Blog: Leonie BarrieSeardel scorns government support

Leonie Barrie | 15 April 2009

South African textile and clothing giant Seardel makes no attempt to hide its disdain for the government’s lack of support for the sector.

Revealing plans to close parts of its Frame Textile division, with the loss of 1400 jobs, the company said it has “made, directly and via the Textile Federation, representations to the various Government agencies for decisive and urgent positive interventions to assist the industry. Unfortunately all of these actions have been to no avail.”

Seardel also blames low-cost imports from China, competition from heavily subsidised international firms, and massive hikes in input costs such as electricity for the decision to shutter its spinning, weaving, finishing and denim divisions – all of which must also affect the entire industry.

South African political party the Democratic Alliance is even more scathing, and estimates a lack of policies to support the industry has led to the loss of more than 50 000 jobs in the past seven years.

“Unless South Africa is able to reconcile its liberal trade agenda with its inflexible labour market, thousands more manufacturing jobs will be lost,” it warns. Other estimates suggest up to 5000 jobs out of the industry’s total headcount of 45,000 could go this year.

Pierre Rabie, DA Spokesperson on Trade & Industry, believes South Africa’s entire trade agenda needs to be reviewed urgently, “especially our tariff structures and the South African Customs Union.”

Tariffs that make inputs relatively more expensive than the final product have led to manufacturing companies sourcing the finished product from markets abroad rather than buying inputs and adding value in domestic clothing and textile factories.
The structure of the South African Customs Union also enables local exporters to move to neighbouring countries such as Lesotho and Swaziland – from where they can take advantage of the rules of origin in the African Growth and Opportunity Act (AGOA) without facing higher labour costs of South Africa.

There has also been criticism of a two-year quota regime to restrict Chinese clothing imports into South Africa. Instead of boosting local makers, retailers simply switched to alternative sources of supply rather than opting for more expensive domestic products.   

A further irony is that Seardel's major shareholder with a 70% stake is Hosken Consolidated Investments (HCI) – whose largest shareholder, in turn, is the South African Clothing and Textile Workers' Union (SACTWU). Its strapline “Keeping jobs in fashion” sounds a little hollow now.



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