TRALAC - Trade Law Centre

Namibia and the Textile Industry: Golden Fleece or Threadbare Hope?

Friday, 22 April 2005

Source: The Namibian (Windhoek)

As thousands of textile workers in southern Africa started losing their jobs during January because of the World Trade Organisation liberalising the market, questions began mounting over whether Namibia will face the same fate.

Already one factory within Namibia's nascent textile industry has closed down.

Speculation is rife that other investors could follow suit as they pursue greener pastures and bigger profits.

For Government, the dream of the textile industry becoming a major player in the country's economy lives on.

By the same token however, the critics remain unconvinced.

Government and critics in the labour industry are at odds over the potential impact on Namibia's fledgling textile industry of the termination of the World Trade Organisation's (WTO) Agreement on Textiles and Clothing (ATC).

The ATC limited imports of textiles and clothing from developing to developed countries to safeguard industries in developing countries and control the level of market access for developing country imports.

The abolition of these quota restrictions on December 31 has already caused the closure of factories in the region and left thousands jobless.

Government says it remains confident that the textile industry will not be severely affected and argues that it has a competitive edge because it benefits from duty-free exports to the US under the Africa Growth and Opportunity Act (AGOA), which ends in 2015, and to the EU under the Cotonou Agreement.

However, with the closure this month of the Rhino Garments factory, critics say it is only a matter of time before the Ramatex Textile Factory also shuts down to move to a more lucrative location.

They believe Namibia's preferential export benefits will not be enough to offset the cheaper production costs of major textile producers such as China, Indonesia and Pakistan.

Warning Signs

In light of recent developments, Ramatex Textiles, which employs about 7 000 Namibians, has denied that its operations in Namibia will be short-lived, but admits that it has not received as many orders as usual.

With the abolition of quotas, countries elsewhere in the region have faced a rapid decline in export potential.

Factories in Lesotho, South Africa, Mauritius, Madagascar, Kenya and Swaziland have already starting retrenching workers or closing down completely.

Namibia's major importer, the United States, has also voiced concern that the abolition of quotas will affect its own domestic markets and is considering invoking restrictions on imports from China to protect its own industry.

But Permanent Secretary of Trade and Industry Andrew Ndishishi firmly believes that Namibia will not face the same fate.

"The new situation created as a result of the termination of the ATC will not threaten the prosperous existence and further development of the textiles and garments sector in Namibia," he said in a statement outlining Government's perspective on the country's textile industry, released last week.

"The lifting of quotas does not guarantee automatic flooding of the US and EU markets, to which Namibia exports, with products from low-cost [manufacturers] such as China, India and Pakistan."

According to United Nations data, China exports clothes at average prices 58 per cent below those of other countries.

Ndishishi maintains that much of the debate around the future of Namibia's textile industry has been "speculative" in nature and not based on an understanding of international trade agreements.

Government does not deny that given global trends it cannot expect the textile and clothing sector to be a permanent feature of Namibia's economy.

It says it views the industry as a springboard for it to progress to more sophisticated, capital-intensive sectors.

Still, Government officials insist that all is not lost and that Namibia has advantages over major textile producers who do not enjoy preferential market access to the US and EU.

Other countries pay import rates as high as 25 per cent.

"Of course we cannot rule out the fact that the abolition of quotas will increase the level of competition from the major low-cost clothing and textile producing countries like China," said Ndishishi.

But he added that Government hoped to guarantee the benefits it reaps from AGOA through a free trade agreement the Southern African Customs Union (Sacu) is currently negotiating with the US.

Government is also banking on a Special Textile Safeguard (STS) in terms of which WTO countries are allowed to invoke restrictions on China, to protect their own markets.

This, along with the anti-dumping restraints imposed on China until 2016, and export duties imposed by China itself on textile products, will lessen the impact on less competitive textile and clothing exporting countries such as Namibia, Government argues.

Ndishishi said Government was actively working on establishing cotton gins to stimulate cotton growing in Namibia and the region and boost the Namibian textile industry.

Cotton Crunch

But not all sectors are as optimistic about the future of the country's textile industry.

The Acting General Secretary of the Namibian Food and Allied Workers' Union (Nafau), Kiros Sackarias, told The Namibian that it was not convinced that the decline in orders at Ramatex Textiles was caused by alerting buyers to poor working conditions at the factory - as claimed by the factory and Government.

"This is just an excuse sought by the company to close up here.

It's a strategy to shift away from Namibia," Sackarias told The Namibian.

"There is more to that, I believe.

They must tell us who the buyers are who decided to leave, and what the reasons are."

Sackarias said the union had not been provided with concrete evidence to prove that buyers were boycotting Ramatex Namibia's products because of steps taken by the union to fight for better working conditions for its members.

Government and the management of Rhino Garments maintained that the factory's closure was a result of the International Textile, Garment and Leather Workers' Federation (ITGLWF) writing to buyers to inform them of poor labour conditions at the factory.

Although the letters expressly stated that the Federation did not want buyers to boycott products, the factory and Government have tried to place the blame at the ITGLWF's door, insisting that it asked for a boycott.

"We should be told what the reason is that buyers don't want to buy.

This issue of the buyers is of concern to us.

It needs thorough investigation.

There is a broader picture," said Sackarias.

"In all countries there are trade unions.

Why only in Namibia does a trade union cause them [Rhino] to run away?" Sackarias said multinationals like Ramatex played the globalisation game well and "knew the right time to come and the right time to leave".

Last year, the mother company Ramatex Berhad opened three new factories in China, and its website announces plans to further expand its operations in that country this year.

"Most of the textile and clothing industry in Africa and elsewhere is going through a lean time as a result of the liberalisation of trade on January 1st when the Multi-Fibre Arrangement ended," says the ITGLWF's Neil Kearney.

The Labour Resource and Research Institute (LaRRI) has said it does not believe that Namibia's preferential export benefits will be enough to offset the cheaper production costs of major textile producers such as China, Indonesia and Pakistan.

"It also seems to be an illusion to think that Namibia, Lesotho, Kenya or any other African country will be able to complete with China under the current rules of the globalisation game," says LaRRI Director Herbert Jauch.

The Swazi government estimates that a third of all garment industry jobs will be lost by mid-year, while in Lesotho several factories failed to open after the festive season, resulting in thousands of job losses.

"Ramatex's stay in Namibia will only be temporary," Jauch predicts.

"Ramatex's investments have little to do with South-South co-operation, as they were not designed to assist Namibia's industrialisation efforts.

Instead, Jauch says Ramatex chose Namibia thanks to its competitive advantages at the time.

A US International Trade Commission report notes that "the absence of duties would not likely retain Sub Saharan Africa's competitiveness, except in cases where US duties are relatively high".



“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.