Corporate Social Responsibility

By Shyamain Wickramasingha

The alleged human rights abuses in the Xinjiang Uyghur Autonomous Region of China led to US sanctions and then the Uyghur Forced Labor Prevention Act. The US Congress passed this Act in December 2021, and it came into effect in June 2022. However, already in 2021 the US Customs and Border Protection issued a Withhold Release Order that blocked all imports from the Xinjiang Production and Construction Corps, which produces one-third of the cotton in China, and China is the second largest cotton grower after India. This blog discusses how the recent rise of economic sanctions against China, which are mainly targeted to specific locations, cause side effects along the wider supply chains. In particular, it shows how Sri Lanka’s apparel export industry was affected by the withdrawal of investment and closure of apparel factories by a Hong Kong firm hit with US sanctions.

Esquel Group and Polytex Garments Limited Sri Lanka

Polytex Garments Limited is a subsidiary of the Esquel Group, a textile and apparel manufacturer based in Hong Kong, China. Esquel is one of the largest woven shirt makers globally. Esquel acquired Polytex Garments Limited in 1983, soon after Sri Lanka opened its markets and was integrated into global apparel production networks. From a single factory building in 1983, Polytex grew into five large-scale factories by 2020. It employed around 7,000 apparel workers in total. 

A family-owned business, Esquel Group was founded in 1978 soon after the Chinese Economic Reforms (also known as the Chinese Economic Miracle and ‘Reform and Opening’ up). Because Esquel is heavily invested in the Xinjiang region, it cannot simply ‘de-risk’ from China, as other textile and apparel companies have started to do by sourcing cotton fabrics elsewhere. From cotton seeds research to product retailing, Esquel has become a total service and solution provider of textiles and apparel. Esquel operates cotton ginning and spinning factories in Xinjiang, including a highly automated spinning mill with only about 45 staff controlling the 30,000 spindles. It has textile mills in Gaoming in Southern China producing mostly woven fabric, and garment factory clusters across Southern China. Esquel’s business strategy of full integration focused on one product segment, its ‘China only’ approach, and its high capital investments in spinning mills in Xinjiang make it difficult for the company to divest from its factories in Xinjiang. Esquel used to have a joint venture with the Chinese state-owned Xinjiang Production and Construction Corps to attain high-quality raw cotton, but it was divested from cotton farming in April 2020. Notably, Xinjiang Production and Construction Corps was a target of US sanctions announced in July 2020.

U.S. Sanctions and the Esquel Group 

In July 2020, the USA Department of Commerce placed the Esquel Group on the Bureau of Industry and Security’s Entity List, which is a trade restriction list banning cotton and cotton products originating from the Xinjiang region in China. The ban aimed at pressuring the Chinese government over the alleged forced labour of the minority Uyghur Muslims in Xinjiang. This put onus on importing companies to ensure that none of their goods are even partially made in the region of Xinjiang. Companies on the Entity List are subject to U.S. license requirements for the export or transfer of specified items. In July 2021, Esquel filed a lawsuit seeking removal from the Entity List in the United States District Court for the District of Columbia against the U.S. government. In August 2021, Esquel was removed, with conditions, from the Entity List by the inter-agency End-User Review Committee. It is not clear what those conditions were, as they were not made public knowledge. Several weeks later, Esquel resumed its lawsuit after failing to reach an agreement with the U.S. Commerce Department regarding the timetable for removal and the specifics of the conditions for removal. 

In July 2022, Ecotextile news reported that Esquel Group had suffered another setback in its appeal to overturn US sanctions against its spinning mill in China’s Xinjiang region over alleged links to forced labour. The US Court of Appeals denied the appeal limiting Esquel’s access to US markets and goods. Consequently, as reported by the Clean Clothes Campaign in 2022, international clothing brands have been ending their business relationship with Esquel in Sri Lanka since 2020. This has forced Polytex Garments to do subcontracting work for local manufacturers. 

The claim of forced Uyghur labour is strongly denied by the Esquel Group. As quoted on their website “The decision to add Changi Esquel Textile Co. Ltd. to the Uyghur Forced Labour Prevention Act (UFLPA) Entity List is both misguided and unjust. We morally oppose the use of forced labour, which is completely contrary to our principles and the business practices by which we have operated for more than 40 years”. Esquel claims that it has provided extensive information about its operations, independent third-party audits, traceability documentation, supply chain maps, and a variety of other documents to the U.S. Department of Commerce and other relevant agencies “proving Esquel does not use forced or coerced labour”. Esquel claims that rather than addressing any of the facts they provided, the US government has chosen to continue to rely on a handful of misleading anecdotal media mentions and “poorly researched reports to justify its policy decisions”. On their website, Esquel claimed that they had to close several of their factories in various countries due to US sanctions. Esquel accuses the U.S. government’s “perfunctory fact-finding process has negatively affected thousands of innocent workers globally from Sri Lanka to Mauritius to Malaysia – whose livelihoods have been destroyed…” (Esquel Group; 20 June 2022).

