Saturday, April 24, 2021

Africa's Sweatshops

 Economists have promoted low-wage textile industry as the best way for poor countries to build a manufacturing base. In East Africa, the promised trickle-down effects of foreign investment have not materialized. The dream of industrial growth comes at a high price.

 A number of East African countries, including Ethiopia and Kenya, are attempting to follow that path. Images of industrial progress and of politicians visiting work-shops, with rows of workers hunched over textile manufacturing equipment suggest that the development that has long eluded the continent is not too far off.

The Ethiopian government sees itself competing with Bangladesh for a place in the global clothing supply chain. And Bangladesh isn’t a floor to build on—it’s a ceiling. 

The Ethiopian Investment Commission markets the country’s wages as “1/7 of China and 1/2 of Bangladesh,” the lowest garment worker pay in the world. From these paltry wages, Ethiopian industry has grown from 11 percent of the country’s GDP in 2013 to 25 percent today. That growth is held up as a local success story. Applauding the country for “building Africa’s manufacturing strength,” the African Development Bank highlighted Ethiopia’s goal of generating $30 billion in exports from the textile and apparel sector between now and 2030.

All this development is sold on creating jobs that will reduce poverty. So how are Ethiopian workers faring?

Studies have shown that an Ethiopian garment worker needs about $146 a month to survive. Only 7.5 percent of garment workers make that much. Ethiopia’s garment sector has no statutory minimum wage; instead, the working minimum is tied to the lowest wages for government employees. As a report from NYU’s Center for Business and Human Rights notes, “The fact that government-paid floor sweepers earn so little doesn’t make $26 a fair base wage for sewing-machine operators employed by foreign manufacturers.” The Worker Rights Consortium found that in addition to being paid the lowest wages in the world (as low as 12 cents an hour), workers were facing the same abuses that plague sweatshops in Asian countries, including harassment, unsafe conditions, forced overtime, and pay deductions for lateness or missing work (on top of wages missed), “despite such practice being barred by international and domestic law, as well as applicable codes of conduct.” 

Colonial-era governments in Africa focused on producing raw materials, which were exported to the metropole and re-imported as finished goods. Shortages during the world wars, and volatility in commodity prices that made it more expensive to import manufactured goods, forced colonial managers to invest in domestic industries. With the decolonization wave beginning in the 1950s came an even greater effort to develop light industry, producing electrical machines and goods like clothing, shoes, paper, and leather. Part of the plan, then as now, was to attract foreign firms that had both the capital and technological know-how to develop industrial capacity.

 To secure these investments, governments implemented policies like tax exemptions, low customs duties, favorable exchange rates for investors, and duty-free import of capital goods. But global competition was steep, and without railroads and other transportation infrastructure, it was difficult to export goods. Neither was there enough domestic demand to support factory production, in part because workers were paid so poorly. Faced with these challenges, many postcolonial experiments in industrialization in Africa ended in failure.

The current development efforts in East Africa have been shaped with knowledge of this checkered history. 

Kenya’s government plans to develop horizontal industrial clusters that build on local strengths, with investments in tanneries and meat, dairy, and leather processing plants. The country is also undertaking efforts to train more engineers to raise the ratio of skilled workers to unskilled ones.

The Ethiopian government, meanwhile, has embraced state intervention to protect infant industries, prioritizing sectors that will “maximize linkage effects” and lead to investments in connected industries, as Arkebe Oqubay, a special adviser to the prime minister, puts it in Made in Africa: Industrial Policy in Ethiopia. In his study of experiments in the cement, floriculture, and leather industries from 1991 to 2013, Oqubay argues that low-income African countries such as Ethiopia cannot develop their natural advantages without the strong hand of the state. This doesn’t mean creating an inflexible command economy, but instead “reserving the right to make mistakes and, in the process, to learn from them.” 

Earlier growth strategies in Africa have been handicapped by a relatively underdeveloped workforce skill base. Training has to be a cornerstone of development policies, and the best bet is to build off where workers currently are. In East Africa, that means farming. Despite its much-touted manufacturing growth, more than 70 percent of Ethiopia’s workforce is still in agriculture.

The African Union’s African Continental Free Trade Area, which went into effect at the beginning of 2021, removes trade barriers for goods and services among countries on the continent, giving infant industries more access to friendly export markets. The additional income from opening trade, plus savings from eliminating tariffs, is estimated to reach $450 billion by 2035.

 The bulk of development efforts are still devoted to attracting foreign business investment, creating an all too familiar race to the bottom. The Tax Justice Network-Africa estimates that Kenya loses a billion dollars a year in tax incentives and exemptions. Export processing zones, a key part of the country’s industrial policy, give companies a ten-year corporate income tax holiday and exemptions from import duties on machinery, raw materials, and inputs. What reason do foreign companies have to invest in linkages with domestic ones, or to train workers, if they are planning to leave the moment the tax holiday is up?

Jacob Omolo, a labor economist at Kenyatta University in Kenya, describes the Kenyan state as caught between standing by the “principles and rights” of Kenyan citizens “versus their desire for investments.”

 As part of its charm offensive to attract foreign capital, the state has been reluctant to enforce labor and union regulations. Pervasive high unemployment, particularly among those under age thirty-five, also leaves workers in a vulnerable position, while the minimum wage—by some estimates, $123 per month—is half a living wage of roughly $240 per month. The promised trickle-down effects of foreign investment have not materialized.

To Omolo, the decision to neglect labor protections has been the “weakest link” in state development blueprints. African governments that fail to support workers, build on existing skills and improve them, and support sectors that create local wealth and diminish the power of foreign capital will have little hope of growing past the sweatshop floor.

Up From Sweatshops | Dissent Magazine

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