TRALAC - Trade Law Centre

AGOA: Glimmer of hope is not always a life boat for any stressful situation

Tuesday, 03 May 2011

Source: Business Report (South Africa)

There seems to be a great tendency to grasp at straws in times of economic stress; to laud anything that appears, on the basis of superficial analysis, to provide a glimmer of hope.

And when the hope collapses in the face of reality, little more is heard of the source of the initial optimism.

The government and most of the trade union leaderships have, all too frequently, been guilty of behaving in this way.

Not that there is probably any malice involved, just wishful thinking, perhaps a genuinely mistaken belief or some self-serving and cynical politicking in laying claim to having advanced something that seemed beneficial.

So it was with the R30 billion Barclays buyout of Absa, a proclaimed “foreign investment” that the unions today admit amounted to “selling off the family silver”.

There are now also grudging admissions within the garment industry that the loudly proclaimed two-year system of quotas agreed by China in September 2006, was of little use and, in fact, widened the sources of cut-price competition.

The quotas were pushed for by the SA Clothing and Textile Workers’ Union (Sactwu) as a wave of mainly Chinese imports washed out thousands of local jobs.

According to research conducted by two University of Cape Town academics, China (including Hong Kong) in 2006, accounted for slightly more than 81 percent of all clothing imports to South Africa that were under cutting local products.

Quotas were duly agreed and were hailed in 2007 by the Department of Trade and Industry as having saved jobs, while creating new work within the sector.

No figures were forthcoming and it soon emerged that, in fact, jobs continued to be lost as imports kept flowing in.

This was a result not only of importers finding alternative sources of supply, but of Chinese manufacturers circumventing the system. Ironically, some of the circumvention came about through much the same channels used in sanctions busting during the apartheid era, with the autocratic feudal monarchy of Swaziland playing a key role. “Garments banned under quota were sent to Swaziland, finished there and packaged as products of Swaziland for export to South Africa,” admits a Sactwu official.

During the apartheid era, garments made in South Africa were sent to Swaziland where they were boxed as Swazi products and sold abroad.

But also in place at the time of the quota agreement was Agoa – the African Growth and Opportunities Act. It was introduced by the US in 2000 amid optimism that it would provide a boost to local industry.

However, since its introduction, tens of thousands of jobs have been lost in the badly battered South African rag trade.

In other words, Agoa was no life belt, let alone a life boat for an industry sinking in a sea of cheaper global surpluses. As a result, Agoa seldom these days features in local discourse.

But this trade policy, by which preferential access to US markets is granted to 40 sub-Saharan African countries, is a major talking point in Lesotho, where the straw of Agoa is still widely clung to.

Again, unsurprisingly, since Agoa played a part in a 300 percent increase in garment sector jobs in the impoverished mountain kingdom. This job creation was off a very low base: according to the Lesotho Clothing and Allied Workers’ Union (Lecawu), there were barely 10 000 workers in the industry ten years ago. Today there are more than 40 000 Basotho employed in more than 40 factories.

Now there are fears that, with all Agoa provision scheduled to come to an end in 2015, Lesotho must find new markets.

But it was not only the export opportunity offered by Agoa that brought Asian and South African-owned factories to Lesotho: low wages and less costly conditions were an obvious attraction.

However, unlike South Africa, Lesotho also qualifies under Agoa as a “lesser developed country”. This means that, until 2015, it will enjoy further benefits – and an additional advantage – in terms of exports to the US. Then, in line with the intention of Agoa that every country should operate on “market-based economics and the elimination of barriers to US trade and investment”, Lesotho will face unaided, competition from the rest of the world.

This, in the final analysis, means joining to an even greater extent what global unions refer to as “the race to the bottom” in terms of wages and conditions.

“But the minimum wages that even the bigger companies (in Lesotho) pay are already very low,” says Lecawu general secretary Daniel Maraisane.

He also maintains that the multitude of smaller plants handling outsourced work from the major players do not even pay the minimum, set at R960 a month for a qualified machinist and R839 for other workers. “Less than half the minimum rate set in South Africa,” he notes.

However, only 15 percent of the workforce is unionised in a country where unemployment and rural poverty mean that nearly 60 percent of the population lives on less than R10 a day. Maraisane concedes that, in such conditions, many workers are reluctant to join the union.

In an attempt to gain leverage, Lecawu has concentrated its recruitment efforts on the biggest staff uniform manufacturer in Africa, the South African-owned Jonsson.

A private company that began operations in Durban in 1955, Jonsson now has five plants in Lesotho, employing more than 2 000 workers.

“More than half the workers are now in the union, but Jonsson won’t recognise us,” says Maraisane. “As a result, the matter is now before the labour court and the union is confident that it will win.:

But this could be a Pyrrhic victory. Asian-owned companies are already talking of leaving Lesotho once Agoa ends and wage levels become the priority, in line with “market-based economics”.

“We have seen it all before,” the Sactwu official agrees. “Several proclaimed ‘Proudly South African’ companies now source most of their products from Asia – and from Lesotho.”

“ Latest AGOA Trade Data currently available on

Click here to view a sector profile of South Africa'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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