The Lesotho textile giant that makes jeans for Levi Strauss, The Children’s Place and Wrangler owner Kontoor Brands has laid off 4,000 workers over the past year, the result of a dearth of orders from American brands, the rising cost of salaries, unrest in South Africa and an ongoing pandemic, local media has reported.
In an interview with the Lesotho Times last week, Ricky Chang, manager at the Nien Hsing Textile Co., said that the Taiwanese-owned business was in the process of letting go 2,500 workers from its C&Y Garments, Formosa Textiles, Global International and Nien Hsing International factories. A fifth, Glory International, sent home 1,500 workers when it shuttered last year.
Chang blamed the “negative impact of Covid-19 and other market forces” for the job eliminations, but noted that the reduction in orders from buyers only marked the beginning of the company’s woes. Recent wage protests precipitated a loss in revenue by “severely crippling” Nien Hsing’s production, while fluctuating Covid-19 infections and riots in neighboring South Africa following the arrest of former president Jacob Zuma contributed to an “uncertain business environment which is difficult to operate in.”
“Both the supply and demand side[s] of the business have suffered under the current economic climate and it is no longer feasible to continue operating as we are running at a loss,” he added. Together, the retrenchments have nearly halved the 10,000-strong workforce Nien Hsing commanded in 2019.
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Most of Nien Hsing’s output is destined for the United States, where it benefits from the African Growth and Opportunity Act’s duty-free access for thousands of products, including apparel and textiles. Lesotho exported $325 million in goods to the United States in 2019, making it the world’s No. 1 economy’s 104th-largest supplier, according to the International Monetary Fund.
Levi’s said that the denim juggernaut has maintained, “and at times increased,” its order volume with Nien Hsing over the past year. “At present, we are monitoring the negotiations between Nien Hsing and local worker unions to ensure that all legal obligations are upheld,” a spokesperson told Sourcing Journal. The Children’s Place and Kontoor did not respond to requests for comment.
Last month, the Lesotho Textile Exporters Association warned that its members were considering laying off thousands of workers because they couldn’t afford the 14 percent bump in salaries the government gazetted for the 2021/22 fiscal year in June. In clashes with police that sometimes turned deadly, workers who were earning a monthly floor wage of 1,696 loti ($113.54), or far below the living wage of 4,000 loti ($267.74), had demanded a 20 percent hike in their paychecks.
“The 14 percent wage increase will significantly affect our pricing making Lesotho products more expensive than those from other countries we are competing with for the U.S. market,” the trade group said at the time. “Under these circumstances, employers are considering temporarily downsizing their workforce to manage costs on delivering the outstanding orders until they get new ones.”
Lesotho’s garment sector is one of the African nation’s largest formal industry employers, providing jobs to more than 40,000 workers—70 percent of whom are women—in 2019. In all, more than 6,000 garment and textile workers lost their jobs between March 2020 and March 2021 due to Covid-19’s economic fallout, according to the Lesotho National Development Corporation.
Chang said that Nien Hsing is hopeful that the factory will be able to staff up “in the near future” when conditions improve. “We did not want to take this route,” he said. “We understand that this is bad news for employees but this is a painful decision that we had to take for the survival of the enterprise.”
But the retrenchments are likely to hit workers hard, pandemic or no pandemic.
“These reductions are a major blow to workers at Nien Hsing and a further indication that the pandemic’s impact on the world’s garment workers is far from over,” Scott Nova, executive director of the Worker Rights Consortium, a Washington, D.C.-based labor-rights group, told Sourcing Journal.
Samuel Mokhele, secretary of the National Clothing, Textile and Allied Workers Union, told the Lesotho Times that the unions had done “everything in their power” to prevent the layoffs, including proposing a government bailout.
“This will only compound the unemployment problem which Lesotho is already struggling with. Many people lost their jobs in the past year due to the impact of Covid-19,” Mokhele said. “The crime rate will increase as unemployed people struggle to feed themselves and their families. The economy will also significantly suffer because of the reduction of disposable incomes.”