The start of 2009 not good for South Africa's Clothing and Textile Sector

Not even one month of 2009 has passed and South Africa's clothing and textile has been hit with companies on the brink of shutting down while an other was closed due to financial fraud.
The ongoing question about the quotas and the lack of communication from South Africa's Department of Trade and Industry in communicating if the quotas has ended or not is not helping the industry.
The one good thing is it seems that South Africa's Revenue Services is acting decisively and with intent on illegal imports. I really hope they keep up the pressure. Companies and individuals caught defrauding not only the country but the clothing and textile sector must be named, shamed, fined and jailed.

Seardel: no quick fix
Jan 28 2009 13:25
Marc Hasenfuss
Cape Town - Seardel, the clothing and textile conglomerate, "came as close to bankruptcy as one would like without going bankrupt", chairperson Johnny Copelyn told shareholders at an annual general meeting AGM on Wednesday morning.
Late last year, Hosken Consolidated Investments (HCI) charged to the rescue of debt-laden Seardel by underwriting a R300m rescue rights issue. HCI's R250m participation in the rights issue (pitched at 50c/share) saw the empowerment investor taking control of Seardel.
Responding to questions from shareholder Allan Groll (a well-known Cape Town property personality), Copelyn stressed there was no quick fix for Seardel - which notched up huge operating losses in the year to end June 2008.
He conceded that the weakening in the rand against major currencies could help, but cautioned shareholders around expecting too much of an improvement at Seardel in the short term.
Copelyn did, however, sound an optimistic note around fashion retailers warming to the calls to buy more local merchandise.
"There's been a lot more openness by retailers to local clothing suppliers than when the rand was trading at around R6 to the dollar."
Seardel did not provide a detailed trading update to shareholders at the AGM as the group is in a closed period. A trading update is expected to be published shortly.
But Copelyn noted: "This company was in a very serious hole. To turn the company around it needs the financial support that it now has, as well as a certain amount of luck."
He said the turnaround also required Seardel to introduce highly skilled industrial engineers into the group to ensure operations used modern business techniques.
Fin24.com

SARS seizes huge haul of illicit imports
28/1/09
By Mathabo le Roux
THE South African Revenue Service (SARS) has confiscated more than 100 tons of clothing imports since the mid-December launch of a customs crackdown on goods imported illegally from the Far East. The value of the goods has not yet been established .
This seizure was in addition to 60 tons of goods confiscated in Sasolburg and the contents of an entire warehouse in Cape Town, seized at the start of the campaign .
It is understood that SARS has also made a “significant discovery of criminal intent” by a long- established agent in the industry.
The activity allegedly involved the illegal import of apparel from China that ended up on the shelves of major listed companies. Arrests are imminent in Durban and Cape Town, a source close to the investigation told Business Day.
Moreover, a SARS official has confirmed that SARS is looking into allegations that the buyers of certain listed retailers travel to the East with import agents, identify line items and leave it up to agents to import goods at predetermined prices, thereby putting pressure on importers to bypass import duties through under-invoicing.
SARS has apparently also unearthed evidence of the fraudulent use of duty credit certificates and is investigating importers in both KwaZulu-Natal and Western Cape. The duty credit certificate scheme is an incentive programme available to the industry that compensates exporters with rebates on import duty.
SARS launched its customs crackdown at the end of last year, and in a letter dated December 15 informed shipping companies of its plan to curb “noncompliance” through targeted interventions.
Since the launch of the campaign, customs monitoring has increased markedly, a shipping company confirmed on condition it was not named. Whereas an insignificant 2%-3% of consignments were checked by customs officials in the past, up to 15% of consignments are now examined.
This is bumping up costs by as much as R10000-R12000 a shipment, or up to R84000 a month — and increasing lead times on delivery by a week on average, the company said. These costs were passed on to importers and, ultimately, to consumers.
Another shipping firm, Saf- marine, also said it was aware that the cargo of several of its customers — notably those importing garments from the East — had been subjected to increased customs inspections. However, the shipping service between SA and the Far East had not been affected, as import cargo was inspected only once it had already been discharged from vessels, spokeswoman Debbie Owens said.
The customs crackdown resulted from the discovery of large-scale under-invoicing of imports that suggested fraud was being committed when clothing was imported from China to SA.Trade statistics showed that textiles and apparel worth R15,3bn were exported from China to SA last year. However, invoices reflected imports worth only R6,1bn, representing a 60% shortfall in invoicing, the trade and industry department said at the end of last year.

