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Textile Investors Flee High South African Wages

Bad, though not surprising news from South Africa.  Textile firms are fleeing rising wages and strong unions in South Africa for the greener pastures of Lesotho, Swaziland, and Mozambique. Ekkehard Oelz, chief executive of clothing maker Peter Blond & Associates, told the WSJ:

A business is a business, and investors want their returns…There is no growth potential in South Africa. I, as a business operator, am increasingly concerned.

The big question mark hanging over the future of democratic South Africa is the problem of the black middle class.  To build a middle class you have to have many jobs that pay high wages.  If you raise the wages you can’t get the jobs; if you don’t raise the wages, where’s the middle class?

Watching South Africa wrestle with this problem tells a lot about the future of that country and of the region.  So far: no answers in sight.

Stay tuned.  The only thing worse than a dark Satanic mill exploiting the workers is a dark Satanic mill closing down.

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  • fredr

    “To build a middle class you have to have many jobs that pay high wages. If you raise the wages you can’t get the jobs; if you don’t raise the wages, where’s the middle class?”

    What about productivity? That seems like a missing element in your equation.

  • Michael Bender

    Lesotho and Swaziland are both land locked by South Africa so although there would still be access to South Africa Infrastructure, the textile mills would be forfeiting protection of the court system and other valuable benefits not available anywhere else in black Africa, and moving is expensive.
    As for Mozambique, it’s hard to see a fit there: they are poor, not democratic, their infrastructure was mostly destroyed during their 15 year civil war, and Portuguese not English is their official language.
    If what South Africa wants is intolerable to the textile industry, look for a lot of mills closing down.

  • A_Nonny_Mouse

    My understanding of S.A. (and Mozambique, and Zimbabwe; and of Leftists/ Progressives in general) is that per their worldview, Prosperity just “is” and money just “comes”. When prosperity doesn’t “just happen”, it’s because somebody got their hands on it first and won’t let go.

    So by this view, colonialist whites glommed onto the sweet flowing river of prosperity and monopolized the benefits; they had to be forced out so that native blacks could get their fair share. Somehow, lately, that “sweet flowing river” isn’t nearly as productive as it once was, and the pool of prosperity is shrinking.

    The Guys Running The Show have no idea what’s wrong.

    They honestly do not understand that “productivity” is tied to efficient use of capital and resources; that endemic corruption and wasteful spending suck capital out of productive use; that planning, education, self-discipline, prudent investment, and R&D all play a part in turning resources into items which people will buy for more than the cost of production ==> voila, PROFITS.

    In other words, they see, in a cargo-cultish way, that there’s a linkage between resources and profits, but they don’t grasp the “invisible steps” (ie the planning and work required) to turn resources into goods which can generate profits. And instead of acknowledging that they’ve missed/ misunderstood a vital element of wealth-creation, they “double down on stupid” by disparaging and de-legitimizing the notion of personal profits as a fundamental incentive to increase efficiency and productivity, and thus wealth. The greater the number of people engaged in wealth-building, the greater number of people employed; ultimately this leads to the nation itself becoming more prosperous.

  • Westie

    I would think a highly published journalist such as WRM would dig a bit deeper into why this company would leave the successful post apartheid black run South Africa for the backwaters of Southern Africa. For a better explanation of the true situation in SA read Ilana Mercer’s “Into the Cannibal’s Pot”….SA is rapidly closing on Zimbabwe and is no place for any producer Black or especially White.

  • Kris

    A_Nonny_Mouse, as Robert Heinlein memorably put it:

    Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
    This is known as “bad luck.”

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