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Swaziland: US trade act a mixed bag for Swazis

Published date:
Tuesday, 20 April 2010

A decade has passed since the US trade initiative, the African Growth and Opportunities Act (Agoa), expanded some countries’ economies like a balloon, bringing the largest manufacturing investments of any single time and tens of thousands of jobs, only to later deflate when the party seemed to be over

Agoa offers duty-free access into the US market for African manufactured exports but Lesotho, Madagascar and Swaziland found the treaty has enticed mostly Asian-owned textile firms to invest in their countries. When the fortunes of these companies declined in recent years, the benefits they had brought, which had proved marginal at best, disappeared.

"The success of Agoa is mixed. Yes, it brought jobs but the quality of the jobs left something to be desired. Workers were not trained or promoted to management positions at the textile companies. Tax revenues that government hoped to receive did not materialise. The short-term benefits (of Agoa) were good but the long-term benefits are questionable," said Felicia Dlamini, a developmental economist.

Swaziland may be the best example of a country where the initial positive impact of Agoa fizzled as the decade passed. The concept behind the initiative - to encourage poverty alleviation through export-driven job creation - is still valid, and US trade officials are studying the country to find out what went wrong and what to do about it.

Noting the success of one Swaziland export, jams from Eswatini Kitchens, US trade representative ambassador Demetrios Marantis said: "To export to the US, products must meet the highest health and food safety standards, navigate global logistics, and pass through US customs, all the while remaining price-competitive. So the US couples our trade-preference programmes with training, technical assistance, and other trade capacity-building programmes. In 2008, the US provided more than $1 billion (R7.33bn at current exchange rates) in critical trade capacity-building assistance to sub-Saharan African countries."

As in Lesotho, thousands of new jobs were created literally overnight as Taiwanese-owned textile companies opened in Swaziland to take advantage of Agoa. In 2002, at the height of garment industry investment, 30 000 workers were employed. Today, half that number have jobs. Many factories at the Matsapha Industrial Estate have closed.

Multiple problems

The reasons are threefold. The global economic recession lessened orders for goods everywhere. Exports from Swaziland are less competitive because their price is tied to the rand, to which the Swazi currency is pegged, and the rand has appreciation against the dollar. Finally, transhipment rules that went into effect in 2007 require inputs for exported products to be sourced locally, but Swazi textile firms continue to bring in materials, mainly from Chinese companies. The product is merely assembled in Swaziland without any value-added benefit to the economy.

"Agoa is set to expire in 2015, and this raises questions of whether the US should renew the programme and, if so, how it can be improved," said Marantis.

Labour issues, for instance, need addressing. The conviction last week in a magistrate's court of a Chinese national for strangling a female worker - he was given a R500 fine and told to stop strangling people - symbolised the rocky relations between Swazi workers, who tend to feel exploited, and their Asian employers, who feel unappreciated.

"The textile companies hire mostly women and they pay them starvation wages, so the workers have to share six to a room and sleep in shifts because there are not enough beds," said labour lawyer Sifiso Maphalala.

"They cannot support themselves or their families. They are 'employed' only in terms of having jobs and not because they can earn a living. Some women turn to prostitution to make ends meet," he said.

"The idea is to get tax-paying workers, who earn enough to support families and pay taxes. That is not happening," said economist Dlamini. A tax-paying workforce was one benefit the government expected from Agoa-inspired manufacturing growth.

"The salaries the employees get don't leave much for taxes. They make... R800 a month; higher if there is overtime," said Zodwa Mavimbela of the Ministry of Finance.

As for the companies themselves, they are also no-shows at tax time.

"Do they pay taxes? No ways! These companies come to make a profit, not pay taxes. That is the very disappointing aspect to the story," said Philda Msibi, Swaziland's commissioner of taxes.

"My experience is that a lot of them operate at a loss; I don't think there is one of them that has made a profit in 2009," said Mavimbela.

She added that the prospect of tax revenue keeps receding with each passing year. "They also carry their losses forward. This is another disadvantage as far as taxes are concerned, because you have companies carrying millions and millions of losses that accumulate year after year," she said.

Increased industrial activity should have given Swazis training opportunities and advancement up the corporate ladder. But after a decade Swazi managers are few, and Swazis are largely confined to the factory floor.

"We spoke with factory managers when they arrived here and they told us they were impressed by the relatively high education level of Swazis... So the workers could be trained. They have the ability. But they weren't trained, because the managers didn't foresee a long-term stay here. And in the end they did leave," said Dlamini.

Departing was easy. To lure investors, the government built dozens of factory buildings and made them available for free.

"It is a highly mobile industry, so it was easy to move when incentives changed. They didn't make any capital investments. They just packed up the machinery. Government was left with empty factory shells," Dlamini said.

Some workers were left without back pay, while all were stranded without training to do other work.

Added to low pay, poor working conditions and job dissatisfaction is a yawning cultural divide. Factories may be Taiwanese-owned, but a majority of foreign workers are from Mainland China. Neither owners nor managers speak much English or any SiSwati.

"Swaziland had one big industrial push before, when the sugar industry was created in the 1970s. The sugar companies have built schools and clinics for their workers, trained and promoted Swazis and really added value to the communities where they are. We ask of the Agoa factories, how have we benefited?" said Dlamini.

A US government source familiar with Agoa said: "If labour issues are not improved, Swaziland may lose its Agoa privileges."

In a recent speech, Swazi Prime Minister Sibusiso Dlamini acknowledged the value of Agoa privileges, and asserted the state would do what was required to stay compliant.

“ Latest AGOA Trade Data currently available on

Click here to view a sector profile of Swaziland's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.

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