Rugby teams lose their shirt makers
With only six weeks to the start of the Super 14, the Lions and the Cheetahs have started to look at possible new kit sponsors following the shock news of the voluntary liquidation of the South African arm of apparel supplier Canterbury SA yesterday.
Empowerment company Brimstone manufactures kit for the Super 14 and Springboks under Fifth Element Marketing (Pty) Ltd — a clothing design and wholesale business that owns fashion and sportswear supplier Canterbury International SA (Pty) Ltd, plus surf wear and fashion brand, O’Neill SA.
Canterbury SA is also the kit supplier to the Sharks and the popular Varsity Cup competition, and its sudden collapse has left top rugby officials reeling.
“We have already received a substantial bulk of our supply and merchandise, but there is still a lot outstanding,” Free State president Harold Verster told The Times.
“We’re investigating our position, but we have a number of other kit suppliers who are willing to take over our account.
“Canterbury, though, have assured us that they will stick with us and help us out. It’s very uncertain at this stage, but they’re having board meetings over the next few days and there will be clarity soon .”
Lions president Jannie Ferreira said the collapse of Canterbury could cost his union about R2m.
“We’ve been pushing hard to get our playing kit over the past three weeks and we have received most of it,” Ferreira said. “But the fact of the matter is we are now waiting to see if the kit will be released, or whether they are going to stop manufacturing and delivering immediately.
“We are in limbo, but we have immediately embarked on looking for an alternative apparel sponsor. It’s still early days; some companies have shown interest.”
The Varsity Cup is due to start next week and could be seriously affected, as Canterbury supplies the competing teams. Most haven’t received a single item yet.
“We are currently investigating how this situation might affect us,” Varsity Cup managing director Duitser Bosman said.
The SA Rugby Union took a similar approach and said they would wait for the outcome of a Canterbury board meeting .
Should the Cheetahs and Lions secure a new sponsor before the Super 14 starts, it could raise some logistical issues over registering the playing strip in time for promotional material to be made .
“ I cannot see Sanzar turning us down if we need to change the strip slightly at this late stage,” Ferreira said. “We don’t intend deviating from our playing colours .”
Brimstone’s clothing manufacturing subsidiary, the House of Monatic, under which Fifth Element’s marketing falls, is apparently the target of an SA Revenue Service investigation into financial irregularities.
By: Craig Ray
The Times
29/1/09

Brimstone to liquidate subsidiary
Jan 27 2009 21:15
Marc Hasenfuss
Cape Town - Empowerment giant Brimstone Investment Corporation has applied to place its clothing brands subsidiary, Fifth Element, into liquidation.
In a statement released on Tuesday evening, Brimstone confirmed Fifth Element Marketing (Pty) Ltd - the clothing design and wholesale business which owns fashion and sportswear supplier Canterbury International SA (Pty) Ltd and surf wear and fashion brand, O'Neill SA.
Canterbury International owns the licensing rights to manufacture Canterbury sportswear, including the Springbok rugby jersey and jerseys for a variety of Super 14 and provincial rugby teams.
The liquidation of Fifth Element is a major setback for Brimstone, which was looking to build a fashion brand house around its 100% clothing-manufacturing subsidiary House of Monatic.
Brimstone initially acquired a 51% stake in Fifth Element in 2006 and recently upped its stake to 100%.
No alternative
Brimstone said evidence of possible financial irregularities perpetrated in the business were recently uncovered during an ongoing co-operative investigation by House of Monatic and the South African Revenue Services (SARS).
House of Monatic CEO Iqbal Khan said these irregularities could have been the cause of the current financial position in Fifth Element's liabilities exceeded its assets.
"House of Monatic has therefore been left with no alternative but to liquidate the entities concerned."
Khan said the findings of House of Monatic's preliminary investigations were of such a serious nature that the company needed to act firmly and responsibly.
Fifth Element, O'Neill and Canterbury collectively generated turnover of around R100m.
Khan said it was difficult to quantify the irregularities at the moment. "We have appointed a firm of forensic attorneys to pinpoint exactly where the possible irregularities lie in the businesses. It should not be too long before their preliminary findings are released."
Khan believed the wind down of the business would not have a material financial impact on the Brimstone balance sheet.
"Of concern, though, to the holding company are the impact and potential job losses to employees of Fifth Element and its subsidiaries. House of Monatic is actively seeking ways in which these jobs could potentially be saved."
Regarding the manufacturing of the Canterbury rugby jerseys, Khan said the position had been explained to Canterbury International.
"They will be holding a board meeting tomorrow, and then gives us their decision. They could opt to give the manufacturing licence to another manufacturer; or offer it to us again."
He stressed House of Monatic's day-to-day operations would not be affected by developments.
"Our manufacturing arm in Parow, that was being set up as a dedicated sportswear manufacturer - will lose a key customer though."
Khan said although the action would impact Brimstone's aspirations to build a fashion brand-house the company would refocus its energies on building the capabilities and growing the brands within House of Monatic.
"It has not diminished our mission of realising our values of being profitable, empowering and to have a positive social impact over the longer-term."
- Fin24.com


