Global Development Institute Blog

In the first of our Shifting South series, Stephanie Barrientos talks to Khalid Nadvi and Shane Godfrey. They reflect on the project and their research into regional garment value chains, and decent work in Southern Africa.

Shifting South investigated:

  • the rise of South-South trade through regional and domestic markets
  • what this means for decent work – especially women in precarious jobs
  • and looked at specific commodities and value chains in the horticulture and garment sectors in South Africa, Lesotho and Kenya.

Listen to the podcast or read the transcript in full below.


Stephanie Barrientos Hello, my name is Stephanie Barrientos. I’m an Emeritus Professor at The University of Manchester and I’ve been leading quite a large project funded by the Global Challenges Research Fund in the UK, looking at decent working regional value chains within sub-Saharan Africa. This podcast focuses on shifts taking place in African garment value chains, which has been going through major changes over the last decade and part driven by Asian imports into Africa, but also significant changes within trade and the way in which value chains fall by the trends organised across sub-Saharan Africa. Shifting South is a research collaboration between the Universities of Manchester, Cape Town and Nairobi, as well as the Ethical Trading Initiative in the UK. And what we wanted to examine was as these value chains are shifting south and as trade is shifting increasingly between countries within the global south. What are the implications for the governance, decent work and labour standards, particularly within sub-Saharan Africa. In garments, we focussed on regional value chains linking South Africa, Eswatini and Lesotho where they were supplying the South African market. I want to introduce you to the two lead researchers involved in the research. First, Shane Godfrey is at the University of Cape Town, and he led the government research within sub-Saharan Africa and also  Khalid Nadvi at the University of Manchester, who collaborated with Shane, both in terms of analysing the trade flows and on the way in which the shifting trade flows are playing out for garment value chains in Africa. Shane, could you elaborate a little bit further on the research project, the how you carried it out in relation to garments?

Shane Godfrey Thank you, Stephanie. Yes, the government research involved fieldwork in Lesotho and Eswatini and quite extensive fieldwork in South Africa, which Khalid and I did together. I did the fieldwork in Lesotho on my own and then the fieldwork in Eswatini was done by myself and Giovanni Pasquali, who was involved in the project. The interviews were with key informants, policymakers, people, relevant people in government, with many manufacturers, managers and owners of factories, as well as with trade unions and also with workers. And as I said, it’s the interviews were done in those three countries in South Africa. The interviews also included the major South African retailers or most of them, and we’re still busy analysing a lot of that data. But the findings or the data has started to coalesce around four key areas or issues, and the first is the regional garment trade patterns and what is what has influenced those patterns. The second is the key role of the South African market in the region, retailer concentration in South Africa and what is happening in, particularly the big five retailers, as they responding to growth at the value end of the market. But where one is also seeing the growth or the rise of smaller, independent and informal retailers starting to compete in that market. So it’s a very dynamic market in South Africa at the moment. And then the other areas, the implications of these developments in trade and the retail sector for decent work in the region. And one must distinguish and we will do so later between decent work in South Africa, which has a different set of circumstances and in the two neighbours, Eswatini and Lesotho, which are much lower labour cost countries. And lastly is the policy environment where we would be seeking to make recommendations and they will focus on South African masterplan, which is really the key policy intervention in the region. And that was about a year ago, introduced about a year ago, which is as attempting to support South African manufacturing sector by retailers committing to sourcing quota from domestic suppliers and from the region. But we will come back to that in more detail later. Thank you.

Stephanie Barrientos Thank you. Very interesting. Before we go into the detail of the research findings and further Khalid, could you first just paint a bigger picture about this? The changing regional trade flows within sub-Saharan Africa, how they’ve been evolving over the past decades and what you see has implications for garment sourcing within the region?

