Mauritius Textiles : critical juncture

A recent statement from CMT (Compagnie Mauricienne de Textile) and the situation at Palmar Ltée has created an upheaval. While Palmar Ltée has gone under receivership, the direction of CMT announced that it is looking at the possibility of relocating part of its operation towards Mozambique, meaning the elimination of 5,000 jobs. Loss of jobs, cry of despair and economic burden are on the agenda. Is our textile industry on the verge of a big crisis?

The textile and clothing industry has been since decades an engine of economic growth but over the past few years, this industry is facing a crisis. The director of CMT, Francois Woo, recently highlighted the difficulties the Mauritian textile is facing and his willingness to relocate to Mozambique. Nevertheless, this is not the first time CMT has spoken about this plan of his. In 2015, the director had pointed out that they did not agree with the government policy of not renewing the permit of foreign workers and this created a turmoil back then. Added to this came the news of Palmar Ltée going on receivership. Workers are totally confused about the situation. 

Over time, the textile industry benefited much from the Government. For instance, 98 companies have benefitted from the Speed-to-Market Scheme (STMS), resulting in an increase of 9% in exports by air to Europe and 20 companies have benefitted from the Exchange Rate Support Scheme (ERSS), which was set up in September 2017 to cushion the decline in the revenue of the manufacturing Export-Oriented Enterprises due to the sharp depreciation of the US Dollar. Without forgetting the Stimulus package as well. Despite this, how come our textile industry is plunging downwards? Experts in the field shed light on this issue. 

Statistics 

Statistics demonstrate that the contribution of the manufacturing sector to the Gross Domestic Product (GDP) is declining. The figure fell down from 14.7% in 2015 to 13.1% in 2018. The contribution of the textile segment, meanwhile, also declined from 4.6% to 3.7% during the same period. In 2016, total exports of the textile sector amounted to about Rs 27 billion, compared to Rs 29.4 billion the previous year. Total employment in the sector was around 47,100 in 2016, compared to around 48,600 in 2015.

The burden on the economy

Economist Pierre Dinan asserts that with the decline of the textile industry, the commercial balance will be impacted. “Our textile sector mostly concentrates on export. If this sector is affected, this will result in less export. On the other hand, we will keep on importing. So, the balance of import and export will be affected. For the time being, we have a good reserve but if we start exporting less, it will have a negative impact on our reserve. We are already facing deficits and this will continue to accentuate.” 

Another consequence will be unemployment. “The textile industry absorbs a maximum of employees, especially women. We are already facing the issue of unemployment among young people and now if this situation persists, many women will find themselves without any job. This can have a major impact on our economy.” 

Relocation: The most preferred 

Factories are finding it easier to relocate in order to become competitive. Many factors have been deplored for relocation such as shortage of manpower, costs of operations. Along with the big firms, small SMEs in the sector are willing to relocate to countries like Reunion, Mayotte, Martinique Maldives, United Arab Emirates, US or even Europe. 

Ahmed Parkar, director of Star Knitwear, avers that the textile industry is indeed in a transition and many are looking forward to relocating in countries like Madagascar, India or Bangladesh. One main reason advanced by him is labour. “Bringing labour here is costly. Per month for one expat, you need around Rs 18,000 minimum, as there are fees associated with them. So, it comes easier for the companies to relocate in places where there is easy access of labour. Besides, in Mauritius, there is less interest in the textile industry and less skills available as well.” 

He further elaborates that the operation cost has increased and it has become difficult to have full integration. “In other countries, they believe in specialization and different firms manufacture different products. So, it becomes easier to sustain and survive.”  

François de Grivel: “There is a future in textile industry”

Former President of MEXA, François de Grivel reveals on Radio Plus on Monday that in general, the situation is worrying but we still have a good future in textile industry. “We do get orders but we need to respect delivery deadlines as well. For this we need operators. Most of the employees in this sector come from Bangladesh, India or Madagascar. Mauritians need to be aware of the importance of this sector.”

Commenting on the minimum salary, he said that “there has been a stability. In countries like China, salaries are increasing and same for Bangladesh. But many Bangladeshis prefer to come to Mauritius. So, we can say that the sector has its purpose. Now, companies have the responsibility to pay the minimum salary and add a prime for performance as well. All depends on the companies.” 

When asked whether we are heading towards a second crisis after that of 2000, he replied, “If there are no sufficient orders, we will experience difficulties. The promotion of exportation is dynamic. The EDB is doing the necessary to increase orders. If we are making value-added product and high-end products, we can boost this sector again. We are never safe from the sales reduction and closing of factories.” 

Maxime Koon: “It is becoming very difficult to compete with Asian countries” 

President of the Textile Apparels Manufacturers’ Association, Maxime Koon explains that since three years now, the situation has been declining and nothing concrete has been done to alleviate the problem. “There are around 300 SMEs in this sector and they are all suffering. Some have already closed their doors, while others are operating at a loss. It is becoming very difficult to compete with Asian countries.” 

One of the reasons, according to him, for this decline is operating cost. “With time, the cost of operation has incredibly increased. Shortage of labour has compelled the importation of expats which has a cost. Raw materials are imported as well. With all these costs on the rise, the factories are finding it difficult to cope and it is impossible for them to increase the price as well.”

