TRALAC - Trade Law Centre

Namibia: The Ramatex Saga - An Analysis

Friday, 08 April 2005

Source: New Era (Windhoek)

Over the past few weeks, Ramatex made headlines again as its subsidiary Rhino Garments reportedly plans to retrench workers due to a lack of orders from its customers in the USA. The Permanent Secretary of the Ministry of Trade and Industry hastily pointed fingers to the International Textile, Garment, and Leather Workers Federation (ITGLWF) and "people who want to destroy the nascent African textile industry." The Permanent Secretary further alleged that there were "local players chasing away our markets" and that the letters sent by the international union were devastating for Namibia.

He claimed that any problems occurring at Ramatex such as labour rights violations could be sorted out internally.

Shortly afterwards, the allegations of closure were refuted by Ramatex and the Namibia Food and Allied Workers Union (NAFAU). Furthermore, the ITGLWF pointed out that it never called for a boycott of Ramatex but instead wanted to support NAFAU (as its affiliate) in the struggle for workers' rights at the company. The Ramatex workers, in the meantime, observed signs of a pending factory closure. What then, is really happening at this company?

In order to understand why Ramatex is behaving the way it does, why it came (temporarily) to Namibia and why Namibia's costs are likely to outweigh the benefits derived from Ramatex, it is crucial to look at three inter-related issues:

1. The developments in the global textile industry, especially the end of the WTO's Agreement on Textiles and Clothing (ATC) and the 'Chinese attraction';

2. The global Ramatex company strategy; and,

3. The special incentives offered to Ramatex in Namibia.

Global developments

When the international Multi-Fibre Arrangements (which provided for a complicated host of quotas for textile and clothing products) came to an end in 1994, it was followed by the Agreement on Textiles and Clothing (ATC) within the framework of the World Trade Organisation (WTO). This agreement paved the way for the gradual phasing out of quotas and other measures aimed at protecting local textile and clothing industries (particularly in the industrialised countries).

These quotas came to an end on 31 December 2004 and basically "freed" global textile companies from shifting production to countries whose quotas were not yet filled. We need to remember that Ramatex essentially came to Namibia to benefit from the provisions of the Africa Growth and Opportunity Act (AGOA), which granted duty-free access to the US market for companies that produce in African countries, "approved" by the US government. As tariffs on clothing and textile products as well as country quotas are removed, companies like Ramatex have no special incentive to stay in a particular country like Namibia as they will be able to choose their production sites anywhere in the world.

The end of the quotas at the beginning of this year already had severe implications for Africa's textile industry. In Lesotho alone, more than 22 000 textile workers lost their jobs as the global corporations relocated their production. Likewise, Kenya is about to loose 20 000 textile jobs and even Asian countries (like Bangladesh, Sri Lanka and Indonesia) are likely to lose millions of jobs in the clothing and textile sector. The likely scenario is what the ITGLWF called a "unipolar textile world with China at its heart" (see Ferenschild and Wick 2004). Under such conditions, countries like Namibia are unlikely to keep the transnational textile corporations within their borders.

The "Chinese attraction"

China has fast become a main attraction as a production site and potential market for global capital. By 2002 already, 30 million of the world's 43 million workers in Export Processing Zones (EPZs) were employed in China. In that year, China already accounted for over 20% of the world's exports in clothing and its share is expected to rise to about 50% within a few years. It already supplies 70% of all Japanese and Australian clothing imports.

China offers the full production chain from the production of cotton to the final products and is able to meet the demands of the global clothing and sportswear chains. It also offers extremely fast manufacturing and transportation times, cheap electricity and has reached high levels of productivity. This means that even the extremely low-wage Asian countries like Bangladesh, Indonesia and Pakistan cannot compete with China in the race for foreign investment. During peak times, Chinese workers are forced to work 7 days a week and up to 14 hours a day!

This is a classical example of the race to the bottom as far as labour and environmental standards are concerned. It is therefore highly questionable if it is in Africa's interest to enter this downward spiral. It also seems to be an illusion to think that Namibia, Lesotho, Kenya or any other African country will be able to compete with China under the current rules of the globalisation game.

Ramatex's plans

A visit to the Ramatex website provides a glimpse into the company's global strategy.

The initially Malaysia-based company expanded production into China in 1997. In 2001 it started operations in Namibia and expanded them in 2002. In 2003, Ramatex returned its focus to Asia with expansions in Cambodia and China. In 2004, this trend continued as the company expanded further in Cambodia and especially in China where it plans further expansions in 2005. This is in line with global trends and if international experiences are anything to go by, Ramatex's stay in Namibia will only be of a temporary nature. Ramatex's investments have little to do with South-South co-operation as they were not designed to assist Namibia's industrialisation efforts. On the contrary, the company operates in line with the classical capitalist logic of a highly mobile textile industry that seeks temporary competitive advantages around the globe.