Polytex Garments Limited in Sri Lanka – Messy closure and contested labour politics 

Esquel Group declared the Polytex factory closure in Sri Lanka as a direct result of US sanctions, a fact confirmed by trade unions and employers’ associations in Sri Lanka. As Esquel Group itself reported to JustStyle, it has cut production in Sri Lanka due to “the loss of many US customers”. 

The five factories of Polytex Garments Limited were located in Ekala, Kegalle, Koggala, and Yakkala, all out of Colombo. The first to close was the factory in Yakkala in 2020. According to a trade union, the reason for the closure of the first factory was cited as lack of orders and challenges faced due to the Covid19 pandemic. Most workers were given termination benefits, with the rest transferred to the Polytex factory in Ekala, closer to the Katunayake Free Trade Zone. Trade unions said that to facilitate this transfer, the Ekala factory had to fire all or most of the workers on probation, whose employment with the factory was less than six months. This fact however is not verified by the employers. Following this, the Ekala and Kagalle factories were closed in June 2022. As reported by JustStyle, the remaining two factories – Koggala 1 and Koggala 2 were closed in March 2023. For the latter two, permission from the Commissioner General of Labour to terminate the workers’ contract was still pending as of April 2023. As confirmed by unions and workers, Polytex Garments Limited had paid over and above the legally stipulated termination benefits including gratuity, employers provident fund, compensation payment according to the termination laws, and an additional three months’ salary. Polytex also waived off all outstanding loans taken by the workers. 

The events leading to the factory closures turned out to be messy and were highly contested by trade unions, workers, and employers. This was well reflected in the contrasting accounts shared by different stakeholders with regard to the closure of the Koggala factories. In spite of having spoken to multiple stakeholders – including workers, employers’ associations, trade unions, the labour department, and civil societies – it was difficult to have a clear understanding of exactly what happened during the closure of the last two factories in Koggala.  

According to the representatives of employers’ associations and the labour department, before the factory closure, Polytex sought to change the name of the company from Esquel to ‘JK Apparel Koggala Private Limited’ and continue operating in Sri Lanka. The reason for the name change as revealed by the employers association was to secure the orders and independently get the quotas required for direct manufacturing instead of subcontracting through other manufacturers. This name change was thus projected by the employers association as a strategic move by Polytex Sri Lanka to distance itself from the US sanctions on Esquel.  The main national trade union (Union) involved in the negotiation initially agreed to this. Workers were provided the assurance that the status and terms of employment would remain the same including salaries, job descriptions, promotion schemes, and accumulated gratuity and statutory benefits. Workers consented to this transfer in front of the Commissioner of Labour. The proceedings were discussed through a series of online meetings (due to the pandemic conditions) which were attended by all parties concerned including workers’ representatives, the labour department, employers’ representatives, and the management of Polytex. 

Employers’ associations alleged that the leader of the Union then “changed his word”. Instead, the Union had demanded that Polytex terminates the contract with workers, pay compensation and termination benefits plus an additional 20% to the workers. Upon paying these benefits, the Union had requested Polytex to re-hire the workers to the ‘new company’. As the employers’ association justified, Polytex Garments Limited could not afford to pay both the termination benefits and then continue the business with the new company, especially, as they were already financially hit by the pandemic and the US Sanctions. This resulted in the closure of the factories. 

The Union however shared a different version of the events that lead to the closure. According to the Union, the name change was already carried out by Polytex Koggala in 2022 and workers stayed on as employees for about one month after the name change. As a former worker of Polytex quoted “they explained to us that they could not get orders from America. They said they are changing the name to see if they could get orders”. But the Union said that they suspected that the two factories in Polytex Koggala were being sold to a financially non-viable businessman. The Union feared that a few months after the acquisition, the new buyer would go bankrupt, resulting in workers losing all accumulated benefits and compensation including gratuity and termination benefits. The Union cited this as their reason for the objections to the transfer of workers to the new factory. Subsequently, the unions advised workers not to agree to the transfer, resulting in the closure of the two factories in Koggala. 

Implications for apparel workers 

Indeed, Polytex workers were extremely disappointed and distressed about the factory closer. As a worker quoted “We tried very hard to stop the closure. We even met government ministers and the Board of Investment. We appealed to them to help the factory get orders”. Simultaneously many protests were being carried out by workers outside the Polytex factories reportedly against the closure of the factories. Some of these protests culminated in workers holding the General Manager and the Human Resources Manager of Polytex Garments Limited hostages on the factory premises. The two executives were rescued by army and police officers who arrived at the scene in the early hours of the following day. 

