Clothing and textiles firm Seardel yesterday dismissed reports it was transplanting some of its crucial operations to Lesotho to take advantage of lower wage requirements.

Seardel chief executive Stuart Queen said the operation represented less than 5 percent of the company’s workforce and would have 60 fewer workers than a year ago.

The company recently announced 1 500 possible job cuts due to shrinking margins.

According to industry sources, a machinist or general worker in a clothing factory in Lesotho earned R800 to R1 000 a month, while in South Africa the same worker earned about R750 a week.

Researchers said this differential made it feasible to consider operating from Lesotho or Swaziland.

Johann Baard, the chairman of Apparel Manufacturers of SA, said although members with operations in both countries were in the minority, it was logical for businesses to migrate to other locations for low-cost operations.

“If this is happening, then it is happening at a trickling rate, but if the problems facing the industry are not sorted out, then it could turn into a flood where we will see more manufacturers leaving for Lesotho or other countries,” Baard said.

Although Baard refused to single out Seardel, he said the organisation was shocked at recent proposed retrenchments as the industry was starting to stabilise, with at least 1 000 jobs created since October last year in the Western Cape.

Clothing industry researcher Renato Palmi said it would make business sense for companies to look outside of South Africa if lower operational costs were achievable.

He said the issue was not only about wages, but about operational costs and productivity. “Most of the time when these decisions are made, businesses are looking to increase productivity,” he said.

However, Palmi said this strategy would hurt small and medium-sized clothing manufacturers that had the potential to create jobs.

“If the clothing industry can come together with their resources and stop wasting time and money on wage disputes, the industry can come out of this tough environment stronger,” he said.

Baard said a lot of work was being done to prevent retrenchments and praised the retail sector’s role, especially the Foschini Group for its acquisition of Prestige, a clothing manufacturer in the Western Cape.

Tern Sportswear and Foschini have moved businesses to Lesotho and Swaziland, respectively, a move industry players have labelled as a betrayal.

On top of possible job cuts, Seardel last week announced the closure of its Profortune production. Its decision was closely followed by Trubok, which raised the possibility of sacking 400 workers.

Baard said companies were looking at diversifying their locations with a view to retaining their presence in South Africa. In some instances, the low-cost environment would complement local operations.


Source:  Business Report – Nompumelelo Magwaza