There are scores of industries which are currently on the decline, affecting not only neighbouring cities and towns; but Newcastle as well. One of these declining industries is the Textile Sector.
Statistics SA (Stats SA) claims local manufacturing firms are using less and less of their full capacity. This stems from both a weak economy and an increase in imports, which reduces the need for manufacturing in South Africa.
According to Stats SA, eight of the 10 manufacturing divisions showed decreases in utilisation of production capacity in November 2019 compared with November 2018.
The largest decreases recorded were petroleum, chemical products, rubber and plastic products (-4.1 percentage points), glass and non-metallic mineral products (-3.9 percentage points), motor vehicle, parts and accessories and other transport equipment (-3.7 percentage points), furniture and ‘other’ manufacturing (-3.2 percentage points), basic iron and steel, non-ferrous metal products, metal products and machinery (-2.6 percentage points) and radio, TV and communication apparatus and professional equipment (-2.5 percentage points).
With Karbochem Newcastle closing off its rubber division and ArcelorMittal retrenching more and more people, the local manufacturing industry is truly facing one of its most challenging times in history.
Newcastle was once dubbed the textile hub of South Africa, with scores of textile factories supplying chain stores and large companies with well-known branded items and was something to admire.
“Currently, there are between 13 000 and 15 000 people employed by local textile factories,” explains Alex Liu, a local businessman involved in the textile industry.
Employing many people, Liu explains the textile industry is facing just as many difficult challenges as other manufacturers.
“Over the past two years, five factories in Newcastle have closed down and there are talks that more might follow suit,” he says.
With talks of other local factory owners shutting down their operations in Newcastle and moving out of South Africa, Alex explains it is not just local textile factories which are facing extreme difficulties. He claims that eight factories have recently closed in Durban.
But what is the cause of the textile industry’s decline, considering it was a once flourishing industry?
Liu explains recent regulations sees retailers affiliating themselves with the National Textile Bargaining Council and working more with factories affiliated with the council.
“This has cut business for many factory owners, which in turn sees many closing down their businesses and moving to countries such as Eswatini (Swaziland).”
With several factories already facing financial constraints, Liu adds that the increase in the minimum wage has also played a role in local textile factories either shutting down or retrenching people.
“As some textile factories cannot afford the minimum wage, they are forced to retrench people, in order to pay the necessary wages, which are set by law.”
Liu adds load shedding has played a major role in the decline of the manufacturing sector’s productivity.
“I have had several factory owners complain to me, how the schedule is not always followed. Either the power is switched off 15 minutes earlier than scheduled or it is put back on 20 minutes later than promised.”
Liu says the issue with this is, that productivity comes to a total standstill during the power outages.
“This results in certain factories missing deadlines, which costs the owner a lot in the long run. If a factory owner misses its deadline, not only will the customer cancel the order, but the owner will have to pay for the material and all the trimmings of the order. In order to get the money back from just that one order, you need to get five more orders to cover the costs of the missed deadline.”
Liu explains load shedding also damages equipment, as power surges damage the computerised chips in the equipment when the power is restored.
“It is really sad to see the face of decline in the textile industry. It is like watching a vehicle heading to the end of a cliff. Despite all the warnings, certain regulations are causing more damage than what they are resolving,” Liu concludes.