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Africa: Footloose Industry and Labor Rights
AfricaFocus Bulletin
Jan 27, 2008 (080127)
(Reposted from sources cited below)
Editor's Note
"The largest investments in manufacturing [resulting from the U.S.
Africa Growth and Opportunity Act (AGOA)] are in the garment
industry. However, throughout the world, garment industries have
been the most footloose, moving from country to country following
government incentives and low wages" - Global Policy Network
Labor activists from Africa and the United States met at a
conference hosted by the Global Policy Network in Washington this month,
focusing on the impact of AGOA and the need to find better ways to protect labor rights as well as
development. Although AGOA has increased U.S. imports from Africa,
which rose from $13.7 billion in 1999 to $59.2 billion in 2006,
most of the growth in trade has been in oil. And in the garment
industry, the benefits are both limited and vulnerable.
Matsepo Anna Lehlokoana, an organizer for the Lesotho Clothing and
Allied Workers Union, told the conference that AGOA initially
spurred growth in the industry. But now, she said, employment in
the industry, mainly women, has fallen to half those employed in
2001. Moreover, the companies largely ignore health and labour
standards.
Audio from panels at the Global Policy Network conference are available at
http://www.gpn.org/research/agoa
This AfricaFocus Bulletin contains excerpts from two 2007 reports
on the garment industry and AGOA, drawing on the cases of Namibia,
Lesotho,and Swaziland.
Previous AfricaFocus Bulletins on trade issues are available at
http://www.africafocus.org/tradexp.php
For information on international campaigns to promote labor rights
in the garment industry, see the Europe-based http://www.cleanclothes.org and the U.S.-based
http://www.sweatfree.org Neither of these sites, however, has much
information on the role of the garment industry in Africa, as
compared to the much larger representation of Asia and Latin
America.
For extensive background information on AGOA and related trade issues, visit http://www.agoa.info
Representative Jim McDermott, one of AGOA's leading advocates, has
now introduced a new bill, "The New Partnership for Development
Act," that would eliminate all tariffs on products from "least
developed countries," while requiring that qualifying countries
adopt and maintain core labor rights.
Update: "No Easy Victories," edited by AfricaFocus editor William
Minter with Gail Hovey and Charles Cobb, Jr., will be featured at
events in Chapel Hill, North Carolina on January 30 and Berkeley,
California on February 7. For more information, see
http://www.noeasyvictories.org The book can be ordered from the
website at a 15% discount from the list price.
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
An Assessment of the Africa Growth and Opportunity Act (AGOA) and
its Implications for Namibia
Prepared by the Labour Resource and Research Institute (LaRRI) for
the Namibia Trade and Poverty Programme
http://www.larri.com.na
July 2007
[excerpts only]
Executive summary
The United States introduced the African Growth and Opportunity Act
(AGOA) in 2000 with the intention of maximising trade between the
US and sub-Saharan African (SSA) countries. Specifically, AGOA
aimed at developing the textile industry in SSA countries as it has
the potential to contribute positively to employment creation due
to its labour intensiveness nature. Unlike other trade agreements
that are bilateral, AGOA is a unilateral trade preference agreement
decided upon by the United States and targeting SSA countries. AGOA
accords the President of the United States the right to cease the
status of a SSA country that does not meet the requirements set out
in AGOA. Only eligible sub-Saharan African (SSA) countries that
meet certain requirements outlined in the Act can benefit under
AGOA. Under AGOA, certain goods from eligible SSA countries can
enter the United States duty free and quota free.
The introduction of AGOA led to increased trade between the USA and
the SSA countries. However, the increase in trade was not
experienced at the same level in all SSA countries and did not
affect all goods equally. Trade statistics show that countries that
experienced substantial growth in trade included Nigeria, Angola
and South Africa, Gabon and Chad. Furthermore, products dominating
trade between United States and SSA countries are natural resources
and primary products. Overall, petroleum products account for more
the 90 per cent of all African exports to the United States. In
other SSA countries, AGOA led to the development of textile
industries. Thus countries like Swaziland, Lesotho and Malawi
experienced a substantial growth in their textile industries.
