Jobs cuts spell disaster for economy, entrench poverty

Lesotho Times
12 Min Read

Kaleen Chikowore

THE thousands of factory jobs that have been lost since last year will worsen endemic poverty and spawn a new wave of crime, analysts have warned.

Unfortunately, the job losses seem set to continue unless the government comes up with an effective plan to empower entrepreneurs in new fields outside the traditional fields of employment.

There is also a dire need for Lesotho to meaningfully leverage on the African Growth Opportunities Act (AGOA) trade concession. Instead of exporting just textiles and apparel, Lesotho should explore other products that it can sell to the US market.  South Africa for instance exports a wide variety of products under AGOA from wild nuts to automobiles worth billions of maloti annually.

Added to that, the government should lead the way in finding more markets for goods produced locally instead of relying on the United States and South Africa only.

Analysts said if these and other measures are not taken soon, then the problems being faced by the wobbly textile sector will only continue with even more severe challenges in the economy and at the social level.

Before the Covid-19 pandemic reached Lesotho last year, the country had over 50 000 factory workers. At least 90 percent of that number are women, according to unions.

However, the number has significantly gone down with at least 20 percent of that figure now jobless.

Last month denim wear manufacturing company, Nien Hsing International, started retrenching 2500 employees and announced it would shut down its factory outlet this month.

Nien Hsing manager, Ricky Chang, blamed the “negative impact of Covid-19 and other market forces” for the retrenchments. The company manufactures jeans for top US clothing brands like Levi Strauss and Co among others and it is part of the larger Nien Hsing Textiles Group, which originates from Taiwan. The group has four textile manufacturing factories in Lesotho, which collectively employ about 10 000 workers.

The four factories are Nien Hsing International, Global International, C & Y Garments, and Formosa Textiles. The fifth factory, Glory International, closed last year sending home 1500 workers. This means that by the end of this month, the group would have retrenched more than 4000 workers in just a year.

The number is huge considering that the Lesotho National Development Corporation (LNDC) has reported that at least 6000 workers lost their jobs within the manufacturing sector from March 2020 to March 2021. The job losses were all attributed to the Covid-19-induced slow down in global economic activity.

And other employers are also mulling axing more people as they battle to manage ballooning production costs.

In July, the Lesotho Textile Exporters Association (LTEA) warned that its members were considering laying off thousands of workers, as the recent salary hikes had made their operations unsustainable.

This after the government in July awarded a 14 percent salary increase to textile workers. Other sectors were awarded a nine percent wage increase for the 2021/22 financial year. The salary hikes came on the back of violent worker protests for better pay from 10 May to 7 June 2021.

The workers complained that the cost of living had gone up since their last wage adjustment in 2019.  They wanted a 20 percent salary increase for the current 2021/22 financial year, while their employers were offering six percent.

They were also demanding the retrospective publishing of the minimum wage gazette for the 2020/21 financial year which was never issued after employers pleaded that they were financially constrained due to the negative effects of Covid-19.

The majority of Lesotho textile factories export their products to the United States (US) under AGOA. Others export to the neighbouring South Africa.

But analysts this week warned that the job losses were just the beginning of bigger problems to come.

The crisis of job losses, worsened by the Covid-19 pandemic – had been long visible. Lesotho had focused on textiles but failed to leverage on AGOA by seeking opportunities to develop and export other products. AGOA covers a range of 6000 other products that can be exported duty free into America from qualifying countries including Lesotho.

Instead of diversifying into other sectors, Lesotho had concentrated on one product to its disadvantage. Now that the market is depressed, there are no options for the country.

The already fragile economy coupled with weak and directionless political leadership would only spell doom for the country, analysts warned.

National University of Lesotho (NUL) senior lecturer, Tlohang Letsie, said the negative effects of the job losses will be felt by everyone.  Businesses needed consumers to buy their products while the consumers need the goods and services provided by these businesses for survival.  Without liquidity in the economy because of lack of employment, social strife becomes inevitable.

