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REDUCE CORPORATE TAX TO 10% FOR BETTER WAGES – TEXTILE FIRMS

27/04/2022 08:27:00 Stanley Khumalo

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MANZINI – To better the salaries of textile and apparel industry workers, some of the employers in the industry are appealing for the reduction of corporate tax to 10 per cent, similarly to the sector in Lesotho.

The employers claim that the reduction of the corporate tax for their sector would assist them in redirecting the finances to the remuneration of their employees. Currently, the textile and apparel industry is marred by industrial action that has lasted over a fortnight in the Shiselweni Region. This follows salary negotiations which fell through, as employers and government supposedly voted for 7.25 per cent increment, much against a 15 per cent demand that was tabled by the Amalgamated Trade Union of Swaziland (ATUSWA) on behalf of the workers.
In addition to this challenge, employers are in the process of seeking unpaid layoffs from the Office of the Labour Commissioner following unprecedented torrential rains in the KwaZulu-Natal Province, South Africa, wherein raw materials were destroyed. The province is critical to the country’s economy as it has a major port used for exports and imports of items in and out of the Kingdom of Eswatini to international clients.

In light of these woes faced by the sector, the employers are appealing for the corporate tax to be reduced from 25 per cent to 10 per cent for the textile sector. This, they argue, would cushion them on the rising costs of the sector, while affording them an opportunity to improve the remuneration of their employees. Some of the employers argued that this was possible from government as it had been done in Lesotho against the backdrop of endless labour actions by workers in that kingdom’s (Lesotho) textile sector. The employers said the industry had made strides in being the largest employer in the country.

The employers bemoan that the industry has experienced massive challenges in recent years, which include the introduction of multiple factories in Newcastle, South Africa, which are taking advantage of the new rebate policy in the neighbouring republic. Some of the employers further said due to the rebate policy introduced in South Africa, where the government is encouraging companies to support their local factories, it would be easy for their buyers to discard their services. They said the political environment in Lesotho, Botswana and Namibia could also make them to look for new factories there. It was claimed that the ongoing political challenges in Eswatini posed a great threat to the sector. The employers also raised a concern that the drastic fuel price increase had created a perfect storm that was sending them further into a downward spiral. Their argument was that the increment in the other factors essential to their supply chain meant that their pricing would skyrocket as well. This, they claimed, posed a threat to the sector as this caused them to increase their pricing against what competitors were offering their sectors.

Regime

According to the World Bank, Lesotho applies a favourable fiscal regime for firms engaged in manufacturing activities. These firms are subject to a corporate tax of 10 per cent, compared to 25 per cent for other activities. It is reported that there is also no withholding tax on dividends. Construction companies, as well as hotels and casinos, can also benefit from different tax incentives. Furthermore, other incentives said to be granted to the manufacturing sector are those administered by the Lesotho National Development Corporation (LNDC), which focuses mainly on investment. The textile and apparel sector is also one of the main beneficiaries of the Southern Africa Customs Union (SACU) rebate 470.03.7.

“Under this programme, registered companies are exempted from duties on imports of raw materials from outside SACU, as long as they use these inputs to produce goods destined for export outside the SACU area. If the final goods are exported to the SACU area, exporters must pay the import duties that were initially exempted,” according to the LNDC website.
Meanwhile, 33 per cent of emaSwati are employed in the manufacturing sector, which is the same percentage of the working-age population, according to the Eswatini National Skills Audit. It is reported that the manufacturing sector consists of the textile, wearing apparel, beverages and food products subsectors.

The working age population, according to the Integrated Labour Force Survey 2021, is said to be 790 862 and this means about 260 984 people are employed by the manufacturing sector. The study also found that this sector was the only high priority sector that employed more females (82 per cent) than males. However, the majority of those females occupy low-income jobs such as embroiderer, sewing assistant, presser, line feeder, fabric layer, and factory line worker. The study was conducted by Eswatini Economic Policy Analysis and Research Centre (ESERPAC) and it was presented by the former in conjunction with the Ministry of Labour and Social Security.