Despite the significant growth experienced by the above-mentioned
countries, total exports to the US from African countries are still
dominated by petroleum products.
In Namibia, products that dominate exports to the US are metals,
minerals, textiles and apparel. The highest overall exports of US$
238.219 million were recorded in 2004 and dropped significantly to
US $129.557 million in 2005. The reduction in exports was also
experienced in the textile industry in Namibia and in many SSA
countries. For instance, many textile producing SSA countries
experienced a decrease in their textile exports and subsequently
company closures, which led to loss of thousands of jobs. In
Namibia alone, about 1 600 jobs were lost when one of Ramatex's
subsidiaries (Rhino Garments) closed down in 2005.
Namibia became a beneficiary country in 2001 and qualified for the
'special rule' provision on apparel articles which allows lesser
developed SSA countries to source their raw materials from anywhere
in the world. Only countries that had been classified as
lesser-developed countries on the basis that their GDP per capita
did not exceed $1500 could benefit from this provision. This
provision is not permanent but has been extended to 2015.
Under AGOA, Namibia stood to benefit in the following ways:
Increased exports to the US due to free market access and absence
of limitations on exports Increased employment opportunities
through investment; and Creation of infrastructure in the textile
and garment industry Before, 2001, Namibia did not have a developed
textile and apparel industry but this changed with the introduction
of AGOA coupled with many government concessions, which largely
influenced the Ramatex company decision to invest in Namibia.
Ramatex is by far the largest textile factory in Namibia and was
expected to create about 8,000 jobs, a reason which was used to
justify the concessions offered to Ramatex. Following retrenchments
in 2005 and 2006, there are currently only 3 600 Namibian workers
employed at Ramatex. Despite having increased workers wages in 2006
following lengthy negotiations and a strike, Ramatex workers are
still among the lowest paid industrial workers in Namibia.
Furthermore, since its inception, labour relations have been tense
at the company with the lack of wage increases as the main source
of conflict.
This study revealed that there are internal and external challenges
that face the success of AGOA in SSA countries. The internal
challenges relate to the ability of companies to fully benefit
under AGOA due to internal capacity constraints whilst external
constraints are the end of the Multi Fibre Agreement (MFA) coupled
with the attractions offered by China as an investment location. In
Namibia, we found that Ramatex is currently the only company that
is exporting to the USA under AGOA and, thus, the only AGOA
beneficiary in Namibia. Other exporters to the US indicated that
AGOA had no relevance for their exports and thus did not affect
their business.
There are many reasons why Ramatex is the only company benefiting
under AGOA. Firstly, Ramatex is a big Multinational Corporation
whose operations is fully integrated and has been in the business
for a long time. Thus Ramatex has the equipment, manpower, already
established business contacts and experience to meet the
requirements and demands of big US retailers. Namibian textile
manufacturers on the other hand operate on a small scale and do not
have established business contacts in the US, equipment and
manpower necessary to allow them to fully utilise the opportunities
presented under AGOA. Another challenge that face Namibian textile
and garment manufacturers is the costs involved in shipping
products to the United States due to the lack of a direct shipment
between Namibia and the US. Thus all exports to the US have to go
through South Africa.
Having experienced these constraints, Namibian textile and garments
manufacturers came up with an initiative to deal with the challenge
by forming a company called the Namibia Garment and Market Company
(NGMC). The NMGC was formed in June 2006 with the main aim of
bringing together textile and garment manufacturers to assess
possibilities for growth and promotion of the textile and clothing
industry in Namibia. However, the NGMC had not yet started
exporting to the US as they were still looking for proper
facilities and equipment to be able to meet the requirements and
demands of US retailers.