The closure of Polytex Garments Limited resulted in about 7,000 job losses. At the time of writing, most of the workers who lost their jobs were unemployed. Some had gone back to their villages, and some were engaging in informal work. Some workers were hired by other factories, but many of them were again let go of when those factories started downsising due to the challenges of the economic crisis in Sri Lanka and the lack of orders. As per the labour laws, employers are able to let go of workers who are on probation (under six months of service). This unfortunately has been the case for Polytex workers who joined other factories. Another segment of workers was reported to be ‘blacklisted’ in the industry. According to trade unions, these were the office bearers and key members of the Polytex trade union, who were involved in the protests. A manufacturers association commented these were the workers who obstructed the proceedings and prevented the continuation of the business and the potential continuation of employment for workers. In addition, as confirmed by an employers association, compensation of 200 workers was pending as of June 2023 due to these workers having taken legal action against Polytex.

The closure of Polytex factories took place just as the country was emerging from the pandemic. The closure also happened in the middle of the worst economic crisis the country faced since its independence from the British Empire 70 years ago. The inflation had skyrocketed with cost of living increasing by 200% or more. At the time of the closure, garment workers were facing a rapid rise of the cost of essential goods, shortages of electricity, shortages of food, medicine, and other necessities, and a declining value of the national currency. Loss of employment in this current economic crisis had plunged Polytex workers out of the frying pan into the fire. According to the Union, two workers have already committed suicide due to the loss of income. This information however is not verified and nor published elsewhere. 

Trade sanctions and increased vulnerabilities of disadvantaged communities

Sanctions are increasingly becoming the weapon of choice to enforce US foreign policy goals, from countering terrorism, battling drug trafficking, to countering human rights violations. In a fully integrated global economy however, the effects of such sanctions are not limited to the targeted countries, individuals, or governments. More often than not, the worst affected groups of such sanctions are people who already live under precarious conditions. Ironically, in cases such as of the current example, trade sanctions imposed to prevent alleged violations of human rights in one country have resulted in erosion of livelihoods and social welfare standards in another. 

The trickle-down effects of trade sanctions in global supply chains are thus varied and complex. It is important to have a clear understanding of the costs and benefits of unilateral economic sanctions, not just for the nations such sanctions are enforced on, but also on the economies and people, who are inter-linked and integrated into these supply chains and are at the risk of being affected by such sanctions. The effects of such sanctions linger long after they are lifted because it is hard to recover from the loss of business and livelihoods. Businesses lost today for the Sri Lankan apparel industry due to the closure of five large scale factories means lower exports revenue at a time when the country is devastated by an economic crisis. Income lost today means thousands of workers are plunged below the poverty line, unable to provide for their families and growing children. Such losses – both human and economic – are difficult to reverse. While it is not clear whether the sanctions will have the intended effects on forced labour in the Xinjiang region, the sanctions have had unintended effects on the lives of labour along the apparel global supply chain as shown with the closure of Polytex Garments Limited in Sri Lanka. 

Shyamain Wickramasingha is a Research Fellow at the University of Sussex Business School, and a Visiting Fellow at CBDS, within the Department of Management, Society and Communication at Copenhagen Business School. Her work focuses on the political economy of global production networks with an emphasis on inter-firm relations, uneven development, and labour regimes. 

By Shyamain Wickramasingha

How can an entire industry flourish during a crisis, yet plunge its workers into precarity? 

As Sri Lanka is battling its worst economic crisis for 70 years, this blog looks at the crisis’s paradoxical effects on the firms and workers in the Sri Lankan apparel industry. 

Sri Lanka: economic crisis and the apparel industry

Sri Lanka is currently battling with what is being described as the worst economic crisis since the country’s independence in 1948. In March 2022, Sri Lanka declared itself bankrupt, having defaulted its foreign debts of over $55bn. Without adequate foreign reserves, the government has been struggling for over a year now to provide its citizens with the most basic needs such as fuel, electricity, gas, essential drugs, and foods. The food security is severely threatened by the ongoing fertilizer problem in the country which has destroyed and slowed the growth of crops including rice, vegetables, and fruits. 

Against this turbulent economic backdrop, the fate of the apparel industry has been a major concern. The apparel industry is the most significant contributor to the economy, accounting for over 45% of the country’s export earnings. Media, researchers, and industry stakeholders predicted and continue to express their concern that the country’s economic turmoil and political instability could adversely affect apparel exports. On the one hand, stakeholders were concerned that the lack of steady supply of fuel and electricity would affect the smooth operations of the industry. On the other, it was noted that brands and retailers have started to move sourcing orders from Sri Lanka to neighboring countries to mitigate the risks. As JustStyle reported in mid-2022, some of the expected consequences were loss of business and revenue and re-location of production to other countries. Furthermore, given that Sri Lanka’s apparel production relies on imported raw material, an increased concern was the ability of Sri Lankan manufacturers to afford the foreign currency reserves required to purchase raw material to fulfil orders. 

