NOVEL OPERATION TO SHUT DOWN IN MADAGASCAR
Byline: Joshua Greene
NEW YORK — Due to the political controversy in Madagascar, Novel Denim Holdings said Thursday it will shutter its operations there over the next three months.
The decision was announced the same day four government protesters were killed at a rally in Fianarantsoa, a town located near the capital of Antananarivo, where Novel’s factory is located. The murders bring the death toll to around 30 people since the controversy started earlier this year when Marc Ravalomanana, the capital city’s mayor, plunged the country into civil turmoil after he refused to recognize the results of the presidential elections on Dec. 16, when he lost by a narrow margin to President Didier Ratsiraka and declared himself to be president, as reported.
Madagascar, an island off the east coast of southern Africa qualifies for quota- and duty-free benefits for apparel imports to the U.S. under the terms of the Africa Growth & Opportunity Act. Last year, its shipments of textiles and apparel to the U.S. surged 62.4 percent to $178.1 million.
In a statement, Novel Denim chief executive officer K.C. Chao said, “Our factories are facing severe fuel shortages and production delays due to road blockages. We were unable to ship many of the orders and have now decided to close our Madagascar operations over the next three months, including our knitted shirts business.”
Novel also expects to report an unbudgeted loss from its Madagascar operations of $1.5 million for the fourth quarter. Discounts given to customers for late deliveries, inventory on orders that were not completed and air transportation costs are estimated at $3.7 million.
The closure leaves nearly 2000 people out of work, a spokesman said. Machinery from the factory and a group of senior managers will be transferred to Mauritius and South Africa, where the firm opened factories shortly after the AGOA bill went into effect in 2000. In Mauritius, the company has experienced a labor dispute over immigrant employees. Chao said the conflict was resolved and nearly all of the 1,500 immigrant employees have returned to work.