Brimstone hits back at DA
May 20 2008 10:07
Michael Hamlyn
Cape Town - Directors of Brimstone, the Cape Town based black empowerment investment company, hit back on Monday evening at Robin Carlisle of the Democratic Alliance, who earlier this month made a series of allegations about the way the company acquired Novell, a clothing company in Atlantis.
"No good deed goes unpunished," said Fred Robertson, a founder and executive deputy chairman of the company. He insisted that Brimstone had taken over the moribund clothing company as part of his firm's social and civic duty to save jobs in what would otherwise be an economic wasteland.
"We did that good deed, and we have been punished for it," he told Monday's annual shareholder meeting.
He said the company would like to debate with Carlisle, a Western Cape legislator, who raised vociferous objection to the sale.
Transaction fails to comply with law
The DA man drew attention to the report by the auditor general on the sale, in which he said the Western Cape investment and trade promotion agency (Wesgro), which bought the company from its foreign investors in order to prevent them from closing it, sold it to Brimstone in a transaction which failed to comply with applicable laws and which netted a loss which Carlisle put at R21m.
He said the provincial government had "unlawfully handed over to Brimstone R21m of taxpayers' money".
"We invited Mr Carlisle to be here tonight," Robertson told the shareholders. "But he has chosen not to pitch."
The board - unusually for a commercial company - was given backing from the floor by Tony Ehrenreich, Cosatu's provincial leader. He praised the "right course" the company took in relation to Novell and urged the directors to continue the good work and disregard what Carlisle was saying.
The ANC in business
Brimstone, however, is an unusual company. If the Church of England in Britain could be described as "the Tory Party at prayer", Brimstone could perhaps be described as the ANC in business.
Its chairman is Jakes Grewel, Nelson Mandela's cabinet secretary. Its directors include Yousuf Pahad, chairman of Wesgro, Alan Roberts, an adviser to premier Ebrahim Rasool and Mzwandile Hewu, head of the provincial department of social services and former manager of the ANC in parliament.
The latter two were re-elected to the board on Monday. Olive Shisana, former director general of the national department of health, was also elected to the board for the first time.
Present at Monday evening's AGM was Wallace Mgoqi, former Cape Town manager, who was removed from office with great difficulty when the DA took over the last year.
A letter to the Cape Times on Monday morning put the director's point of view on the sale and purchase of the factory. Takula Tapela wrote that having been prevailed upon by the workers and believing in their potential to break even, House of Monatic - a wholly owned subsidiary of Brimstone - made the offer to Wesgro based on the estimated value of the assets less the expected future losses.
"A valuation on the property was done at the time in an attempt to mortgage it and raise working capital, but no bank was willing to lend even a fraction of the property value as the factory is purpose-built and financial institutions did not believe that the business-purpose would be able to support the debt," Tapela said.
Shareholders at the AGM also heard that the profits for the year reported by the company were down on the previous year - a fact Mustaq Brey, the chief executive, explained as having been due to the previous year being counted over 21 months, thanks to the switch of the new international financial reporting standard.
They were however pleased to endorse the payment of a dividend which was double the previous year's.
- I-Net Bridge