“Our leaders are not progressive,” Dr Letsie said.

“If they were progressive, then they would have long ensured that Lesotho takes advantage of more AGOA product lines. They abdicated duty by putting the proverbial eggs in one basket. Surely, we cannot continue relying on textiles only for AGOA exports and expect everything to work out.

“Unemployment has costs to society that are more than just financial. Societal costs of high unemployment include higher crime. That is murder, prostitution, theft, gangsters among others. We must brace for more societal ills,” Dr Letsie said.

Youth activist, Motsamai Mokotjo, said the government erred when it imposed the 14 percent salary increase for factory workers when the employers were already hamstrung with depleting orders and rising production costs. For Mr Mokotjo, the act was tantamount to slaughtering the goose that lays the golden egg.

He opined that the government made a populist decision meant to portray leaders in good light ahead of the September 2022 elections.

“Our leadership is weak and its planning is completely deplorable,” Mr Mokotjo said.

“They politicise everything. I believe this move of granting the factory workers the 14 percent salary increase was meant for vote buying.

“While factory owners are right in saying that Covid-19 has decimated their industry, the job cuts are a clear response to the salary increases. They were unhappy.”

That the textile sector predominantly employs women means the challenges resulting from job losses will hit hard on households, he said.

Sam Mokhele from the National Clothing and Textile Workers Union (NACTWU) concurred saying many women were the breadwinners in their respective households. Therefore, loss of income would spell doom for their dependents.

A United Nations Development Programme (UNDP) report titled: Assessment of the Socio-Economic Impact of Covid-19 on the Kingdom of Lesotho 2019, states that the manufacturing sector contributed 14.2 percent to gross domestic product (GDP) and made up 16.4 percent of all formal jobs. The report adds that the manufacturing industry is the second largest formal employer, after the government, with 46,500 workers as of 2019.

Mr Mokhele alluded to the report and added that reduced economic activity in the textile sector would be disastrous for Lesotho’s comatose economy.

“Without the garment industry, the economy will just break down. The export of textile accounts for more than 20 percent of the country’s GDP.

“The factories employ mostly women whose families will not have anything to eat. These retrenchments are exposing women whose sole survival means are dependent on these textile jobs.”

Among the ripple effects would be a rise in transactional sex, he said. This will subsequently put a strain on the sickly health sector due to a likely increase in sexually transmitted diseases and HIV.

Economist Majakathata Mokoena-Thakhisi said she foresaw a serious crisis at household level. In fact, she predicted that there was a likelihood of an uprising of the masses if no new opportunities are availed for the retrenched employees.

“What is saddening about these job cuts is that they are affecting female breadwinners. The government does not seem to have a plan regarding the retrenched people. This is likely to lead to an uprising because people will genuinely struggle for food,” said Mr Mokoena-Thakhisi.

For analyst, Mpho Litima, Lesotho will continuously face challenges until women are empowered to create their own jobs and factories. As long as there were no locals owning several factories and producing a variety of goods, then the government was likely to continue facing challenges.

“I encourage the retrenched women to come together and start income generating projects. It does not matter starting small but what is important is that they are self-reliant. These retrenchments are not new. We have been here before and we must look for permanent solutions and change our story.”

Mr Mokoena-Thakhisi shares the same sentiments with Ms Litima. It was important for the government to have a stake in the factories and participate in decision making.

“It is unfortunate that the government does not have a say in the factories. I am sure if the factories were locally owned, the government would be in a better position to negotiate deals that would ensure that Basotho do not lose their jobs. The government was supposed to buy shares in the factories long back,” he said adding that the effects of the retrenchments would be disastrous.

“A lot is at stake as result of these job cuts. They may seem as just figures but these are people’s lives. These are also people who have been participating in the economy but they no longer have the power to do so. Losing income means they can no longer pay value added tax (VAT) and the government will not generate enough money to deliver services,” he said.

Mr Mokoena-Thakhisi said so dire is the situation that the government may struggle to finance the upcoming elections next year due to loss of income.


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