Winners and losers: the remarkable performance of the apparel industry 

As the crisis evolved through 2022 to 2023, contrary to these initial concerns, the apparel industry has been performing surprisingly well. A closer look at the crisis response reveals that the industry is cushioned by concessions granted by the government and advantages of foreign trade that are not available to local businesses. Power cuts, at times extended to 10-13 hours per day, did not apply to export processing zones and the garment factories located in other areas. Recognising the importance of export production, the government excluded the locations of garment factories in their electricity demand management schedule. Similarly, even though there has been a severe shortage of fuel – with fuel stations shut down for weeks – the apparel industry saw a steady supply of fuel. As quoted by a key apparel manufacturer “I think as an industry we have been fairly insulated throughout the crisis because there was a recognition that the only way out of the crisis is to focus on apparel and tourism. So, there were certain changes made by the government that allowed us to source raw material and operate factories without any interruptions”. In addition, with the US Dollar value going up 100% against the Sri Lankan rupee overnight in March 2022, the industry gained significantly from the exchange rate depreciation, especially since the workers’ salaries and some production costs remained unchanged. Furthermore, manufacturers have been able to keep some of the revenue in offshore accounts, a practice currently being debated and criticised by media and activists. 

Despite the ongoing political and economic turbulence in the market, investors have continued to show interest in the sector. The Board of Investment Sri Lanka reported that it has signed agreements worth $76m for new investments and expansions in the sector in 2022. The industry’s remarkable resilience against the economic challenges were shown with an all-time high revenue of exports in 2022. As per the Joint Apparel Association Forum, June 2022 recorded the highest performance for a month ever reported in the industry, with a 39.45% growth of export revenue. By December 2022, Sri Lanka reported $5.6bn revenue from apparel exports, a 10% increase from 2021 and a 5.6% increase from 2019, the pre-pandemic context. Thus, contrary to the mainstream opinion that the economic crisis would set-back the apparel industry, the industry has shown not only resilience but a significant growth. 

Growth of exports revenue in the Sri Lankan apparel industry: 2004 – 2022

Winners and losers: where are the workers?

The resilience of the capitalist economic system is such that even against unprecedented disruptions, capitalists emerge as stronger than ever. The moment a crisis strikes, the foremost concern of nation states and capitalists is the resilience and recovery of business. To this end, governments prioritise the needs and wants of businesses, with greater concessions granted to business owners to deal with the crisis. Existing strategies are strengthened, new strategies are drawn, and new plans are made. Yet, this latest example of the Sri Lankan economic crisis shows that workers who are toiling at the bottom end of the businesses are left behind. 

While the apparel industry has grown from strength to strength, apparel workers are being pushed to further precarity. As a manufacturer himself admitted, “the real people who felt the crunch of the economic crisis are workers”. Since March 2022, living costs have increased at an unprecedented rate, with prices of essential goods going up by 400%. In contrast, existing standards of the industry are eroded, with workers having to deal with loss of financial and material benefits such as overtime, bonuses, increments, transport, and free or subsidized meals. This has left over 350,000 apparel workers who were already living on subsistence income struggling to survive with their monthly salary. Their salary falls between $45 – $90, with $45 being the minimum wages in the industry and $90 being the total take home salary including overtime and production incentives that are available for workers. With salaries remaining the same and some of the incentives removed, apparel workers are struggling to fulfil even their basic needs. Even though a monthly Emergency Relief Allowance (ERA) around $27 for workers has been established to counter the effects of currency devaluation and skyrocketing inflation on workers’ livelihoods, the Clean Clothes Campaign found that apparel workers have not been receiving the full ERA. With the absence of any support mechanisms, local civil society organisations in the Katunayake Export Processing Zone revealed that they are currently running soup kitchens every weekend to provide meals for the most vulnerable segments of workers such as pregnant and lactating mothers. How does one reconcile this paradox: while the industry is thriving, its workers are starving?

Images of soup kitchen operated by Dabindu Collective, Katunayake Free Trade Zone

Making sense of the paradox that does not make sense… 

Externalising the costs of business has been the modus operandi of capitalists, where these costs are often born by the society and environment at large. In this vein, has the resilience and recovery of the Sri Lankan apparel industry been achieved partly at the cost of the financial, material, and emotional wellbeing of workers? Do the apparel workers lives matter less? These workers, integral to the Sri Lankan economy, are largely part of the hidden workforce of global supply chains and already face poverty wages and very few if no social protections. The economic and social disruption of crises – both the Covid19 pandemic and the economic crisis –  have threatened the long-term livelihoods and wellbeing of hundreds of thousands of Sri Lankan apparel workers, predominantly women and primary caregivers in their families. 