The end of the MFA at the beginning of 2005 had devastating effects
on the textile industries in many SSA countries as mentioned
earlier. These effects were acute as it was the introduction of the
MFA that had led to the development of textile and clothing
industries in many developing countries, which were not affected by
quota restrictions. Thus the end of the MFA meant that quota or
quantity restrictions that had been placed on certain products
(mostly textile) from Asian countries were not longer applicable.
In tandem to the end of the MFA, China became highly competitive by
offering the opportunity for companies to significantly lower their
production costs. Thus many textile companies closed their
factories in SSA countries (who are beneficiaries of AGOA) and
opened new ones in China and other Asian countries. Thus the
success and impact of AGOA has been very limited due to the
external (global) and internal challenges faced by local
businesses.
Footloose Investors: Investing in the Garment Industry in Africa
Amsterdam, August 2007
by Esther de Haan & Myriam Vander Stichele
SOMO Centre for Research on Multinational Corporations
http://www.somo.nl
[excerpts only; for full text visit http://www.somo.nl]
1.1 Introduction
Sub-Saharan Africa has recently received substantial foreign
investment in the garment industry, since the US drew up the Africa
Growth and Opportunity Act (AGOA). This act is removing barriers to
trade between the US and Africa, and has also facilitated the
growth in trade in garments from Africa towards the US. Governments
in the various countries have put a great deal of effort into
attracting the garment industry, and have competed with their
neighbouring countries in offering incentives for manufacturing
companies to start production - and later on to continue production
- in their countries.
Have these efforts been beneficial for the countries in question
and who has really gained from these efforts? What have been the
consequences of attracting what is known to be an unstable,
footloose industry? This report brings together various case
studies and analyses, and looks at the consequences of this
investment for those that it should ultimately benefit; the
population and workers in the garment industry in the various
countries in Africa.
This report focuses on Lesotho and Swaziland as two countries that
received a share of the foreign investment in the wake of the AGOA,
and whose garment industries and exports have grown substantially.
...
6. Critical Issues
So far the AGOA has predominantly benefited the foreign investors
that came to Sub- Saharan Africa to profit from the tariff benefits
under the trade arrangements, and from the incentives provided by
the various governments. In the race to attract this investment,
African governments have provided substantial incentives to the
industry, ranging from 0% taxes to full rebates on imports to
providing factory shells and infrastructure. When they arrived in
these countries, the investors identified the AGOA as the main
attraction, and the incentives were more the icing on the cake.
Nevertheless, for the countries in question these incentives could
mean the difference between benefiting from the investments in the
garment industry or totally losing out. ...
What becomes clear is that, following the MFA [Multi-Fibre
Agreement] phase-out, a substantial number of companies closed
down, most without paying benefits to their workers, some leaving
large debts unpaid. Nevertheless, a considerable number of
companies decided to continue producing, while still trying to
squeeze out a bit more from the governments in their host
countries. There are several interesting initiatives, notably in
Lesotho, that could (potentially) improve the lives and working
conditions of the workers in these industries, but a thorough study
is needed to make sure that they are not, once again, geared
towards benefiting the companies. ...
6.1 What have the countries gained?
The question is whether the AGOA has benefited the economies and
the workers, specifically when looking at the benefits of the
garment industry. ... Governments, with the support of donors, have
put a great deal of effort into attracting investment, foregoing
taxes, investing money in factory shells and in highly specific
infrastructure, while turning a blind eye to labour abuses. ...
Neither downward pressure on labour rights nor government
incentives have prevented companies from leaving the African
countries where they temporarily had a presence. This creates ever
more desperate attempts by countries to keep the investors, in an
industry that has already cost countries too much, by offering
better incentives. For instance, a company like Tri-Star was able
to use the desperation of a country like Uganda for foreign
investment to get the government to provide and invest in buildings
and infrastructure, secure loans and credit facilities. The company
left the country without repaying any of its debts, leaving behind
a destitute workforce that did not even have enough money left to
pay the bus fare home. And this happened after the company had
already abandoned factories in Tanzania and Kenya, without repaying
its debts or paying off its workers.
