"Taking the devil's rope"
Findings from Swaziland

In May 2001 Trade Union Research Project (TURP), located in South Africa and the Center for Research on Multinational Corporations (SOMO), based in the Netherlands carried out research on Swaziland's garment industry. Researchers visited 10 factories and interviewed management, trade union and NGO representatives, Governmental organizations, as well as garment workers.

Swaziland is a small country wedged between the east of South Africa and the south of Mozambique in Southern Africa. It is a small, open economy that created goods and services to the value of R6.5 billion in the 1999/2000 fiscal year. Historically, its economy is dominated by agricultural and agro-processing industries and government services. During the 1980s Swaziland's rate of industrial growth rapidly increased, prompted both by company relocations as a part of disinvestment from apartheid South Africa as well as government attempts to take advantage of the country's relative stability in the region above that of war torn Mozambique and other neighbours to attract investment. Agricultural growth has continued to decline into the 1990s becoming nearly stagnant by 1998. (1)

There are between 1 million and 1.2 million people in the country. Sixty percent of the population are below the age of 21 and 10 000 matriculants enter the labour market each year. Formal employment is estimated at around 100 000. Unemployment is estimated at between 21% and over 30% by different sources; the government favours the latter calculation. There is also growing informal employment. The population has a high level of literacy (at 75%) and is predominantly English speaking. (2)

Swaziland has experienced growing political instability since the death of King Sobhuza II in the early 1980s. Much political activity has come from the banned People's United Democratic Movement (PUDEMO) and the Swaziland Youth Congress (SWAYOCO), but also from the Swaziland Federation of Trade Unions (SFTU).

These, and other organisations, have been pressurising the government for political transformation including:

• The re-introduction of a constitution to govern the country,
• The ending of the state of emergency introduced since 1973 and the scrapping of the Public Order Act of 1963, which allows the state to introduce such states of emergency,
• The reforming of the Industrial Relations Act (IRA), and
• The end of trade union repression.

Swaziland narrowly averted getting its Generalised System of Preferences (GSP) privileges scrapped by the USA when it released the new IRA. After a visit to Swaziland the International Labour Organisation (ILO) reported on the lack of freedom in the act and the repercussions it would have for trade union freedom. This would have severe consequences for the eligibility under the Africa Growth and Opportunity Act (AGOA), which is an expansion of the GSP. The USA had objected to the lack of freedoms in the new Industrial Relations Act and required changes otherwise trade relations would be broken. While the Act has now been amended to both the International Labour Organisation's (ILO's) and the USA's satisfaction, the SFTU still believes that there are problems with the Act. (3)

The SFTU welcomed the USA's and other countries' international pressure around the new IRA and would welcome further international pressure, particularly from the USA, to force further changes to the Act. They believe that this is an effective pressure tool as the act still contains many infringements on trade union freedoms. (4)

Approximately 80% of goods produced in Swaziland are exported. Products dominating exports are sugar-based concentrates and blends, paper products, garments, textiles and sweets. Sugar and citrus products make up 40% of total exports. Sixty percent of Swaziland exports are aimed at South Africa and, indeed, 85% of its imports are received from there. Trade is critically important to the performance of Swaziland's economy. A third of the country's gross national savings are generated through customs receipts. In addition, receipts from the Southern African Customs Union (incorporating South Africa, Lesotho, Botswana, Namibia and Swaziland) make up 50% of the government's annual revenue. (5)

Swaziland's incorporation into the countries eligible for preferential access to US markets through the AGOA will further bolster trade from Swaziland through export-orientated garment production. AGOA's Special Rule also allows Swaziland to source its fabric from anywhere in the world until September 2004, which helps the country since its domestic textile industry is very small. The Swaziland Investment Promotion Agency (SIPA) expects that economic growth will pick up to 6% from the current 2.5% and create 10 000 jobs this year (2001), because of the AGOA (6). After an initial delay Swaziland has been approved eligible for AGOA in July 2001. The delay in the final approval has caused some agitation amongst manufacturers in Swaziland.

Swaziland, however, is not considered a cheap investment destination by garment producers compared to Asian countries and even to Lesotho. The ending of the Multi-Fibre Agreement (MFA)(7) in 2005 could negatively affect Swaziland's foreign direct investment and trade performances.