In an industry where ethical sourcing is supposedly playing a central role, how ethical is it to leave the workers behind in the capitalist agendas of resilience and recovery? As the Clean Clothes Campaign (CCC) revealed in early 2023, many attempts to engage with brands urging them to take actions to safeguard the livelihoods of their workers have been futile so far, except for ASOS, Patagonia, and Victoria’s Secret who have reacted positively. Throughout the year of the crisis, CCC has been calling upon brands to ensure that the workers in their Sri Lankan supply chains are paid the ERA unconditionally while securing workers right to organise. As a trade union quoted, “Sri Lankan garment workers have contributed to making these brands rich. Therefore, the least these brands can do is to ensure their workers get through the crisis”.  The story of Sri Lankan apparel workers in crisis has laid bare the systemic failure of brands’ ethical codes. Ethical codes have barely been able to protect apparel workers at the best of times, but they have been little to no use when the crisis struck. Brands can no longer continue to pretend that their regulatory interventions are working on the grounds. This leaves us with an important question. How can decent work really be ensured in global supply chains? Who should and can take the responsibility to protect workers’ interests? Where do we go from this point? 

Operation in crisis mode now seems to be the ‘new normal’ for global supply chains.  For Sri Lanka, economists predict that it will take at least ten years to reverse the effects of the crisis. Precisely because of this, the Sri Lankan apparel industry is in urgent need of an inclusive, just, and equitable plan that will ensure not just the resilience and the growth of the industry, but also the material and emotional wellbeing of its workers. If a commitment to such a plan is not forthcoming from brands and manufacturers, then it is the responsibility of the government to safeguard the rights of workers. 

If the government is also not capable of stepping up to do what it should have been doing in the first place, then the only realistic solution is a collective intervention delivered through a multi-stakeholder initiative. Such an approach can be similar to the Bangladeshi Accord (the Accord on Fire and Building Safety), with legal teeth to hold brands and manufacturers responsible for living wages and fair working conditions in the industry. A focused and targeted intervention like this can only be driven at the global scale by workers representatives, where enforcement is grounded on a chain of market sanctions, seeking first to influence consumer decisions and apply pressure on brands, with the brands transferring this pressure to manufacturers through their purchasing decisions. Like in the case of the Accord, such a collective effort may have the potential to protect workers interests and ensure that workers are not left behind. It will help workers cope as the economic crisis and the resultant inflation escalate at an unprecedented rate in the country, creating havoc on their lives and livelihoods for years to come. 

Shyamain Wickramasingha is a Research Fellow at the University of Sussex Business School, and a Visiting Fellow at CBDS, within the Department of Management, Society and Communication at Copenhagen Business School. Her work focuses on the political economy of global production networks with an emphasis on inter-firm relations, uneven development, and labour regimes. 

Additional resources on the Sri Lankan apparel export industry by the author:

• CBDS Podcast: Informality in the Sri Lankan apparel industry – choice or no choice? CBDS Podcasts with Prof. Lindsay Whitfield and Dr. Shyamain Wickramasingha (Episode 2).
• Wickramasingha, S. (2023). Re-imagining vulnerabilities: The Covid-19 pandemic and informalised migrant apparel workers in Sri Lanka. Research Paper, International Center for Ethnic Studies, Colombo.
• Wickramasingha, S., & De Neve, G. (2022). The collective working body: Rethinking apparel workers’ health and well-being during the COVID-19 pandemic in Sri Lanka. Global Labour Journal, 13(3). 
• Wickramasingha, S. (2022). ‘Living for the day’: Informality, gender, and precarious work in the Sri Lankan apparel industry. SSA Polity. 

By Søren Jeppesen, CBDS, MSC, CBS and Andries Bezuidenhout, Department of Development Studies, University of Fort Hare, South Africa

The garment industry is often portrayed as an industry that has the potential to bring about large-scale economic and social changes in countries in the Global South. Bangladesh and China are examples of this, where garment manufacturing led to increased levels of employment and further industrial development. However, smaller economies can also benefit from the industry by establishing a significant number of formal jobs in contexts otherwise dominated by informality and subsistence agriculture. Lesotho and Eswatini (formerly known as Swaziland) in Southern Africa are such examples, where some 45.000 and 22.000 jobs have been created since the late 1990s/early 2000s. The bulk of the garments made in these new factories is exported to the US and to the two countries’ South African neighbours.

