SWAZILAND: Textile industry asks govt for bailout

[ This report does not necessarily reflect the views of the United Nations]

MBABANE, 7 Mar 2005 (IRIN) - Swaziland's floundering textile industry will need around US $9 million to pull itself out of its job-shedding crisis.

The Swaziland Exporters Association said uncertainty over continued trade benefits from the United States was only one of the reasons for a drop in Swazi exports.

"Investor worries about Swaziland's governance, the relatively high wages paid to unskilled workers, low worker productivity despite those wages, utility and transportation costs that are often excessively high, and the appreciation of the South African rand [to which the Swazi lilangeni is linked] have made Swazi exports more expensive and thus less competitive worldwide," the association said in a new report.

The textile industry exporters want government to institute a national business policy, as well as a subsidy of R160 ($27) a month for each worker, or R53 million ($9 million) this year, and reduced utility rates.

"The garment industry is the second largest employer in the country. Government has been beating the drums about efforts to save jobs but, despite the numerous problems, it would seem that there are absolutely no long-term plans to sustain the industry," the association remarked.

Association spokesman Robert Maxwell said the strong rand had raised the price of Swazi garments to uncompetitive levels.

"The rand's appreciation of 150 percent [against the dollar] has been the major source of our troubles: we are operating at a 27 percent loss," Maxwell said.

The break-even point for Swazi exporters would require a rand trading between R7.25 and R7.50 to the US dollar, and the association warned that the strong rand could lead to the closure of at least two major manufacturers this year.

But low worker productivity, coupled with high wages, were also threatening the industry's sustainability.

"Apparel firms in Swaziland are not as productive as competitors in other regions of the world. Wages increased by 6 percent, effective 1 September 2004, and apparel firms in the country pay $155 (R930) a month, although workers in Swaziland are no match for their Asian counterparts, in terms of the cost of labour and productivity. In Vietnam, a worker is paid $80 (R480) a month, and produces on average 50 percent more product," the association pointed out.

At Swazi factories, daily absentee rates averaged between 8 percent and 12 percent. HIV/AIDS was assumed to be the reason for this, as nearly four out of 10 adult Swazis were HIV positive - the highest percentage of any country in the world.

Exporters said Swaziland's political climate was also causing customers to cancel orders.

"While Swaziland maintains largely free-market policies, the country does not subscribe to a multiparty democracy. Firms cite the Swazi political tradition, which combines traditional Swazi power structures with westernised democracy, as an impediment to the country's economic progress," the exporters association reported.

One garment producer claimed that Swaziland was on an "unofficial blacklist" of American buyers, due in part to the "rule of law" crisis that has compromised the judicial system.

"King Mswati III's tendency to rule by decree creates uncertainty among foreign investors - royal intervention in business and employment issues serves as a deterrent to foreign investment," the association said.

As an example, the group noted that Mswati recently ordered the Royal Swazi Sugar Corporation to cease firing workers. The corporation, a major exporter, was facing the same pressures due to the rand's appreciation as garment and other manufacturers.

Exporters called on government to draft a business policy and supporting legislation.

"Swaziland lacks adequate and comprehensive legislation for the business sector, including an Investment Code, Securities Act and Companies Act. Adequate legislation, when implemented, would provide a comprehensive framework for the private sector," the association recommended.

The manager of a garment factory at the Matsapha Industrial Estate, outside the central commercial town, Manzini, told IRIN, "A year and a half ago, when the industry employed 30,000 workers, we nearly equalled government, which is the country's top employer, with 37,000 workers. The rest of the country's 90,000 workers were in the agricultural sector. Our workforce will soon be halved, and it's no longer a matter, realistically, of returning to 2003 job numbers. We are just trying to stop the haemorrhaging of workers."

No quick solution was foreseeable, the exporters association said, and no alternative but a massive government subsidy existed.

[ENDS]