Khalid Nadvi Thank you, Stephanie. The Southern Africa and in particular, Lesotho and to some extent, Eswatini managed to develop a very strong export garment sector in response to trade preferences that were offered by the United States through the African Growth and Opportunity Act. AGOA, which came into force in the late 1990s under the Clinton administration, was meant to provide trade preferences to low income developing countries in sub-Saharan Africa to get preferential market access into the United States and the clothing sector, which became the biggest segment in sectoral terms in terms of access using AGOA as a way to get there. So one consequence would go was then the rapid growth of clothing manufacturing, particularly in southern Africa and to a lesser extent, also in eastern Africa, with countries like Lesotho, Kenya and Eswatini emerging as major, for whom the United States began to emerge as a major export destination for clothing production. And and these countries became important supplies into United States markets. Over time what has happened is that as these trade preferences took shape, the manufacturing in these countries, particularly in places like Lesotho and Eswatini was not being done by what you might call Lesotho and Eswatini capital. It was not manufacturers and companies  Lesotho owned or Eswatini owned. It was largely foreign direct investment coming in from East Asia, largely Taiwan and also from Mainland China. That located production in these locations set up factories in these locations using local labour in order to produce clothing that was geared to the U.S. market and where the depth of the trade preferences that the U.S. was offering under AGOA. Now, over time, while AGOA still persists, there have been changes in AGOA that took place over time, which have really impacted in terms of the sourcing flows of apparel from southern Africa. So to take one case Eswatini was challenged under AGOA around working conditions and as a result of that, there were limitations placed on Eswatini under the AGOA preferences. And many producers that were located in Eswatini had to begin to think of alternative end markets for their manufacturing because of the challenges that they were that were being imposed on Eswatini, labour and working conditions. So over time, we began to see that a lot of the Eswatini production began to shift from the United States into the US market. Similarly, in Lesotho, we have also seen that a number of producers have now moved into Lesotho, particularly from South Africa, who have begun to see Lesotho production of clothing not necessarily for the US market but increasingly for the South African market. So what we find is that over time, world trade preferences to the US still matter and AGOA still matters. There are question marks going forward about whether AGOA persists for the US market, and increasingly we find that the manufacturing sector for clothing has is beginning to shift. Now in Eswatini, almost 100 percent of Eswatini Clothing production that is geared to export is now geared to exports to South Africa. And in Lesotho, we see the share of the South African market beginning to grow in terms of Lesotho’s overall export profile of clothing. And many of the producers we’ve talked to in both Lesotho and Eswatini are beginning to say to us that the returns that they get in the South African markets are often higher than the returns that they would get for their clothing exports to the United States, and that the compliance costs of producing for those markets, particularly compliance costs around labour standards issues are much lower in the South African market than they are in the US market. So I think what we’re beginning to see is a big shift. Now beyond all of this. What we were trying to investigate in our project was trying to understand how trade regimes and also regional trade regimes helped to drive this shift. So Lesotho and Eswatini are part of the Southern African Customs Union, along with South Africa and Namibia and Botswana. This means that they get customs preferences, customs preferences in order to export into the South African market. So trading in South Africa means that these countries are in the same common customs union. They have a common external customary Customs Border, which means that exporting into South Africa gives you full trade preferences, and those benefits have to be weighed against the external tariffs that the SACU imposes on other regions. So what we begin to see in the regional growth apparel market ends in southern Africa as a whole is both the growth of imports from China because China is very cost-competitive, even with tariffs being imposed on China and the growth of sourcing from regional markets in southern Africa, regional supply in southern Africa, particularly in Eswatini.

Stephanie Barrientos Very interesting. So quite major changes taking place. Shane, you mentioned earlier that certain South African retailers were dominating the retail within the sub-Saharan, within South Africa and across sub-Saharan Africa. Could you expand further on the profile of these retailers and the kinds of demands that they make on suppliers?

Shane Godfrey Yes. Thanks, Stephanie. Yes. So as Khalid indicated, the South African market is really what is driving these emerging trade patterns in garments and the South African market is extremely concentrated, was dominated by six very big retailers until just last year, when one of them went under, under the weight of COVID and and earlier problems. So it’s down to the what could be called the big five, and it’s estimated that they control about 70 per cent of the garment market in South Africa. But that appears to be changing, and it’s driven in large part this change by growth at the value end of the market with the discount end of the market, and that’s leading to two developments. First. Those big five retailers, some of which are in the top market segments, are all getting a footprint in that value end of the market. And one sees it most significantly with a retailer like the FoschiniGroup buying a discount brand from the Edcon Group, which is the big retailer that went under. And so staking a claim in the value end of the market and one sees a new independent retailer emerging and possibly becoming a member of that Big Five or Big Six group called Retailability. Again, it would ask the major part of Edcon, the Edgars brand, so is not a significant player in South Africa. So there’s that restructuring of the large formal retail sector. And then secondly, there are many smaller retailers emerging and growing into this value end of the market, and they range from formal independent stores through to informal stores. And it’s important to link that to some extent and when. It isn’t an absolute link that we are establishing, but there is a core which runs from a high level of illegal imports of garments into the country through to the informal retailers in this value end of the market, who are also linked in with illegal or non-compliant manufacturers in South Africa. So this has been termed the underbelly retail sector the underbelly trade, and it is this informal, non-compliant illegal value chain you could almost call it that that has emerged in the country. The first problem is obviously with trade of this kind or manufacturing of this kind is that one can’t actually measure it. So we don’t know how large it is. But key informants at a workshop we held indicated that it is of a significant size, and some say that actually, it’s at least as big as the the big five in terms of the supply into the South African market. So it’s very large and it’s obviously up because it can’t be measured. It’s outside the realm of policy to some extent in that policy doesn’t quite understand how big it is or how how to deal with it. So that’s a real challenge facing South Africa policy in South Africa and around the garment sector, which is which also has implications for workers and decent work in the region.