However, the garment industry also has a different and somewhat darker side. Significant parts of the industry are characterized by tough working conditions and extremely low wages. This, for obvious reasons, attracts criticism from workers, trade unions, consumer organizations, NGOs, and human rights organizations. Lesotho and Eswatini are no exception to this. In the late 1990s and early 2000s, campaigns about working conditions in these factories undertaken by workers and unions, supported by student movements and unions in the Global North, led to some major retail brands introducing labour codes of conduct to be complied with by their suppliers. These codes, some argue, will ensure proper working conditions and wages not lower than the national minimum level.

Particularly in Lesotho, the implementation of these codes of conduct led to some improvements. To be sure, the country marketed itself as a ‘sweat free’ production destination after these codes had been implemented by major fashion brands. These improvements include better lighting and temperature control in factories. Lesotho, also called the Mountain Kingdom, has extremely cold winters and seething hot summers. However, there is an argument that this focus on ‘outcome rights’ is at the expense of workers themselves voicing their own concerns, also referred to as ‘process rights’ (for more on ‘outcome rights’ and ‘process rights’ see Mick Blowfield’s article published nearly two decades ago in Third World Quarterly *). In addition, while some basic health and safety conditions have improved, wages remain low. The result is that workers and trade unions continue to dispute the sustainability of their working conditions.

The situation in Lesotho and Eswatini points to a number of salient issues regarding options for workers and trade unions in similar contexts, which we outline below. Three issues stand out:

1. Although codes of conduct fulfil some minimum conditions according to national law, these codes do not necessarily ensure ‘good working conditions and proper (living or decent) wages’.
2. Although consumers in the Global North may think that a label in a T-Shirt stating that certain standards have been met and social responsibilities upheld, the groups mainly impacted in the Global South may think differently.
3. While minor improvements in working conditions and (minimum) wages might be celebrated as ‘major achievements’ at one stage, the benefits and experience impact in the Global South can be limited and short-lived. This, in turn, calls for long-term and a more sustained effort internationally and nationally, if the process of outsourced production is to lead to more substantive benefits for workers, and for companies and economies in the Global South.

The entry of the garment industry in Lesotho and Eswatini & the response from workers and unions

Garment manufacturing started in Lesotho and Eswatini in the 1970s and 1980s when South African companies set up production in the two countries. The new employment options were generally welcomed, but as Asian, mainly Taiwanese, companies joined the industry, discontent grew. These manufacturers were under pressure to produce large orders at cut-throat profit margins. Supervisors often did not speak local languages and did not understand local behavioural norms. Workers felt offended by what was considered to be harsh language by foreign supervisors and protests were staged. As the industry rapidly expanded due to additional South African, but in particular Taiwanese investments, additional protests followed. Now issues emerged that also related to long working hours, in warm/humid and poor ventilated factories, and low wages.

Trade unions engaged in collective organizing of workers, though encountering several obstacles in reaching a sufficient level of representation to be granted rights to negotiate with management on behalf of workers. Both Lesotho and Eswatini have labour laws that technically comply with the International Labour Organisation’s core conventions, but the proverbial devil is often in the detail. First of all, in Lesotho, labour laws stipulate that such rights can only be granted when organizing 50% of the workers in a workplace. This threshold for representation is extremely difficult to achieve. In Eswatini, strikes are technically legal, but long ‘cooling-off periods’ stipulated by labour law makes it hard to follow through on industrial action. Secondly, in both countries several unions sprung up, which led to internal competition and union rivalry. In Lesotho, this even further limited the chances of even one union being able to organize 50% of the workers. Thirdly, due to intimidation, extremely low wages (which makes paying union dues difficult), as well as the fear of losing their jobs, workers were reluctant to join unions. So, limited progress materialized.

The picture seemed to change as student organisations and unions in the US became aware of the conditions in Lesotho and to some extent Eswatini. They started to engage the US retailers and brands buying the products from Southern Africa and campaigning in favour of improved conditions in the factories. In Eswatini, where a larger share of the production went to South Africa, the unions started to collaborate with South African counterparts (unions from the Congress of South African Trade Unions, or COSATU). Eventually, the US retailers and brands found the media attention and queries in the US to be too cumbersome. They accepted that some improvements needed to take place and a number of codes of conduct were signed between the US buyers and the mainly Taiwanese garment producers.

These labour codes of conduct led to some improvements in wages, as well as safety and health conditions. An industry initiative in Lesotho attempted to pool resources from different companies to respond to high levels of HIV/AIDS among employees. These initiatives were celebrated in the media in the US, but soon the workers and unions in the two countries realized that the wages continued to be (way) below a living wage. Garment manufacturers expected their orders to increase due to them complying with codes of conduct, but this was not the case. Some union activists felt that the codes made minor improvements in terms of outcomes, but did not significantly address extremely low wages. As a result, protests resumed – and continue to do so as workers fail to see significant improvement.