He also blames the minimum salary for creating more trouble. “It is impossible for companies in the textile sector to abide by the minimum salary. It has added an additional burden on us.” He states that big companies are relocating as they have the capital to do so but there are also other small firms which cannot adopt this strategy and will eventually prefer close down.” 

CMT: Relocation is being considered 

Compagnie Mauricienne de Textile Ltée (CMT) is considered to be a global jersey-wear apparel industry leader which has its headquarters in Mauritius with marketing offices in UK, France and soon opening in New York. Besides, CMT is already present in Madagascar and Bangladesh. According to statistics, since 2016, the number of employees is decreasing. For instance, in 2016, the number of employees were 7,828 among which 4,583 were expats. The number has decreased to 5,976 among which 3,461 are expats. Concerning the financial status of the company, it is seen that pre-tax profits drop drastically from Rs 712 million in 2016 to Rs 196 million in 2017, despite a slight increase in turnover, which was around Rs 6 billion in 2017. 

Palmar Ltée: Confusion and desolation decry 

Palmar Ltée, based in Rivière du Rempart, employs approximately 1,300 people, 904 Mauritians and 356 expats. The company established since 1980 has an annual production capacity of 2.6 million pieces. It exports mainly to Europe, the United States and South Africa. It specializes in the design and production of jerseys and jeans. Its operations include various tasks such as dyeing and finishing, cutting and sewing, printing, embroidery and other embellishments, washing and dyeing of garments, quality control, packaging and storage of finished products. The annual output of the factory is 1,8 million jeans and 4, 2 million jerseys. 55% of manufactured products are for men, 35% for women and 10% for children. According to the financial statement, on December 21st, 2018, Palmar Ltd. made a profit of Rs 11,370,009. 

Since 7th February, it is Yacoob Ramtoola and Afsar Ebrahim who are now Joint Receiver and Manager of the company. The company has debts of Rs 600 million and is placed under administration since 7th February. 

Following this situation, the workers are at a loss. They cannot understand how a company that has been making profits finds itself in such a situation. One of the employees who has several years of experience, Romesh argues that he fails to understand how a company that has performed well in December last year has declared bankruptcy at the start of this year. Another employee, who has been with this firm since more than 10 years, wonders if a new buyer takes over, how the situation will be and if ever their years of loyal services will be counted. “We have been giving our best all these years and now seeing all crushed under our eyes is painful. We do not know how we will manage. We have families and other responsibilities.” 

Ramen also does not understand how the factory that manufactured 500,000 pieces and exported during the months of November and December, last year, may go bankrupt in January 2019. “I wonder if it’s because of the minimum salary or the salary compensation of Rs 400 this year that may lead to the closure of the plant,” he says. The latter does not know how he will manage to feed his family and honor his debts, if the factory closes its doors because his wife is also working in this same factory. Sunita and her colleagues are unaware if they will receive their time of service if there is a buyer. “If we are allocated the same conditions, then we can work. But we will recruit again, so we must have our time of service because some have worked since the creation of the plant 35 years ago. Now we do not know what to do if we are redeployed to another factory in another region. Adaptation will be difficult,” she says.

At the Flacq Unit, the same situation prevails. The employees were asked to stay at home for a week and later, they resumed work. Still, instead of ending work at 17:00, they are going home by 14:00. The employees are confused but at the same worried about their situation. “We are not being informed clearly where we are heading. It is also the second time that employees are getting their salary in time. There are many employees who are experiencing difficulties and they cannot afford to lose their jobs. The situation is deplorable.”  

Eric Dorchies: “We made the very early choice to diversify our production”

Chief Operating Officer of CIEL Textile, Eric Dorchies explains that the textile industry is a cyclical industry and it is a fact that the current global market is difficult, as there is a strong fluctuation in demand in Europe and increased competition from the main producing countries, such as China or Bangladesh, as well as competitors, relatively new, such as Turkey, which benefits from its geographical proximity to traditional markets. “At CIEL Textile, we made the very early choice to diversify our production areas between our regional historical places (Mauritius and Madagascar) and South Asia (India and Bangladesh). Today, we have 19 factories spread over these four countries. This strategy as well as the investments we have made in our operations, design, quality and automation allow us, today, to be considered by our customers as trusted partners and not just producers.”

According to the COO, our economic health therefore depends on our ability to adapt to react quickly and remain competitive. “We invest in digitalization, automation, sustainable development and of course in the training of our teams. We must also deal with external factors (labor costs, tariffs, freight, exchange rates, etc.) and we must continue the constant dialogue with the authorities and the Government in order to preserve our competitiveness against the Asian giants.”

Revamping the industry 

For the economist Pierre Dinan, there are several problems and it is high time to address them in the textile industry. “Firstly, we need to ask how far our textile industry has evolved. Do we have an industry modern enough to compete at an international level? Time has come for our stakeholders to see how they can rebrand our products, giving them a Mauritian touch. Innovation and creativity are needed to give a boost to this sector.” 

For Ahmed Parkar, the Government must concentrate on protecting our local companies and encourage them to come forward with value-added products. “The future is tough but not despairing. There is a long term restructuring to be done. Like it has been done with the Sugarcane Industry, which has been transformed into the Cane Industry. We need a Marshal Plan for the textile industry as well.” 

He further adds, “The rapid changes taking place in the world of retail, such as the strong growth of e-commerce, fast fashion or responsible products, leave us no respite and invite us to constantly evolve to follow the trends and stay in the game.”