Further, the recent signing of the SADC Trade Protocol by countries in the region (including Swaziland) will mean that the country's privileged access to South Africa's markets through the SACU agreement will be significantly reduced. In addition to the above trade agreements, the Swaziland government has entered into a number of other trade agreements including:

• The Cotonou Convention, an agreement between 15 European Union countries and 77 African, Caribbean and Pacific (ACP) countries allowing for duty-free exports of commodities to EU countries from the ACP countries.
• Common Market for Eastern and Southern Africa (MERCOSUR), an agreement between 20 countries in Eastern and Southern Africa promoting increased trade and the establishment of a common market for the signatories.
• A bilateral agreement between Swaziland and Taiwan, promoting and protecting investment and co-operation by companies from each country into the other country.

In addition, to attract foreign investment SIPA, the Swaziland Industrial Development Corporation (SIDC) and the Commonwealth Development Corporation (CDC) fund the infrastructural costs of foreign investors. (8)

Manufacturing accounts for about 26% of employment in the country, second only to agriculture. The state is the third largest employer. Manufacturing has grown to become the largest contributor to gross domestic product in the country. The main manufactured products include food and beverage, clothing and textiles, timber, pulp and paper, engineering (including commercial vehicles), metal, plastics and chemical goods. (9)

The SIDC is focusing primarily on manufacturing investment. Half its industrial property investment and nearly three-quarters of its equity and loan financing is directed towards manufacturing operations. (12)

Investment in garment and textiles is one of the fastest growing forms of manufacturing investment in Swaziland. This is primarily as a result of the MFA, AGOA and the strong diplomatic relationship between Swaziland and Taiwan (this country being chosen because it is considered a "powerhouse for garments" by SIPA).

New investment has shifted from being primarily South African companies to predominantly Taiwanese companies. The Taiwanese companies are largely attracted through Swaziland's inclusion as a country eligible for preferential access to US markets through the AGOA and Swaziland's quota free status under the MFA.

SIPA also believes that AGOA will revive Swaziland's spinning industry, as fabrics for garments exported to the USA under AGOA will soon need to be sourced within AGOA eligible countries. They expect some "strategic alliances and natural relocations" as a result and are therefore encouraging "backward integration" in the industry. There is little evidence of this at this stage and the existing cotton industry in the country is having structural problems while not being supported at all.

SIPA is expecting 6 Taiwanese companies and 4 South African companies to invest this year, creating a potential 10 000 jobs (an amount double existing garment and textile employment). SIPA's focus is on short-term job creation primarily to avoid "social disruption" in the country. (13)

SIPA is aware that AGOA will not last forever and that garment producers are notorious as "footloose investors". However, they say "Swaziland is so desperate! When you are drowning and the devil throws you a rope, you will take it".(14)
SIPA believes that Swaziland is a good garment investment destination because:

• Transport costs from Swaziland to a port are lower than those of other SADC countries (exports are currently sent through Durban - once the Maputo harbour is ready for use, transport costs will be even lower),
• Lead times are short because distances to harbours are short,
• The country's labour productivity is high, and
• The country's industrial relations culture is one of "dialogue" and not industrial action.(15)

Garment manufacturers put AGOA and tax incentives as the main reasons for their investment in Swaziland. Tax incentives include a five-year tax holiday as well as the ability for individual firms to negotiate lower tax rates. Other incentives are listed below:

• The five-year tax holiday or a corporate tax rate of 10% and exemption from withholding tax on dividends for 10 years for qualifying investments (thereafter withholding tax is 15%, reduced to 12.5% for SACU members),
• A rebate of 150% of training costs written against tax,
• Tax-free gratuity for expatriate contract employees of up to 25% of salaries at the end of contract,
• Assessed losses may be carried forward and offset against future profits,
• An initial depreciation allowance of up to 50% on plant and machinery may be claimed in the first year or over a spread of years,
• Financing of the building of custom designed "factory shells",
• Duty free importation of capital goods, new machinery and equipment used in the production of export goods,
• Double taxation agreements with Taiwan, South Africa, Mauritius and the United Kingdom which prevent companies from being taxed by both their own government and the government of the country they are investing in, and
• Full repatriation of profits.