The challenges encountered

The implementation of codes of conduct indicates some level of attention to the particular economic and social issues in the countries where factories are located. There is certainly some level of social responsibility among both brands and retailers as the industry’s major buyers. But the question remains whether these improvements will spill over into sustained changes and more meaningful improvements. Workers and unions have quite legitimate claims — who in a Danish setting would not acknowledge the right to a living wage? — but industry conditions point in a different direction. These conditions are linked to the competitive nature of the industry, dynamics related to the states where production is located, as well as the limits to consumer activism under such conditions.

From a global perspective, fierce competition between countries to attract garment manufacturers to set up shop means that the typical wage paid is low. Wage increases beyond a certain level can price a country out of the market and producers may move elsewhere (on this, see Pietra Rivoli’s now classic book The Travels of a T-Shirt in the Global Economy **).

In addition, and also importantly, workers and their unions have little backing from the state in the two countries. As mentioned above, on balance the labour laws are in support of the garment manufacturers and working against the interest of the workers and their unions. More importantly, the governments of the two countries have a clear agenda in support of the garment manufacturers as part of their investment policy. The outcome of this has been a foreign-owned industry with little link to local businesses and markets. There certainly is the potential that the presence of the industry could assist in building locally owned businesses, but little effort to bring this about through industrial policy. Rather, state intervention is directed at tax breaks for investors, the provision of factory shells in industrial parks, as well as the promise of labour at competitive wage rates. Accordingly, the labour side has been met with a narrative of ‘we should make sure not to scare away the investors’ (understood as ‘we should not ask for too high wages’) – or as framed in the Eswatini context: ‘The foreign investors are like birds who can easily fly away’. In both countries, strikes are routinely met with police violence.

Finally, the awareness of the ‘critical consumers’ and to some extent the ‘critical/supportive’ media in the Global North tends to be short-lived. While both groups can be mobilized for a cause for some time, both tend to turn attention elsewhere within a short time. Consumers feel assured that the social responsibilities are actually making a difference and tend not to follow up on their earlier concerns. Media tends to move on to the next ‘hot topic’ and similarly not follow up on earlier inquiries. Hence, the initial gains made based on attention, joint collaboration and pressures in the Global North and in the Global South wane, leaving workers and unions to continue their fight alone (see Gay Seidman’s book Beyond the Boycott: Labour Rights, Human Rights, and Transnational Activism for more on this ***). The bottom-line in Lesotho and Eswatini, unfortunately, is one of limited and insufficient change leaving the workers with non-living wages and a lot to be desired regarding working conditions in general.

Ways ahead

An analysis that only points to the structural constraints to improving the working conditions and lives of workers in these garment factories runs the risk of ignoring their own efforts to bring about change. Despite the constraints on the potential outcome of the years of struggle, workers and unions have made progress and continue to push for decent work and living wages. In Lesotho, unions often strategically use contact with fashion brands to put pressure on local manufacturers and they have also put political pressure on the state to increase the minimum wage. Unions also formed a single union called the Independent Democratic Union of Lesotho (IDUL), although smaller rivals still muddy the waters of solidarity. In Eswatini, rival unions have also come together to form the Amalgamated Trade Unions of Swaziland (ATUSWA) and have used international pressure to force the state to recognise them as legitimate unions when the government refused to register the newly formed union. The history shows that options for positive gains do exist, especially when based on international collaboration and an ability to create international attention to the issues at stake.

Here we could highlight that proper consumer awareness in Denmark and in South Africa can potentially have significant influence on the situation, but this influence also depends on a more careful understanding of power dynamics in the industry. These power dynamics relate to both the cut-throat nature of competition in the industry and local repression by governments. Hence, activism in the Global North also has to be focused on strengthening internal workers’ organisation and not be focused on ‘outcome rights’ at the expense of ‘process rights’. In the end, workers should be able to voice their interests, rather than being the beneficiaries of ‘social responsibility’. In both countries, the unions have been able to overcome former differences and set up common unions – an important step towards securing the rights of their members.

The blog draws on a longer-term collaboration between the authors, which presently is supported by funding from the Danish Free Research Funds (in Danish: Danmarks Frie Forskningsfond – DFF) through its Society and Business arm. The funding is allocated for an ‘International Research Stay’ for Søren Jeppesen at University of Fort Hare, South Africa with a focus on: ‘Understanding the Role of Business in Development: The Garment Industry in Southern Africa and Enclave Development.’ For joint publications, see below.