Stephanie Barrientos Yeah, that’s very interesting could you expand a little bit further Shane on because you’ve got this very diverse market? We know as Khalid mentioned earlier that northern retailers in the global north in Europe and North America have quite high compliance requirements in terms of labour standards. Are this similar amongst the South African retailers? And then what’s the implications of this very diverse value chains that you’re describing for decent workers of workers working conditions, improving? What’s the outcome really for the worker’s labour standards?

Shane Godfrey Yes. Thanks, Steph. The problem in South Africa is that there is very little it’s called corporate social responsibility really hasn’t got a foothold in South Africa, and it is barely got any foothold in the garment sector in South Africa. So retailers so that this big South African retailers aren’t like the big global retailers that have a C code of conduct and a CSR policy that they apply to their suppliers and they vet their suppliers against. Only one of the retailers has in fact embarked on this by joining the Ethical Trading Initiative. So that is a big difference in these regional value chains compared to global value chains. And this is playing out by the sourcing from Lesotho and Eswatini, which are much, much lower labour cost regions. And have, you know, particularly in Eswatini issues around trade unions and how the state deals with trade unions. But it also has implications within South Africa because there’s a high level of non-compliance in South Africa, although there’s a strong trade union and progressive labour legislation is a high level of non-compliance and these this value end is really tapping into those non-compliant retailers and existing regulatory institutions are finally finding it extremely difficult to try and enforce labour regulation at those suppliers.

Stephanie Barrientos Interesting. Thank you. So really, this has quite big policy this this shifts that are taking place both in terms of trade and in terms of the diverse value chains have quite important policy implications. First, Khalid just from your perspective, what do you think the kind of policy interventions are, would you propose? But also, do you think a feasible to promote decent work and better labour standards, both for workers in South Africa, but also importantly, in Eswatini and Lesotho, which are important suppliers to the regional market?

