SA industry & globalisation: survival in the clothing industry

Etienne VlokAnnual Labour Law

Conference1 July 2011

What’s the problem?

• For a combination of reasons, the clothing industry is unable to compete on price– Very low labour costs in competing countries with• Little labour laws or no enforcement• Weak or no trade unions

– Also• Our currency strength & others’ currency pegging make

imports very cheap & our exports expensive• Significant incentives & support measures in competing

countries.

Why not just cut wages?

• Our constitution & govt’s decent work policy set out a different path

• Clothing wages lowest in manufacturing with a new machinist in rural areas earning R416/w

• Not a sustainable strategy– Only temporary advantage, if any at all, by cutting

wages as others (without strong laws & unions) will quickly go lower• SA vs Lesotho vs Madagascar vs Bangladesh.

Why not just cut wages?

• These types of wage cuts only– Where (close to) full employment exists– In conjunction with govt support measures to deal

with impact on households– Employers give unequivocal ‘no retrenchment’

guarantee– In non-democratic countries

• Actual result– Losses in productivity– Industrial unrest.

So what then?

• Industry strategy, agreed by stakeholders, say move away from competing on price only (& to higher value added goods)– Improving supply strengths to capitalise on

location advantage• Quick Response, in-season trading, stock

replenishment

– Also, improved design, quality & innovation– Use our decent work as competitive edge.

Worth saving?

The CTFL industry can• Easily create jobs:

2.3 times manufacturing average

• Result in increased gender equity (+80% women)

• Develop rural areas• Has major multiplier

effect.

Industry strategy

• A twin strategy:–Demand-side: • use of trade measures• local procurement• addressing customs fraud

–Supply-side: competitiveness & skills programmes.

Implementation

• The past two years have seen a strong emphasis by govt on implementation of programmes– New flagship incentive, PI, introduced

• Links to job creation, competitiveness improvement– Competitiveness assistance incentive launched– Cheaper working capital facilities available– Customs fraud campaign– Increased duty on most important finished products– Duty relief for manufacturers on certain inputs– New government procurement regulations.

Decent work

• Important link between industry strategy & govt strategy of decent work

• Incentives & support measures linked to compliance with labour laws

• Means govt programmes facilitate growth of CTFL industry built on decent work– Not using low wages & sweatshop conditions as

competitive advantage.

SACTWU’s response• SACTWU has used

strategic unionism, packaged in union’s ‘Jobs Campaign’

• Programmes incl– Trade measures– Sector strategy– Factory interventions– Skills development– Local procurement.

Union projects• Trade policy & measures

– Monitor trade flows– Input on trade rules, incl tariff investigation rules & rebate rules– Attendance at WTO meetings and global union lobbying of WTO– Analyse impact of negotiations, incl WTO & bilaterals– Apply for trade measures to deal with imports

• Customs Fraud– Create an awareness in SARS of the problem– Identify new measures to tackle fraud– Propose & get agreement on new sections in new customs bills to

fight fraud– Tip-offs & import data analysis to SARS– Research & communicate non-compliance with Label of origin.

Union projects• Local procurement

– Assistance to retailers, designers & others to find local capacity– Tender monitoring & alerts to manufacturers– Input on govt procurement regulations– Promote industry with a focus on fashion innovation, incl fashion

shows & awards to recognise exceptional performance• Sector strategy

– Input on IPAP & sector strategy– Suggested changes to incentive rules– Market support measures to companies & stewards– Introduce with partners performance improvement projects

• Skills development– Use and improve the programmes of the SETA– Submissions on national skills policy– Skills development training of shop stewards & members.

Impact

• Job losses reduced– 2010 was 28% lower than 2009 and 17% lower

than 2008– trend continuing in 2011

• StatsSA employment stats largely stable– over last 18 months in clothing– over last 15 months in textiles

• Anecdotal evidence of job creation in several provinces.

If not wages, then what?

• Government– Customs fraud:• Campaign can still be more effective, upscaled,

measured with arrests & prosecutions

– Resourcing of incentives:• Initial concerns about uptake but now demand

outstripping supply• Cannot reduce level.

If not wages, then what?

• Business and Labour– Fabric duties: innovative solution needed that

assists both textile and clothing sectors• Removal of 22% duty on fabric imports is equivalent of

a 26% wage reduction• Result would be an 8% reduction in costs

– Increased & better training of workers & managers• History & continued underinvestment in skills• Work with NSF & SETA to ensure major upskilling.

SA industry & globalisation: Survival in the clothing industry

Etienne VlokAnnual Labour Law

Conference1 July 2011