As is clear from the reports on the different countries, by
focussing on the garment industry, countries have not accelerated
industrial development in a way that enabled the countries to
create new productions systems or develop the innovative capacity
to input into new or existing industries.
The mostly Asian companies that have invested in the industry in
Swaziland and Lesotho, for example, have invested very little in
the local economies or in their own companies. Most of the
companies were given factory shells, rebates, tax-free import of
machinery, tax holidays, etc., without contributing much
themselves. This has made it much easier for companies to start
production in a country, sometimes even for a very short time
period, and to leave without looking back. ...
6.2 Factory closures
As is clear from the chapters on Lesotho and Swaziland, there are
no safety nets to assist workers if their factories close down or
they are dismissed. Even if they are given terminal benefits, the
amounts are so low that they have spent the payment within a few
weeks. Companies are not informing the government nor the workers
when they plan to leave the country, nor are there mechanisms in
place that could stop companies from leaving. There is not enough
effort being made to prevent companies fleeing the country. If they
leave, there are no mechanisms in place to make sure that they pay
their debts to the workers, to their suppliers, to the national
banks, etc.. Governments do not set up funds for companies in which
they can put deposits in case they declare bankruptcy or suddenly
leave the country. Workers are often left in the cold, without
their terminal benefits, sometimes without their wages for the last
months and without a social plan to mitigate some of the adverse
effects of the sudden unemployment.
The factories use their position to bargain for better investment
conditions. For countries desperate for foreign investment and
employment, this does not seem like such a bad deal. The costs
incurred when companies close are high, however, both economically
and socially. If the companies flee the country, they leave behind
a shell and infrastructure that was constructed specifically for
their needs, and for which the country has incurred high costs.
With factories closing or threatening to close, the workers are put
in a complicated position. You have no real bargaining power if you
expect your factory to pack up and leave at any time, and the
threat of closure can always be used by the management, whether
implied or real. In this situation, it is unlikely that workers
will negotiate for better wages and improvement of labour
conditions. As more and more factories are closing down, the
possibility of finding employment elsewhere is also decreasing.
...
6.4 Employment in the garment industry
It is unquestionably the case that the most important sector in
terms of employment under the AGOA has been the garment producing
sector, due to the labour-intensive nature of garment producing
factories and the surge in the industry. A proportion of these jobs
in the sector in fact existed before the creation of the AGOA, or
were associated with trade with other countries. Malawi, for
example, used to export predominantly to South Africa. Since the
AGOA came into existence, producers in Malawi have shifted their
focus to the United States market, although employment in the
sector has remained much the same.
Most of the jobs in this industry are low skilled, with very few
people advancing or being trained on the job. Most of the
foreign-owned companies fly in their own management, and other top
and middle management are recruited in China and India, for
example.
Drawn by trade agreements and other incentive programmes to
countries desperate for foreign investment and jobs, investors,
including Asian investors, have been able to circumvent local
labour laws, as well as internationally agreed labour standards
laid down in ILO conventions. In Swaziland, for example, violations
documented at Asian-owned factories in the last 6 years include
forced overtime, verbal abuse, sexual intimidation, unhealthy and
unsafe conditions, unreasonable production targets, and anti-union
repression. In 2001, when asked about their influence, the
Department of Labour in Swaziland admitted that in an attempt to
keep investors happy it did not pursue labour law violations to its
fullest ability. They say they "can't push investors too hard," but
instead are "very gentle and persuasive". Another example is the
sacking of the 'AGOA girls' by the President of Uganda because the
workers were "not disciplined" when they protested against bad
labour conditions. While investors can see profitable returns on
their investments, one wonders if workers and their communities
really benefit when wages and conditions are substandard and tax
abatements and subsidized infrastructure mean that little money
goes back into the community. The argument that workers would
otherwise have no jobs or no income should not be an argument to
sustain exploitation that has consequences for generations because
workers cannot even send their children to school.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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