Khalid Nadvi So one of the things that we are seeing in terms of the growth of regional sourcing into South Africa is that the big difference? I mean, there are a number of incentives that the certain Eswatini governments provide to foreign investments into the country’s, I mean investment incentives, incentives around the setting up of factories and units and tax incentives. But the big fundamental difference is the differences in real wage rates between Lesotho, Eswatini and wage rates in South Africa, particularly the differentiated wage rates that you find in urban metropolitan metro South Africa and in non-metro areas. Those wage rate differences are so substantive that it makes sense for manufacturers to locate into Lesotho and Eswatini. Now I think this raises a series of pressures, particularly around wages and working conditions and how you bring about improvements in wages and working conditions while recognising that much of this regional sourcing is reflected through an uneven development story. The Southern African Strategy, as best reflected through the master plan, has been about how you ensure the growth of the domestic manufacturing industry in clothing and how you strengthen domestic sourcing. This raises some very important questions for us as researchers, and that will impact on how policy gets rolled out onto this. So the first is given that Lesotho and Eswatini, are part of the Southern African Customs Union. The big question marks as to whether that then means that sourcing from those countries is seen as domestic sourcing for they’re part of the same customs boundary. And if not, if they’re seen as external sourcing, then how do you ensure that that domestic sourcing takes place within South Africa? Given the very wide wage differentials that persist? Our sense is that if the value end of the market is the growth end of the market, it is very difficult for producers to produce at those price points, given the wage rates that persist in metro South Africa. And that will then put the pressures on wages and working conditions at that end, so I think there’s a big challenge and a policy challenge and a challenge for different stakeholders, particularly the trade unions, in terms of ensuring that the bargaining council wage levels that take place are being met and that production can still be sourced from those locations. And how do you do that is going to be a big question mark as the, at the value end of the market grows and as the underbelly end of the market grows. I think if you then shift in terms of labour and working conditions in Lesotho and Eswatini, I think the challenge there is even greater because in part you have a very weak trade union movement in those countries that can actually bring about effective agency around workers rights and working conditions. And you have a state that really needs that foreign investment to come in, and the only basis on which that foreign investment comes in is on low wages. So how do we sort of square those challenges? Is going to become a big issue going forward, particularly in a context where for the South African market, there is no real consumer pressure or civil society pressure coming around decent work norms in working conditions, there’s not is not a demand from civil society. It’s not a demand from consumers. It is certainly a demand from trade unions. Finally, the other thing that I think our research and research other colleagues has picked up already is that there is a growth, not just open underbelly in retailing in South Africa. There’s also the growth of an underbelly in manufacturing in South Africa. There are certain parts of South Africa where you see clothing manufacturing, but which is growing in a where working conditions are very poor. So research that we looked at in, particularly in parts of KwaZulu-Natal in and around the city of Newcastle illustrates this, that working conditions in some of these factories where employment is rapidly growing and which is production that is feeding it both into the formal retail end to the of retailers in South Africa, but also into the underbelly. The working conditions in some of those factories are very poor. Their wages in those factories are below the designated wages as agreed with through the bargaining councils. That many of those producers in those areas are not meeting those requirements and yet also municipal government and local governments in those areas is keen to retain those employment, because those manufacturers, because they generate employment. So I think there’s a big set of challenges. Coming ahead is how you develop and how you square a decent work objectives with the kind of commercial pressures that we’re seeing in South African retailing of clothing and the particular growth of the value end of the market and the underbelly and of the market.

Stephanie Barrientos All right. Thank you. Very, very interesting and quite complex. Shane, you mentioned earlier the South African Master Plan. Could you just explain a bit further what that involves and how that’s playing rolling out? But also what are the public policy type interventions you think would be required in South Africa, Eswatini and Lesotho to promote decent work?

Shane Godfrey Thank you, Stephanie. Yes, as we indicated earlier, the South African, its full name is the South African Retail Clothing, Textile and Leather Masterplan. And it’s important to note that the retail upfront in that title because it has taken a value chain approach to understanding these sectors and recognises that the South African retailers and particularly these big, dominant retailers, really their sourcing decisions are the critical factor in terms of whether local manufacturing survives or doesn’t survive. Besides that, one needs to recognise that it is a South African, primarily a South African industrial policy to support and grow the South African garment manufacturing sector. So it isn’t regional and it can’t stipulate in terms of what happens in Eswatini or Lethoto where there isn’t anything comparable to the South African masterplan in terms of their garment sectors, now it’s primarily an industrial policy, but it does have a labour component to it. And the labour component focuses on this large, non-compliant component in the South African government sector, and it’s adopting various carrots and sticks, in particular making the compliance certificate issued by the bargaining council to a manufacturer that’s been inspected and found to be compliant, making that the access to various grants and upgrading programmes that are Department of Trade and Industry and Competition provide, as well as to a rebate on importing of woven fabrics. So they are attempting to beef up enforcement to introduce phased in enforcement so that manufacturers can. So it’s a sort of remedial approach to to work manufacturers up to compliance rather than just closing them down. And then also to incentivise in various ways now that that deals with the South African end. The problem is the manufacturing in Lesotho and Eswatini and what’s going to happen to them if there’s a much greater d orientation to sourcing from South Africa and there’s less sourcing from the region. Now we had a workshop and what came across very clearly, it was an undertaking by South African retailers not to reduce their sourcing from Lesotho and Eswatini that in fact, the sort of localisation drive that the master plant represents is a reduction in imports from East Asia. So that is really the target for increasing local sourcing. So the indication is that there shouldn’t be a reduction in sourcing from Lesotho and Eswatini and there shouldn’t be any loss of jobs from there. But the question then is how does one get towards a more equitable harmonisation in terms of labour costs and uplifts those workers in Eswatini and Lesotho and I mean, we looked at the issue of social clauses in the South African customs union agreement and the SADC agreement that at the workshop we held that didn’t seem to get a lot of traction. A lot of emphasis, and I agree entirely with the emphasis was placed on rather strength of trade unions in Lesotho and Eswatini and rely on collective bargaining to push up wages and conditions of employment. I think we would all be entirely in agreement with that. The question is how and how long is that going to take? And we understand that there are programmes to support trade unions and grow trade unions coming from the global union federations that have a regional branches. But that’s an area, I think, for further research by ourselves to really understand when when that is going to take effect and and when workers are really going to see the benefits of that. Khalid, I don’t know if you want to add …

