sector is taken into account. So it was not surprising when clothing workers came out in solidarity with their employers and opposed the labour department's clamp-down on the failure to pay minimum wages. Employees insisted they were willing to work for wages lower than the regulated levels, because they need the work in a very tight employment climate.
"We don't want to see wholesale exploitation of our labour force," says the executive director of the National Clothing Retailers Federation (NCRF), Michael Lawrence, "but we need people to start taking pragmatic views on the matter before we completely erode the confidence in the local manufacturing sector."
There's a certain irony in the fact that many, if not most, of clothing factory owners in South Africa are Chinese or Taiwanese, and some say they might decamp to neighbouring countries if the situation in South Africa gets much worse. The chairman of the Newcastle Chinese Chamber of Commerce in KwaZulu-Natal province, Alex Liu, says that while some plant owners are considering a move to Lesotho or Swaziland, "the majority remain committed to South Africa".
Divergent views on protection
Not everyone agrees that the industry should be protected from cheap import competition in the name of buttressing the industry and saving jobs.
Professor John Ross, Dean of Economics at the University of Cape Town, maintains that importing cheap clothing is a plus for South Africa. Because it is cheap, people buy more, and more shop assistant jobs are created. Because the total sales volume has increased, VAT income is improved for funding government services and so it takes less tax from other areas. Because poor people get their clothing cheaper, they have more money for food, transport, education and other necessities.
"Perhaps clothing factories in South Africa close down and workers lose their jobs," reasons Ross, "but the welfare gains to consumers make up for what is referred to as 'negative welfare effects'." He describes the history of the clothing industry in South Africa in the past decade "as an almost perfect example of the way in which the gains from international trade promote national welfare".
John Baard, executive director of Apparel Manufacturers of South Africa (AMSA), couldn't agree less. …