The trade unions interviewed were wondering if the focus on investment in the garment industry would be beneficial in the end. "The main thing that is offered is employment and no money comes into the country except the wages that are paid."(16) The Swaziland Federation of Trade Unions sees the garment investment as not sustainable, it pays very little and the economy does not substantially benefit (particularly with a 5 year tax holiday)(17)

The manufacturers interviewed complained that labour costs in Swaziland need to be reduced. They indicated that their presence in the country was directly linked to trade facilitation agreements and, in particular, the promulgation of the AGOA. They also expressed that their best opportunities in Swaziland lay in the four years in which the MFA and the AGOA overlapped. They argued that once these ended it would be difficult for them to compete with Asian based producers. Some indicated that they would shift their operations to China.

Swaziland companies produce mainly for the US market, for large retailers such as Wal-Mart and K-Mart. A small quantity is shipped to the European market. The interviews revealed that these buyers not only control quality standards but also the social and environmental standards, in some cases. They undertake occasional visits to the companies whereupon they stay for about 2 hours during which they allegedly interview the management and the workers and inspect the factory. This is an inadequate time for thorough inspections. What is striking is that none of the workers interviewed were aware of interviews done by foreign buyers nor had ever seen one of the buyer's code of conduct.

Workers in garment and textile companies in Swaziland experience poor working conditions. There is an acknowledgement by government that Taiwanese-owned companies, in particular, have an "unfortunate reputation" of being bad employers. In spite of this and in spite of evidence and complaints of sub-standard working conditions, minimum standards are not enforced.

The Department of Labour complained that government has urged them to "enforce the law, but don't chase the investors away". This has forced them to be "very diplomatic" as "employers from the East have the support of government". As a result they don't "rush to court" but rather try to "persuade" the employers to co-operate with the law. In reality this amounts to very little control on the part of the Department of Labour on the implementation of the law. The Department of Labour admits that it is tougher on transgressions by indigenous companies than on foreign-owned companies.

The research revealed evidence of:

• Low wages,
• Unhealthy and unsafe workplaces,
• Substantial and often compulsory overtime,
• Lack of adequate monitoring by buyers of products,
• Trade union repression by employers and government,
• Extra hardships experienced by pregnant workers, and
• Lack of worker protection by government.

Low wages . Minimum wages for a "casual labourer" are R110.88 per week (about R500 per month), while a first level sewing machinist receives a minimum wage of R163.93 per week (R730 per month). Instead of using minimum wages as a floor, companies tend to use them as a ceiling for wages. In some companies, the minimum wage is not paid. One company paid their workers every fortnight on the 5th and 20th of each month. The result was that the workers were effectively not paid for one month of the year. Overtime is sometimes not paid at all or not according to the law. None of the companies interviewed saw the minimum wage as low or an advantage for them. The workers indicated that the wages paid are not enough to live on. Many workers have been forced to go to "shylocks" (micro-lending finance houses) to get high cost loans to supplement their income. Some workers were paying half their monthly wage to shylocks.

Unhealthy and unsafe workplaces. Very few of the companies visited provided their workers with protective clothing or safety gear. Almost all knitting was done manually, an operation that is extremely physically demanding and a reflection of companies taking advantage of cheap labour. Some workers were bringing their own facemasks from home. Even where companies complied with NOSA rules, the workers complained that there was evidence of bisnossis (a lung disease, developed through long periods of inhaling fibres). Workers were also often not protected against noisy workplaces. The Employment Act requires that certain employees are designated "first aiders" to provide basic medical assistance in the company. This was largely implemented in the companies visited. In some cases, when workers were injured, they had to take themselves for medical care and at their own cost. Further, they were not paid for the periods that they were away from work. The disregard for the health and safety of workers was commonplace. The government has added to these problems by stalling the enactment of the Occupational Health and Safety Bill. The Bill has been awaiting royal approval, the final stage before enactment, for 3 years after it was finally passed into law as of the 1st October, 2001.

Substantial and often compulsory overtime . Weekend work is a common occurrence. Some of the companies did not require overtime during the week because of the danger that women workers faced when traveling home at night. However, other companies were less sympathetic to their workers. Some companies introduced full weekend work for three to four weekends in a row during periods of high numbers of orders. Workers said they often felt exhausted and that management was unsympathetic to this.

