TEXTILE FIRMS TO CLOSE OVER 15% VAT

MATSAPHA - Could government be taking two steps forward and six steps back?

This question emanates from the fact that while the Executive is fresh from launching the five-year Eswatini Strategic Road map, government is likely to face a major setback in as far as job creation and economic development are concerned.

This is because a number of textile factories in the country are on the verge of closing shop and migrating to other countries, like Lesotho. The aggrieved factories are those operating under CMT (cutting, making/sewing and trimming).

In this sector, the supplier keeps the development of new styles and the materials under his control and only outsources the labour. This means that CMT factories are selling labour.

The main issue is that Eswatini Revenue Authority (SRA) is tightening the screws in as far as the implementation of the law is concerned.
Information gathered from a number of the affected factories, who shared their dilemma anonymously due to the sensitivity of the matter, was that SRA informed them that it would charge 15 per cent value added tax (VAT) for every export they made.

According to the insiders, this resulted in some sort of a battle between SRA and the affected factories. This is because since the notification, they had been having constant meetings over the matter. They said factories were of the view that the introduction of the 15 per cent VAT meant that they would make little or no profit at all.

As a result, the inside sources, said the factories roped in Eswatini Investment Promotion Authority (EIPA) in the matter but still, the parties have not reached common ground.
“This will make it difficult for us to continue operating in the country because as CMT factories, we were making little profit because the fabric and design comes with the buyer. This means that the buyer only pays for labour,” said one of the affected CMT factory owners in Matsapha.

They said if the proposed 15 per cent VAT would be implemented on CMT factories, they shall be rendered helpless. In fact, the factory operators said they would not be competitive at all, something which would lead to less or no orders as they could be forced to hike their prices to accommodate the 15 per cent.

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