Special incentives

It is ironic that the special incentives granted by the Namibian government to Ramatex now make it easier for the company to shift production. Namibia provided infrastructure of over N$100 million in the initial stages alone, while Ramatex imported factory panels and machinery in containers. These items can be dismantled again and shipped out of the country, which would leave Namibia with factory foundations that are of little use to the local economy. In general, companies that invest in infrastructure themselves are likely to stay longer as they need to recover their initial investments to achieve profitability over a period of time.

Namibia played the globalisation game in the belief that it has no other option but to accept any demand set by Ramatex. This explains why Ramatex was provided with subsidised water and electricity, which meant that the Namibian public were cross-subsidising a wealthy transnational corporation that had a turnover of over US$300 million in 2004!

In addition, Ramatex was allowed to violate basic workers' rights, the Namibian Labour Act, the Affirmative Action (Employment) Act, as well as environmental and municipal regulations. Despite signing a recognition agreement with NAFAU in September 2002, the company never increased its low wages and condemned its workers to a life in poverty. Evidence of groundwater pollution by the company, which will have a lasting effect on Namibia's own citizens was also tolerated, seemingly as part of the "price we have to pay".

Despite the many warning signs and repeated calls for intervention to rectify these problems, no clear message was sent to Ramatex that it has to adhere to Namibian laws and policies like any other company. It also seems that no systematic skills transfer to Namibian workers has taken place as the company only provided some initial training and instead opted to import thousands of production workers from Asia. This meant that Namibia did not even take maximum advantage of the potential job opportunities associated with Ramatex.

Furthermore, there are no indications of a programme to ensure technology transfer, which could have contributed to the development of Namibia's own textile industry in the medium-term. Such technology transfer was crucial, for example, during the initial industrialisation in South-East Asia.

Conclusion

The dynamics of the global textile industry and the special privileges for Ramatex are now haunting Namibia. It would be a tragic and extremely expensive mistake, if Namibia were to lose the Ramatex jobs in the months to come. After spending huge amounts of public funds, after tolerating avoidable and severe environmental pollution and forcing the mostly young women workers to endure bad working conditions, Namibia faces a bleak scenario.

In 2003, a study carried out by the Labour Resource and Research Institute (LaRRI) warned that the public funds invested to benefit Ramatex were equivalent to the wages of all Namibian Ramatex workers for 3 years!

For Ramatex, on the other hand, Namibia may just have been a temporary location in line with the company's global strategy, which included a shift towards China once the clothing and textile quotas came to an end. These plans have nothing to do with letters written by international trade unions or anybody else. In any case, the letters merely appealed for pressure to force Ramatex to address "appalling labour practices and workers rights' abuses". This was done in support of workers rights and should be the basic and legitimate job of any trade union that is committed to serve its members. Any union that is not prepared to fight for its members' interests would in fact betray its own mandate.

Unless, Namibia wants to return to the abusive labour relations that characterised many workplaces during colonial rule, we should support all efforts to ensure job creation and decent standards of work. Iternational experiences in many countries of the "Third World" have shown that an industrialisation strategy that is based on the goodwill of foreign investors, coupled with repressive labour conditions and environmental degradation, is a recipe for disaster - not for long-term sustainable development.

International experiences have also shown that such policies are not in the "national interest" but merely serve the interests of foreign capital and its local proxies.

This is one of the hard lessons to be learned from the Ramatex saga. Shifting the blame to trade unions is merely an attempt to look for scapegoats. Why should we blame those who reveal abuses instead of those who are the perpetrators?

Searching for scapegoats can only serve to detract from the bigger task of reviewing our economic policies with a view of ensuring greater self-reliance as part of a regional African group of countries. Playing the globalisation game according to ruthless international competition holds little benefits for Namibia and Africa as a whole. The notion of a nation state being able to control global capital also becomes highly questionable under such conditions.

Transnational corporations (like Ramatex) basically blackmail vulnerable states to offer them ever-increasing concessions in return for the promised investments and jobs.

The sooner we start developing and implementing alternative policies, the better our chances are of achieving development that will benefit the disadvantaged majority of our people. Putting social justice at the heart of all our policies as recently suggested by our new President Pohamba is indeed the way to go.

The task now is to put it into practice.



“AGOA Latest AGOA Trade Data currently available on AGOA.info


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


Other regularly updated trade statistics on AGOA.info 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.