This article on a different industry in sub-Saharan Africa reveals the cost pressures on many of their industries due to the rise in the rand price. It will give you some idea what a number of the South African gold producers are going through. For South Africa’s own finance minister to acquiesce to The Gold Cartel ought to stir the ZULUS into a revolt.
Dollar's Fall Silences Africa's Garment Factories
Published: March 12, 2005
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In places like Lesotho, a nation of 1.8 million that is already wrestling with AIDS and drought, the news is perhaps most wrenching. Lesotho's garment industry - and therefore its manufacturing base - rests on the faltering premise that Americans will buy all the clothes that it can sew.
That premise originates in a law, the African Growth and Opportunity Act, which Congress enacted in 2000 in an effort to help sub-Saharan nations lift themselves from poverty. Nations meeting the law's criteria, which range from political pluralism to support for free markets, are allowed to export any of 1,600 products to the United States duty-free.
With a progressive government and extremely low tax rates, Lesotho was one of the biggest winners: clothing exports to the United States ballooned to $500 million last year, from just $100 million in 2001 - nearly a third of all clothing exports by the 37 nations given duty-free status.
The textile boom was a salvation to Lesotho, which lost 60,000 jobs in the 1990's as South Africa reduced migrant labor at its gold and coal mines. Textile factory employment rose from 20,000 jobs before the law to more than 50,000 last year.
When the dollar was more robust, some companies from Taiwan built projects - modern, efficient factories and a mill to produce denim fabric - that is vital to the industry's long-term health. By late 2007, garment makers must make or buy their fabrics in sub-Saharan Africa or lose their right to ship goods duty-free to the United States.
That denim mill probably assures that Lesotho's blue-jeans makers, who turn out 26 million pairs a year, will survive in some form. But the dollar's slide has damped prospects for a knitted-fabric mill.
In Maputsoe, a dog-eared settlement of about 10,000, two of nine garment factories closed in December and January, leaving their workers stunned and, often, penniless.
Itumeleng Khasane was in her fourth month of sewing Old Navy T-shirts at TW Garments in Maputsoe when she went to collect her paycheck on Dec. 17 during the factory's Christmas break. At her last payday in mid-November, it was clear that the factory was struggling: she received only about $54, half the wages due for a month's work.
But when she arrived at the factory that day, she said recently, nobody was there. "We didn't get our money," she said. "We didn't get a salary; we didn't get a holiday bonus; we didn't get a termination payment."
More recently, Ms. Khasane was standing in a crowd of women, along with a few men, outside Johnson Work Wear, a uniform maker that hired a handful of workers in January. It was, they said, their only prospect for another job. Many had arrived at dawn, carrying umbrellas to ward off the midday sun.
At 21, with a seventh-grade education, Ms. Khasane had been the sole wage-earner for a family of five - two sisters, a brother and her jobless father. Her mother died in 2002 at age 38. The family gets by now on handouts.
The second Maputsoe factory, Vogue Landmark Garments, shut down even more unexpectedly; workers say there was no hint of financial problems until they returned after the holiday break on Jan. 12 and found the doors locked.
Masello Motsosi, a 27-year-old sewing machine repairman, was supporting his wife and two boys, his parents and his in-laws on his $135-a-month salary. He used his last savings in January to pay the boys' school fees. "Now, there's nothing," he said.
Lesotho garment factories have closed before, and been snapped up quickly by other producers. But with the American market increasingly unprofitable, few expect that to happen this time. Nor is it easy to diversify away from United States buyers: Canada and Australia, among others, offer American-style tariff breaks, but their markets are too small to replace American orders. And the Chinese, with lower shipping costs and quicker turnaround times, loom ever larger as a competitor.
In response, the nation's biggest garment makers are slashing costs - and praying for an exchange-rate turnaround. "Denim isn't profitable right now," said Oliver Li, the manager of the Global Textiles factory owned by the Nien Hsing Textile Company. It is one of three factories that still churn out up to 70,000 pairs of jeans daily.
"It's not only the appreciation of the rand, but other things like electricity and water," Mr. Li said. "They're all more expensive than before because we pay for them with our dollar income."
At its three factories in Maseru, the Taiwan-based Nien Hsing has dimmed lights, switched from cellphones to two-way radios for communications between plants and even told its staff to carpool to save gasoline.
Not long ago, Lesotho government officials and textile factory managers blitzed Congress, the White House, major retailers in New York and San Francisco and a trade show in Las Vegas with a well-honed argument: Lesotho may not always be cheapest, but it is dependable, honest and squeaky clean on human rights and sweatshop issues that have embarrassed American retailers like Nike in the past.
That, the nation's trade minister, Mpho Malie, says bluntly, may not always be true of certain competitors. "We're not only talking about the quality of garments, but also the quality of workers' conditions on the factory floors - labor issues, environmental issues," he said in an interview in his Maseru office. "Because in the future, a client will come to you and say, Where are you sourcing from, and what are you doing about the welfare of the people you are sourcing from?"
That argument seems to have won over some of the more socially conscious garment buyers in the United States, like Levi Strauss and Gap, which have maintained or increased their orders here.
Whether it will play with mainstream American retailers for whom price is the bottom line is more problematic. "As a country, we think that we are doing something right," Mr. Malie said. "We're saying that tomorrow, there will be questionable things about China - things that are not only a government question, but that your consumers in the long run are going to question."
He said that when the honeymoon with Chinese suppliers was over, "those questions will have to be answered."
