Apparel SMEs in grave crisis

Sri Lankan apparel workers are returning to their villages unable to fight the crisis of lost labour hours as most small scale garment businesses where they were working are heading towards an alarming situation come March when wages could get delayed and loans go unpaid.

“Unlike the government that can print money to pay salaries of state sector workers, we cannot do the same, so the authorities need to intervene and assist the apparel industry particularly the SME sector to sustain their organisations,” Sri Lanka Chamber of Garment Exporters SME Sector Secretary General Hemantha Perera told the Business Times.

Though no workers have been laid off, the SME sector is also facing the 40 per cent crunch in orders as a result of which they have been compelled to lower the number of work hours from about 10-12 hours per day to 8 hours per day.

“Some are working only three, four or five days a week,” Mr. Perera said adding that as a result of this workers are finding it difficult since their income level has drastically reduced and with the high prices in Colombo sending money home has become unbearable.

The take-home salary of workers that was in the range of Rs.4060,000 has now drastically dropped to about Rs.25-30,000 which is just the basic salary.

More than 30 per cent of workers in the SME sector are leaving their jobs and at the same time skilled workers and executives and senior staff are migrating for better prospects.

The real impact has not come yet since there were orders till November but after February there will be serious issues arising, Mr. Perera highlighted.

The real impact has not come yet since there were orders till November but after February there will be serious issues arising

Banks will have serious problems as most factories will find it difficult to pay back their loans and except for a few factories a majority of them will not be able to pay salaries on time, he said.

As a result banks will stop issuing loans to pay salaries which factories borrowed until last month, Mr. Perera noted.

Moreover, the SME factories are facing cash flow issues as they no longer are provided a moratorium by the banks; payment of a electricity price tariff close to 135 per cent and another hike expected again; 30 per cent interest on LKR borrowings and 13 per cent on forex borrowings; all these will just kill the SME sector, Mr. Perera stated.

Meals that workers used to be provided by the factories are something that the organisations are now finding difficult to manage, he noted.

Another interesting development is the second generation of entrepreneurs who are opting to migrate than go through the suffering their parents are facing today as a result of the current crisis, Mr. Perera noted. He pointed out that this would mean less investments into this sector by the next generation of entrepreneurs who prefer less risky jobs.

Companies are expecting that workers will automatically not report to work and will leave since

Future automation of the factories would mean that fewer workers will be required to run the factories. In this respect the workforce needs to be reduced and so trade unions believe this opportunity is being used by companies to tighten the workforce.

then they will not be compelled to pay compensation, he noted.

In fact, he added that future automation of the factories would mean that fewer workers will be required to run the factories. In this respect the workforce needs to be reduced and so trade unions believe this opportunity is being used by companies to tighten the workforce.

In the meantime, adding to the losses of the SMEs is the unfair practices of not increasing the power purchase tariff for fixed roof mounted solar systems. These were brought down on dollar loans that seemed favourable to the SMEs at the time, but today it has only added to their losses as they do not make gains on solar generation.