Søren Jeppesen is an Associate Professor in Business & Development Studies (see: www.cbs.dk/en/staff/sjmsc). His main research areas includes CSR, SMEs and Entrepreneurship in developing countries with an emphasis on Southern and Eastern Africa. He works on issues regarding local factors which influence the development and growth potential of developing country firms (or lack of same). One of his major research activities concerns the importance of Codes of Conduct for working conditions in the textiles and clothing industry in Southern Africa (in South Africa, Lesotho and Eswatini).Andries Bezuidenhout is Professor of Development Studies at the University of Fort Hare in South Africa’s Eastern Cape province. His main research areas include an interest in precarious labour, labour markets, labour movements and development policy. He is the co-author of Grounding globalization: labour in the age of insecurity (2008, Blackwells) and co-editor of the forthcoming volume Critical engagement with public sociology: Perspectives from the Global South (2022, Bristol University Press).

Joint Publications:

Bezuidenhout, A. and Jeppesen, S. (2011). ‘Between State, Market and Society: Labour Codes of Conduct in the Southern African Garment Industry.’ Development Southern Africa, Vol. 28, no. 5, pp. 653-668.
Jeppesen, S and Bezuidenhout, A. (2019). ‘Swaziland: The Garment Industry in its Economic, Political and Social Context.’ Frederiksberg: Copenhagen Business School [wp] 2019, 51 p. (CBDS Working Paper Series, No. 4, 2019).
Jeppesen, S. and Bezuidenhout, A. (2019). ‘Lesotho: The Garment Industry in its Economic, Political and Social Context.’ Frederiksberg: Copenhagen Business School [wp] 2019, 50 p. (CBDS Working Paper Series, No. 3, 2019).

References/Further reading:

*Blowfield M (1999) Ethical trade: A review of developments and issues. Third World Quarterly 20(4): 753-770.
**Rivoli P (2005) The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade. Hoboken, NJ: Wiley.
***Seidman G (2009) Beyond the Boycott: Labour Rights, Human Rights, and Transnational Activism. New York: Russell Sage.

By Lotte Thomsen (Centre for Business and Development Studies, Copenhagen Business School) and Martin Hess (School of Environment and Development, University of Manchester)

Did you also wonder why coloured gemstones, like rubies and emeralds, are ‘back in the market’? And why they abruptly compete with diamonds, which were otherwise the most valuable and desirable stones since the early 1900s? Our joint effort to provide some answers to these (and other) questions so far led to a newly published paper in Economic Geography, which explores the connections between the rising popularity of coloured gemstones and a corporate re-focusing away from diamonds.

The image and value of diamonds was challenged and problematized since the 1990s when they became connected with a variety of sustainability challenges, not least with conflict in diamond supplier countries. In contrast, the social and environmental problems of the coloured gemstone industry have not yet been the focal point of similar scrutiny and intensive research. Rather, coloured gemstones are often branded as “sustainable”. We show how the rising popularity and value of coloured gemstones is part of a “corporate escape” from known problems in the diamond sector.

Gemstones are highly connected to their “grounded” nature and geographical origination. “Geography” is therefore an essential aspect of gemstone and jewellery valuation, and “provenance” is often utilised as a marketing tool in the industry. However, using “origination” for branding purposes certainly works best when the places in which consumer products origin are perceived as “exotic and adventurous” rather than “problematic and unsustainable” by consumers. Gemstones frequently originate from “dark places”, where sustainability challenges for mining communities, workers, and the environment are severe and manifold. Gemstones are also often unearthed where sourcing is considered unethical or even embargoed. Thus, the geographical origination of gemstones is potentially problematic for retail sales.

Corporations therefore increasingly turn to strategies and practices of “geographical dissociation” of places and matters that are damaging for retail sales and brand reputation. An inherent intransparency of the industry has become key to such processes of dissociation. Gemstone mining, processing, and trading takes place in overly complex and unregulated supply networks which connect with global value chains for gemstone and jewellery. Thus, coloured gemstones that enter into international markets commonly involve informal—and sometimes illicit—mining and trading practices.

You can read much more about the myriad of trading networks and global value chains for coloured gemstone and jewellery, by accessing our full paper:

Lotte Thomsen & Martin Hess (2021) Dialectics of Association and Dissociation: Spaces of Valuation, Trade, and Retail in the Gemstone and Jewelry Sector, Economic Geography. https://www.tandfonline.com/doi/full/10.1080/00130095.2021.1989302?src

References

Channel News Asia. 2018. Why coloured gemstones are so popular right now.

Ibert, O., Hess, M., Kleibert, J., Müller, F., and Power, D. 2019a. Geographies of dissociation: Value creation, ‘dark’ places, and ‘missing’ links. Dialogues in Human Geography 9 (1): 43–63.

Pike, A. 2015. Origination: The geographies of brands and branding. Oxford: Wiley.

Shortell, P., and Irwin, E. 2017. Governing the gemstone sector: Lessons from global experience. Natural Resource Governance Institute, September 19, 2017

Wright, C. 2004. Tackling conflict diamonds: The Kimberley Process certification scheme. International Peacekeeping 11 (4): 697–708.