The Swazi apparel industry that once seemed the salvation of the economy has had an extremely rough year, but some insiders say the worst may be over for the surviving garment makers.

"As a small open economy, Swaziland is vulnerable to external shocks," the Central Bank of Swaziland explained in a study of factors that led to 18 of 31 textile companies shutting down since July 2004.

Workforce employment has also been halved, dropping from 31,000 workers in June 2004 to 15,000 today.

"Swaziland's clothing and textile industry, which significantly increased its exports and created thousands of jobs under the African Growth and Opportunities Act (AGOA) [through trade benefits for Swazi goods entering the US], is threatened with the Agreement on Textiles and Clothing (ATC)," the bank noted.

When it came into effect in January 2005, ATC lifted all quota restrictions on clothing and textile exports worldwide, paving the way for more cost-effective producers, such as China and India, to elbow out Swazi garment makers.

Bheki Dlamini, CEO of the Swaziland Investment Promotion Authority (SIPA), explained: "The end of the International Multi-Fibre Agreement by the World Trade Organisation [and its replacement by ATC] opened the floodgates for Chinese exports of textiles and garments into the Western markets, particularly the United States, where Swaziland enjoyed a quota and duty-free exports as a beneficiary of AGOA. As Chinese exports are cheaper for USA buyers, they are therefore preferred."

Robert Maxwell, head of the Swaziland Exporters Association, told IRIN, "The textile industry was hit hard twice in a row, and only the companies that restructured quickly survived. The first hit was when the US Congress delayed approving AGOA II."

While Congress debated AGOA rule changes, Swaziland's apparel makers saw their orders dry up in the face of uncertainty about the treaty outcome.

"For months there was no activity at all. As soon as AGOA II was ratified, the second hit came. China entered the world market, and overnight there was a 50 percent drop in garment prices," Maxwell said.

"The factories that survived laid off workers and cut costs during the AGOA II negotiations. With the advent of Chinese exports, the factories that prepared, survived," he said.

Meanwhile, suppliers, transport and other service providers, which had done good business during the apparel industry's boom years, suffered enormous losses in 2005.

This week a major road transport and freight clearing company shut down, unable to replace lost clients in the garment trade with other customers in Swaziland's struggling economy.

For the same reason, a major global courier service told IRIN it has considered shutting its facility at the Matsapha Industrial Estate, where apparel companies are concentrated outside the commercial hub, Manzini, 30 km east of the capital, Mbabane.

Restaurants and shops serving Matsapha area workers have closed or shed employees - even informal sector services like taxis and sidewalk fruit-vendors are suffering.

"This is the holiday season, and last year I was sold out - now my fruits are rotting in the sun," said 'Auntie' Shongwe from beneath an umbrella shading her selection of apples, plums and bananas.

Ten metres away, Swaziland Railways' 4:10 p.m. freight train began its daily run from the landlocked country to the port of Durban, on South Africa's Indian Ocean coast. Cargo volume is down by half on some trains, but railway officials are proud that they still run on time.

"The garment export situation has been absolutely devastating for all the support industries," Maxwell said.

The exporters' association head, who also runs a garment company, has been the leading voice in articulating the Swaziland garment industry's needs and problems to government and international trading partners like the US.

However, after two years of gloomy assessments, there is now a note of optimism in his view of the situation. "I can safely say the worst is behind us," Maxwell predicted.

"My company is fully booked until mid-2007 - we make high-end sportswear for Russell Athletics in the US - I could take five million more units easily, and give these to subcontractors. The orders are there for us - too many of them," he said.

The problem now is a shortage of skilled people. Trained workers departed Matsapha after the industry shakeout, and some left Swaziland altogether; replacing them will take time.

While the remaining, more streamlined apparel companies are recovering, SIPA has announced that no new investors in the textile business have come to Swaziland to create employment.
 
"Fifteen thousand garment industry jobs were lost in one year, and there are no replacement jobs on the horizon. We still have a massive unemployment problem. The ancillary businesses that once serviced the textile companies also must find new customers," a source with the finance ministry told IRIN.

Allafrica.com