A bold new look in clothing industry

The agreement, set to be signed just after the FM went to press, paves the way for the rest of the country to accept the inevitability of a two-tier labour market.

Relieved clothing manufacturers, who have been fighting a losing battle against cheap Chinese imports, heaped praise on the SA Clothing & Textile Workers' Union (Sactwu) leadership "for being bold in stepping beyond the confines of traditional collective bargaining mandates".

Sactwu's stance is noteworthy, given that union federation Cosatu has been dead against treasury's attempt to introduce a variant of an entry-level wage model through its youth employment subsidy scheme. The clothing sector's entry wage agreement will be SA's first test of whether it's possible to increase employment by reducing the cost of hiring inexperienced workers.

Treasury's R5bn youth employment subsidy is being debated in the National Economic Development & Labour Council and is to be implemented in April 2012. It proposes paying employers a maximum subsidy of R12000 over two years for each first-time young worker hired. The idea is that reducing the relative cost of hiring a young person will increase demand for young workers.

By contrast, under the clothing industry's 2011/2012 wage agreement, employers will be allowed to pay new entrants 30% less than the minimum wage in metro areas and 20% less in non-metro areas.

New entrants are defined under the agreement as people with no previous work experience in the industry or those with work experience who haven't been employed in the industry for at least three years.

In exchange, employers have agreed to six-monthly monitoring of their employment records with the goal of raising industry-wide employment by 15% by March 2014.

If the jobs target isn't met, the entry wage provision will be terminated and those earning the entry wage will receive the full gazetted wage from then on, unless the parties to the 2014/2015 round of negotiations agree otherwise.

Johann Baard, executive director of Apparel Manufacturers SA, is confident clothing manufacturers can meet the 15% jobs target, especially as two additional trends are acting in their favour. First, the prices of Chinese clothing imports are rising rapidly and second, retailers are looking to locate their supply base closer to home as this allows for much faster stock turn in response to changing consumer preferences.

National Clothing Retailers' Federation executive director Michael Lawrence agrees it's "very likely" that retailers will source more clothing locally if the new wage model allows local manufacturers to come in at better price points.

The agreement includes checks and balances to prevent employers from retrenching existing workers and replacing them with new entrants at the lower wage rates, as well as from skewing short-time work arrangements in favour of the cheaper workers.

But it was not all plain sailing. The clauses detailing these provisions caused a last-minute hiccup in the negotiations which took over four months to conclude.

Employers battled to convince Sactwu that their intention was to increase the size of the labour pool, not replace existing workers with lower-priced labour. But in the end, "it had become clear to everyone that the industry is in a bad state and that if we keep on doing things in the same way we shouldn't expect different results, just the continued shrinking of the industry," says Baard. "We had to cross the collective bargaining Rubicon; we could no longer afford to do things the same way."

Sactwu general secretary Andre Kriel declined to comment.

The deal, which applies only to compliant firms, also allows for a 6.5% annual increase in the total labour cost of metro workers.