Newcastle on a knife edge

2011-06-01 00:00

IT’S heading for one o’clock on a Friday and Faye Turavh is setting up his spaza shop selling an array of vegetables at the side of Yellow Road in the Madadeni Industrial Estate outside Newcastle in northern KwaZulu-Natal. Turavh and his fellow traders are a feature of the street every Friday when workers from the factories spend their weekend wages on food.

Most of these people are employed in clothing and textile factories, the main tenants of the estate, but these factories are facing closure if their owners do not comply with the National Bargaining Council for the Clothing Industry’s demand to pay their workers the agreed minimum wage by April next year.

In January a compliance phase-in agreement gave employers 16 months in which to comply in paying a minimum wage of R516. Under the agreement employers were required to be 70% compliant by April; 90% compliant by the end of the year and paying the full amount by next April. The council cracked down on those who had not met the first target and closed down four factories in Newcastle. Country wide, 42 factories have closed down voluntarily because they could not meet the 70% compliance rate.

Of the 22 000 people employed in the manufacturing sectors in Newcastle, 7 000 work in the clothing and textile sector producing garments for the local market. It is estimated that over 5 000 people will lose their jobs if the non-compliant factories are closed down.

A feature of the clothing industry in Newcastle is that the factories — 85 in all — are owned and run by Chinese attracted to the area by government incentives in the eighties and nineties.

Only two factories in Newcastle are minimum-wage compliant — Allwear and Sandown — both big hitters in the industry, one devoted to the production of school uniforms, the other supplying chain stores such as Edgars and Mr Price. The majority of the Chinese-run factories operate cut, make and trim (CMT) operations, creating garments from supplied materials. Family-run businesses, they operate on low profit margins.

“Our profit is already nearly nothing so we can’t pay the minimum wage,” says Alex Liu, chairperson of the Newcastle Chinese Chamber of Commerce. “The big operations can pay because they supply chain stores.”

Liu and others (who did not want to be named) said they felt the Bargaining Council does not represent the interests of the industry and complained that they hadn’t been allowed to participate in the process that identified the minimum wage. “We are playing to rules set by others,” says Liu.

They also complained that local conditions had not been taken into account. In the past, the Department of Labour decided on the minimum wage, taking into account the socio-economic character of the area. Now minimum wages are paid according to an area’s city or town status . No consideration is given to unemployment rates or, as in the case of Newcastle, the impact of added transport costs due to geographical location.

Local economic development is a local government mandate, according to Ferdie Alberts, who heads up the Newcastle Municipality’s economic development unit. “But we have no input into national legislation. Outsiders make the laws, but we have to deal with the effects of these decisions.

“Upwards of 5 000 jobs will be lost in Newcastle if factories are closed down for non-compliance Then what? What are we going to replace them with. What other industry can you set up so quickly? It’s going to have a hell of an effect on the socio-economics of Newcastle.”

* * *

Perhaps the whole story is summed up by a T-shirt held in the hands of David Yen, a factory owner in Yellow Road, and president of the Newcastle Clothing and Textile Industrial Association.

“Last year we made the same T-shir­t for the Football World Cup,” he says. “The only difference is the rugby logo. Last year we were contracted to make it for R8. This year we can only get R5,50. Yet everything else has gone up — electricity, petrol and wages.

“If I say ‘no’ someone else will do it for that price,” Yen says. “But I can’t carry on like this, I will go bankrupt. I will have to go somewhere else, to Lesotho or Swaziland or back to China.”

Already delegations from Mozambique and Swaziland have visited Newcastle in a bid to lure the Chinese factory owners to relocate to countries where wages are lower.

Issues of non-compliance and the future of Newcastle aside, what this T-shirt demonstrates is the inherently exploitative nature of the clothing industry worldwide. The T-shir­t’s retail price is R89,95. Now explain the ethics of that mark-up in an industry that pays the lowest wages because buyers and retailers go to the cheapest suppliers.

“In the clothing and textile industry wages are the biggest expense and globally wages are the lowest,” says Alberts. “If there is a problem here buyers will go to China, Vietnam or Cambodia, wherever it’s cheaper.”

“There is huge pressure on CMT prices. Before they could make an offer but now they are told ‘this is the price. Make it or don’t’. You can’t force people to pay wages that will exclude profit.”

In an area where there is already a 60% unemployment rate the people who earn those wages now find themselves in danger of losing their jobs. “The Bargaining Council and the unions say they are on our side, but what are they doing?” asked a worker who declined to be named. “At the moment only workers suffer. They are closing down factories. They are supposed to be on our side. They are the ones causing us to lose our jobs. I can’t understand it.”

Patrick Vundla, Newcastle organiser for the Southern African Clothing and Textile Workers’ Union (Sactwu), says that there is a misunderstanding when it comes to the minimum-wage issue. “When it comes to non-compliance we are not just talking wages but provident funds and UIF as well,” he says. “It’s not only about wages.

“People are mixing up the Bargaining Council with the union. They are two separate entities. We are in the process of educating members so they can understand the role of the Bargaining Council and unions.”

But however people understand matters, the bottom line from the union side is that factory owners must comply with the law. Vundla says the union is concerned about compliance and is inviting employers to comply. “If they can’t do so we will talk to them. We are busy encouraging them to come to the party.”

But what about people who now have jobs and who could soon find themselves without? “We understand that many people depend on this industry,” says Vundla. “They say ‘this wage feeds my family’. We can’t deny that and we don’t encourage any­one to close factories. It is not our intention to close down businesses.”

But the Bargaining Council has made its position clear: “If factories are not compliant by April next year then we will close them down,” says Leon Deetlefs, compliance manager of the council. “This is a non-negotiable.”

Meanwhile, life in Newcastle looks to be frozen in a Mexican standoff in the hopes that some higher authority might intervene.

“Newcastle is the last castle for the clothing and textile industry in South Africa,” says Yen. But not only those inside its walls stand to lose if the castle falls. So will those families who rely on breadwinners who earn wages within the castle walls. And if the castle falls the effects will ripple out even further.

Next April there may be no one to buy his vegetables and Turavh will find himself battling to make a living.



• In tomorrow’s article, Stephen Coan explores the history and economic impact of the Chinese community in Newcastle, and looks at possible solutions to the current employment crisis.

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