Job cuts spell doom for economy, spawn crime

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Bereng Mpaki

THE ongoing job cuts at the textile factories will not only worsen the already endemic poverty, they will fuel a new wave of crime, analysts say.

Thousands of jobs have already been lost since last year. Unfortunately, the retrenchments are set to continue unless the seemingly clueless government comes up with an effective plan to address employers’ concerns and help them find new markets for their products, the analysts say.

There is also an urgent need for Lesotho to meaningfully leverage on the African Growth Opportunities Act (AGOA) trade concession which allows it to export its products duty-free to the US.

In addition, 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 troubled textiles sector will worsen with even more deleterious effects on the economy and society.

Before the Covid-19 pandemic began wreaking havoc on the local and global economy last year, Lesotho had over 45 000 factory workers. At least 90 percent of that number are women, according to the workers’ unions.

However, the number has significantly gone down with a staggering 25 percent of that figure having been laid off now.

As reported by the Sunday Express in its latest edition, denim wear manufacturing company, C&Y Garments, has begun retrenching 2600 employees as it prepares to shut down at the end of the month.

Some of the workers have already been sent home while others are currently serving out their employment termination notices, the employees and their trade unions have said.

C&Y Garments manufactures denim products for export to the United States market under the AGOA facility which allows Lesotho to export goods duty-free to the US.

The factory is part of the larger Nien Hsing Textiles Group, which originates from Taiwan. The group has four textile 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. In September this year, Nien Hsing International retrenched 2500 workers and retained a skeletal staff of 200 due to what it said was a decline in the demand for its products.

The fifth factory, Glory International, closed last year sending home 1500 workers. This means that by the end of next month, the Group would have retrenched 6600 workers in just a year.

This is a massive jobs haemorrhage 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 mainly due to the negative impact of Covid-19 on global economic activity.

Prior to last year’s retrenchments, the government had put the number of factory workers in the country at 45 000. Given the LNDC reports of 6000 job losses since last year, this means that the total number of those who would have been retrenched by end of next month will be 11 100. In other words, a staggering 25 percent of the entire workforce would have lost their jobs since last year.

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.

The Lesotho Textile Exporters Association (LTEA) is on record saying that its members were considering laying off thousands of workers, as the June 2021 salary hikes had made their operations unsustainable.

This after the government in June 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 had 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 only 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  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, the country is in serious trouble.

Economist, Majakathata Thakhisi, said the massive lay-offs in the textiles sector spelt economic disaster for the country as they would have a ripple effect on other businesses that were dependent on the sector. These would also be forced to retrench some of their employees, Mr Thakhisi said.

“It’s not just about the job losses in the textiles; other industries that rely on the factories will also feel the pinch,” he said.

“When the factory workers are no longer able to support businesses like bakeries and the taxi industry, these businesses will also be forced to scale down their operations and retrench some workers. The retrenchments will worsen poverty in the country as factory workers have no significant savings that they can use to start income generating projects due to the slave wages they were getting from their employers.”

Mr Thakhisi said apart from the Covid-19 pandemic, other factors such as the sexual abuse of the predominantly female workers in the textiles sector had contributed to the decline in the demand for Lesotho’s products as they were being shunned by some US buyers who place a high value on the observance of human rights.

He said the country needs to seriously implement measures to deal with the sexual abuse allegations to win back the confidence of the US market.

Private Sector Foundation CEO, Thabo Qhesi, concurred, saying the Covid-19 pandemic was not the real reason behind the diminishing demand for the Nien Hsing Group’ products.

He said the sexual abuse allegations were most likely the cause of the group’s woes and these had to be urgently addressed to restore market confidence and ultimately stem the job losses.

“I believe they are no longer getting enough orders due to the sexual abuse that has been exposed within the group. The United States market is human rights sensitive and they will not be comfortable buying goods produced where human rights are violated. I am saying this because other countries like Bangladesh, which are also exporting to US, are seeing improvements in their exports while Lesotho’s exports are going down,” Mr Qhesi said.

Messrs Qhesi and Thakhisi may well be right because the declining US demand has hit the Nien Hsing Textiles Group hardest and it came in the aftermath of the release of a damning report on the rampant sexual abuse of female employees by their male supervisors.

The report by the Workers’ Rights Consortium (WRC) was based on an extensive investigation of labour practices at the textile factories, including in-depth, offsite interviews with workers conducted in 2017, 2018 and 2019.

The WRC is an independent United States-based labour rights monitoring organisation. It investigates working conditions in factories around the world with the aim of identifying and exposing the practices of global brands and retailers “that perpetuate labour rights abuses”.

The factory managers allegedly coerced women to have sex with them, threatening that the workers would lose their jobs if they objected. The abuse took place across three factories owned by the Nien Hsing Group.

Sexual abuse was also reported earlier this year at another Taiwanese-owned factory, Hippo Knitting, in Maseru.

The factory predominantly supplied products to Fabletics, a popular US athletic apparel line co-founded by actress Kate Hudson. Following the sexual abuse reports, Ms Hudson cut ties with Hippo Knitting.

Another analyst, former Development Planning Minister, Tlohelang Aumane, said more people would soon be needing food assistance as the job cuts worsened. This would further strain the already overburdened government social grants scheme, Mr Aumane said.

“We can expect the crime rate to increase. The killings, house breakings and hijackings which are already very bad will likely rise,” the former minister said.

He said the government must improve the investment climate to enable new investors to take the places of those who have left.

“The government must fast-track the removal of any investment obstacles for prospective investors to come in. We must also diversify our product lines which are currently very narrow and therefore vulnerable to external shocks like Covid-19,” Mr Aumane said.

Another analyst Sello Sello, concurred. He said Lesotho was now paying the price for successive governments’ failures to find other markets as well promote the diversification of the economy.

“Lesotho ought to have long taken advantage of the fact that AGOA allows for several product lines but we seem to have put all our eggs in the one basket of textile products. By now we should have developed other product lines and even explored other markets apart from the US,” Mr Sello said.

Sam Mokhele from the National Clothing and Textile Workers Union (NACTWU) said the loss of jobs mainly by female workers, who were breadwinners in their families, would spell doom for their dependents.

“Without the textiles sector, the economy is in serious trouble. It will collapse. 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 moribund health sector due to a likely increase in HIV/AIDS and other sexually transmitted diseases, he said.

 

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