SA industry & globalisation: survival in the clothing industry

1. SA industry & globalisation: survival in the clothing industry Etienne Vlok Annual Labour Law Conference 1 July 2011

2. 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.

3. 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.

5. 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.

6. 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.

7. 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.

8. Industry strategy • A twin strategy: • Demand-side: • use of trade measures • local procurement • addressing customs fraud • Supply-side: competitiveness & skills programmes.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. SA industry & globalisation: Survival in the clothing industry Etienne Vlok Annual Labour Law Conference 1 July 2011