Players in the textile industry have made an urgent call, asking government to extend the stimulus package to avoid closure of factories following the recent minimum wage increase.
According to a letter submitted to the Ministry of Trade and Industry, the P38 million bailout that expired in December injected some life into the industry but wage increase to P 4.20 has worsened things as the operational costs have gone high.
As a result, the industries want government to consider extending the bailout with immediate effect. The letter says that a further injection of money into the sector will resuscitate the industry, to avoid loss of jobs and closure of factories.
Krishna Chinniah, the managing director of BMN Garments, who drafted the letter, said since Jan 2012, the industry has been battling without this subsidy because the market has become tougher and more competitive and the increase of minimum wage has made things worse.
In March this year, manufactures negotiated prices with South African buyers, for the spring and summer 2012. It has been difficult to get orders and even lost some big orders because of R 0.50 about 1.5 to 2.0 percent differences in prices.
“The buyers informed us that they would give us orders only if we can match their target prices,” he said.
The bailout, created more than 6000 jobs in the past two years. This includes people who were retrenched at the height of the recession in 2008, but has since been rehired after the industry was bailed out.┬á
By the end of November 2011, about P33 million out of the P38 million stimulus package channelled to the industry had already been used.
Chinniah said as an industry, they are requesting an extension that includes wide ranging options, which government should consider as part of a broader strategy to help the textile industry contribute meaningfully to the country’s economic growth.
“We do acknowledge and accept that the rate needed an adjustment because of the cost of living has gone up over the last couple of years. But we felt that the textile industry has received a double blow on our face,” said Chinniah.
He said the labour subsidy was terminated in Dec 2011 and “we have lost P 18 /day for each employee and now we have to find an extra 40 thebe /hr or P3.60/day for each employee”.
“With this increase in labour cost, transport cost and other costs, it is going to be very difficult to cope with and survive the competition,” said Chinniah. “It is a special request and would greatly appreciate if you could look in ways and means to assist the textile industry, otherwise factories will continue to close down and lay off people.”