Khalid Nadvi I would agree and I think there’s a lot, a lot at stake here and a lot of stake as to how this unfolds. So, you know, this point that I mean, the master plan is a really important document, and it’s really helpful that it’s been done in a way that has been consultative with the industry, particularly the retail sector. But what our research sort of points to is that there’s a challenge between the policy suggestions that are coming out from the master plan and the ways in which commercially the industry is developing and that creates a real potential conflict. Coming forward.

Shane Godfrey Just to add, the master plan is a policy. It’s not legislation. So it’s relying on those retailers effectively signing up to it and committing to meet certain targets. So the rest of the retail sector that doesn’t sign up to it is in effect untouched by the master plan and can can carry on doing what it has been doing.

Stephanie Barrientos Fascinating. So a lot of changes taking place. What we’ve really depicted is the growing importance of regional value chains and particularly in the South African retailers, but also having a value chain approach in terms of policy. But there is still this constant threat from the informal, illegal inverted commas, producers and the low end of the market. And Khalid, did you want to just add a…

Khalid Nadvi Yeah, I just want to say, I think this if we step back a little bit from the specific story within South Africa, I think there’s an interesting story here about emerging markets, a growing southern end, markets are growing and the South African story sort of underlines that, particularly for regional sourcing. It is about the growth of the southern end market. Now, many of these South African retailers are not just major retailers within South Africa, they’re also developing an international profile. They’re acquiring brands and retail outlets in the global north and in the UK market, in the European market and also in the Australian market. And they’re internationalising and in some of these firms have become some of these major South African retailers have also signed on to the UK’s Ethical Trading Initiative, either by themselves, independently or through the affiliates that they have purchased, the affiliate retailers that they purchased in the globe. So I think there’s an interesting discourse that’s taking place and interesting debate is taking place in some of these organisations in some of these retailers in terms of their engagement around decent work standards. And what will be fascinating to look at as time goes on is whether they begin to sort of differentiate their South African operations with their international operations and whether the lessons that they’re gaining from their engagement in their international operations also trickle down into their activities in South Africa. And to what extent over time, we begin to see some of these decent work norms and the kind of consensus that we’re beginning to see in northern end markets around decent work and labour standards and conditions begin to permeate more widely in terms of the South African retail market. And also this is a wider question how does that then play out in other regional markets, which are growing? So in India, in China, Latin America, we see the massive growth of middle class consumption in those countries in line in line with growing incomes and the growth of these economies. And it raises questions as to whether we will see a kind of a race to the bottom around labour standards and decent work conditions in those areas or whether we might well see in many of these countries the growth of new forms of standards, new forms of engagements around decent work as both consumers and retailers and producers begin to engage around these sets of issues.

Shane Godfrey I agree very much with you, but I just want to just add something at the end quickly. And that’s, you know, what we found in in the region is that, you know, we’ve been talking about a very contemporary situation and a very dynamic situation at the moment. But this labour differing labour cost differential in the region has long, long historical roots going back, as you mentioned the uneven development going back to colonisation of the southern African region, the discovery of gold and diamonds in South Africa, which then drove its industrialisation and the leaving Lesotho and Eswatini very undeveloped, and effectively they became labour pools for the South African mines. And it’s really that unevenness that underpins the labour cost differential now. So very interesting interplay of these historical patterns. And then, you know, these these emerging developments now and these more global developments going well beyond the region. Thank you.

Stephanie Barrientos Thanks for providing some really interesting insights into these rapidly changing trade regimes, value change shifts which are taking place and and also really thinking through what the implications are for decent work across different groups of workers, in different countries and at different types of of retail chains, if you like. So I would like to say thank you again to Shane and Khalid. If you’re interested in further information on the research findings and also on similar research which was undertaken in horticulture in Africa, you can visit the Global Development Institute website where Shifting South has its own dedicated web page with all the publications arising from the research, policy briefs and other activities, and also information on all those involved. So thank you again and look forward to engaging with you further.



Note: This article gives the views of the author/academic featured and does not represent the views of the Global Development Institute as a whole
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