Lack of adequate monitoring by buyers of products . Although buyers were making regular or occasional visits to factories to assess the quality of products, very few were conducting inspections on labour conditions and those who were did not interact with workers, according to the interviews. One worker complained that companies made cosmetic changes to impress the buyers while labour abuses were hidden: "I don't care about nicely painted walls," he stated, "when workers are dying of bisnossis". The workers have never heard of Codes of Conduct or other systems by buyers that would set basic labour standards

Trade union repression by employers and government. Companies severely restricted the union's right and ability to organise and represent their members' grievances before the employers. The existing labour legislation, mentioned above, also restricted the power of the unions to influence working conditions. In one company, a worker that was organising members for the union was fired and the rest threatened with termination of contract if the organising continued. In several factories workers were warned not to join unions. Most of the managers interviewed talked not very sympathetic about the union, or about their abilities and several mentioned not allowing unions in the factory. In other cases, the employers would use delay or avoidance tactics to prevent meetings from ever taking place. Some employers were verbally abusive to the trade union officials.

Pregnant workers experience extra hardships. The laws regarding maternity leave currently allow for three months leave, with one of these months being paid at the full rate. However, many times pregnant workers are only allowed one month's leave, others can take their three months but are not paid for it. This is a great additional burden on pregnant women which causes them to work right up until they experience contractions and makes them often return to work after a month.

Lack of protection by the government. This was a source of great frustration for unions and workers. Clear abuses were not being taken care of by the government. Some employers boasted to the workers that they would bribe any labour inspector who visited the factory. The industrial court had a waiting period of between two and five years and the Department of Labour complained that the central prosecuting office of the government did not take labour violations seriously and would often not release the necessary resources for such prosecutions. The government's stalling of the enactment of the Occupational Health and Safety Bill is further evidence of this. At the same time, the Department of Labour admits to not tackling labour law violations to its fullest powers in an attempt to make the investors happy. Companies also have the right to lay workers off for periods of two weeks if their employment is not desired. The Department of Labour (DoL) have taken "many companies" to court but generally "don't rush to court". This is because:

• The judicial system do not take labour law violations seriously. The result is that their cases are deprioritised and it takes a long time for prosecutors to be assigned to them. The DoL is pressurising to have prosecution in government decentralised so that they can employ their own prosecutors.
• There is a huge backlog of cases to be heard at the Industrial Court. He reckoned, "you would be lucky to have your first date of trial scheduled within one year". The backlog is considered to be between 2-5 years.

The DoL, as a part of government, has to make Swaziland "as attractive to investors as possible". As such, they can't "push investors too hard" but are rather "very gentle and persuasive". They would prefer to write to the federation of employers requesting compliance rather than take the company to court.

Extract from SMAWU records illustrating the difficulties that unions have in getting companies to recognise them inspite of the unions following the law (18)

Notes:

1. Government of Swaziland (2001) Yearbook 2000 (Mbabane, Christina Forsyth Thompson)
2. Swaziland Investment Promotion Agency, Swaziland: the right choice, Mbabane: SIPA, no date (investment pack)
3. SADC Campaigns for Clean Clothes interview with SFTU, May 2001
4. SFTU interview, 2001, as above.
5. Government of Swaziland, 2001 as above.
6. SADC Campaigns for Clean Clothes interview with SIPA, May 2001
7. A GATT agreement that places limited quotas on volumes of garments and textiles from the main textile and garment producing countries mainly with regard to North America and European countries
8. For example, the researchers learnt of the building of one new clothing factory, expected to employ about 3500 people, is costing the government R57 million.
9. Government of Swaziland, 2001 as above.
10. Government of Swaziland, 2001 as above.
11. Government of Swaziland, 2001 as above.
12. SIDC website, http://www.sidc.co.sw, accessed 9 May 2001.
13. SIPA interview, 2001, as above.
14. SIPA interview, 2001, as above.
15. SIPA interview, 2001, as above.
16. SADC Campaigns for Clean Clothes interview with SMAWU, May 2001
17. SADC Campaigns for Clean Clothes interview with SFTU, May 2001
18. SADC Campaigns for Clean Clothes interview with SMAWU, May 2001