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650 WORKERS RETRENCHED AS TEXTILE COMPANY CLOSES

27/05/2024 08:41:00 Sibusiso Zwane

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MATSAPHA - About 650 textile workers have been retrenched as the global market of the industry continues to shrink.

The retrenchments happened against the backdrop of a number of layoffs, which had been implemented by some textile firms in the country due to a decline in orders. Golden Jubilee Textile Factory, which is one of the six sub-factories under Tex Ray Eswatini Group, retrenched all its workers on Monday May 20, 2024, as the company temporarily ceased operations due to the lack of orders, to keep it up and running. According to a well-placed source within the company, the main reason for the closure was that the business had been recording a drastic decrease in terms of orders. However, the source was quick to highlight that the company was already working on a long-term plan, which would see it reopening in the not-so-distant future.

Decline

When asked what could be the cause of the decline in orders, the insider attributed it to the fact that the South African Government introduced a rebate system. In February 2021, the South African Government passed a policy, which this publication reported would spell doom for the textile industry in the Kingdom of Eswatini. The policy was a result of the South African Retail - Clothing, Textile, Footwear and Leather (R-CTFL) Value Chain Master Plan, which is part of the neighbouring country’s COVID-19 economic recovery strategy.
The South African policy, as per the master plan, was aimed at delivering significant new jobs along the value chain behind a clear set of commitments from retailers to buy locally. In a bid to ensure that retailers supported local manufacturers, the South African Government introduced some incentives.

Overseas

For example, South African companies, which were importing materials like fabric from overseas countries (Republic of China, Taiwan and the Far East), were paying A 22 per cent levy, but this was scrapped, on condition that they did not export it to other countries like Eswatini, Lesotho, Botswana and Namibia. In that regard, the source said as this master plan was maturing; South Africa was increasing the share of local CTFL retail sales of locally manufactured clothing and footwear, thus the number of companies which placed orders in other countries, including Eswatini, were decreasing. The source added that the first quarter of every year was referred to as a low season in the textile industry, as orders were usually limited and most often companies placed their workers on either short-time or layoffs. This, he said, also contributed to the temporary closure of the factory.

“The global production and supply chain system was also disrupted by consequences of the COVID-19, Russia-Ukraine war and decline of orders from the global market. This means that the reasons for the retrenchments are operational, as the company had been recording a huge loss of orders and decline in sales, which date back to 2020 to date,” the source said. Therefore, he said having explored all options, the company opted for the last resort, to temporarily cease operations. He said the company approached the Labour Commissioner’s Office in the Ministry of Labour and Social Security, with a notice regarding the matter.

He said the notice was about the termination of contracts of employment on reasons of redundancies in terms of Section 40 of the Employment Act of 1980 as amended. In the notice, which was signed by the company’s deputy MD – administration, the textile company said it was a garment manufacturing firm, which was duly registered in terms of the Companies Act of the Kingdom of Eswatini and it was having its principal place of business at Matsapha Industrial Site. Through the notice, the factory management notified the labour commissioner that the company would cease operating on May 20, 2024 and when doing so, all positions would be declared redundant; hence they would retrench all their employees in terms of Section 40 of the Employment Act, as amended.

However, the management highlighted to the commissioner of labour that the company would not permanently cease its operations, but their plan was to close temporarily. He said while closed, they would be scouting reliable customers for long-term productivity. The source said the management tried all possible means to avert the situation, but it all proved futile as they had legally instituted a number of layoffs with the hope that the status quo would improve, but failed and now the company could no longer afford to take risks to continue under the circumstances. It added that having explored all options, they opted for the last resort; to temporarily cease operations and terminate employment of all the employees. The source said after looking into the matter, the office of the labour commissioner gave the company the green light to implement the retrenchments.