Govt saves 2, 831 textile jobs

MBONGENI MGUNI
Staff Writer | Wednesday October 20, 2010 00:00

 

On Monday, a Ministry of Trade and Industry statement announced that of the 44 companies, 11 were large scale, seven medium, 25 small and one a micro-business. Successful applicants for the rescue package are mainly from Gaborone and Francistown with 19 companies in total, followed by Molepolole, Selebi-Phikwe, Tutume, Bobonong and 10 other villages.

'There has generally been slow growth in the coverage of the locations of companies that have benefited,' the statement reads. 'The Ministry is, however, hopeful that the spread of beneficiaries will be from all cities, towns and villages of the country.'

It is estimated that thousands of workers lost their jobs in the textile industry last year, while many companies closed shop. Under pressure from cheaper Asian products to target export markets and with less support from the Southern African Customs Union duty credit certificates, the textile industry's earning shrank to levels last seen in 2006.

Prior to the recession, textiles were Botswana's chief non-mineral export, raking in P2.7 billion for 2007 before declining to P1.8 billion in 2008 and P1.4 billion last year, according to the Central Statistics Office (CSO).

Although official statistics indicate that textile sector output is far from pre-recession levels, the trade ministry hopes that its rescue package will insulate the industry and enable higher exports next year and beyond.

According to the Bank of Botswana (BoB), by the end of June 2010, textile firms had exported P300 million worth of products, a far cry from the P869.8 million exported for the corresponding period in 2008. While factors such as prices and the Pula/US$ exchange rate are factors in the statistics, analysts agree that mass retrenchments and market collapse last year have been the biggest influences.

From peaks of more than 6, 000 employees in the years before 2009, the textile industry has shrunk by more than 80 percent. CSO data indicate that prior to the recession, the textile industry, including preparation of textile fibres, synthetic material, clothing and other wearing apparel, was among the fastest-growing sectors of employment creation in the economy.

The textile industry employed 6, 633 people by March 2008, rising to 8, 019 by June 2008, which is the last period for which official statistics are available. This growth - coupled with the fact that the textile sector is a generator of low skill youth-oriented jobs, providing employment avenues for thousands of out-of-school youths, particularly women - is among the factors that influenced government's decision for a rescue package.

Another influencing factor was the high citizen content in the industry, as the CSO data shows an average 80 percent citizen content in the sector's employment composition.

The rescue package was initially targeted mainly at citizen-owned companies and citizen employees, through the provision of a financial grant to companies that have re-employed citizens, subsidies for these re-employed workers and government guarantees for CEDA loans targeted at working capital and upgrading of machinery and equipment.

After a review, the guarantee was extended to non-citizen companies who wish to access it through the venture capital fund. In addition, subsidies on wages will also cover citizen workers who have been retained as a way of helping the company remain afloat.