One South African textile company to shed 1400 jobs

A further 1400 people within South Africa's textile sector will join the ranks of the unemployed by July 2009

The asset stripping of the Frame Group is so ironic. Seardel took over the Frame Group in 2000. In turn the South African Clothing and Textile Workers' Union (SACTWU) holds nearly 3% of Seardel's low-voting N shares. Seardel's major shareholder I think it is 70% is owned by black empowerment company Hosken Consolidated Investments of which the largest the largest shareholder is SACTWU.

In March 2008 Mr. Copelyn a non-executive director of Seardel dismissed speculation that the company would after extremely poor performance be asset-stripped. Copelyn who represents SACTWU on the Seardel board said that the union shareholding in Seardel was a long-term vision. One year later the Frame Group is to be asset stripped. The subsequent loss of jobs brings into question the ability of SACTWU to protect its members.

A further irony is the fact that Seardel was ranked 26 in the Top Empowerment Companies (TEC) survey's manufacturing raking. Is the stripping of a company and the subsequent job losses conforming to the following: "Black economic empowerment is thus an important policy instrument aimed at broadening the economic base of the country – and through this, at stimulating further economic growth and creating employment."

The Financial Mail (April 4,2008) quoted Empowerdex's Stephen Hawes saying, "the company [HCI] is effectively run by trade union SACTWU and their skills development and employment equity are particularly strong." The report said that SACTWU'S shareholding of HCI has benefited union members. For the 1400 workers on the brink of facing unemployment what benefits do they now face?

ANNOUNCEMENT REGARDING THE CLOSURE OF CERTAIN DIVISIONS WITHIN THE FRAME TEXTILE GROUP'S VERTICAL PIPELINE

1. Introduction
Shareholders are advised that the board of directors of the Company has, as part of its turnaround plan, embarked upon a process of restructuring the Group with a view to returning it to profitability. In the process of implementing the board's turnaround plan, it has made a decision in principle, subject to the outcome of the required consultation process with interested parties, to close certain of the operating divisions that comprise the Frame Textile Division's vertical pipeline being the spinning, weaving, finishing and denim divisions ("the Affected Divisions").

2. Nature of the Affected Divisions business
The Affected Divisions convert raw cotton into yarn, the majority of which is then converted into woven fabric for use in garment manufacture as well as finished textile products such as bed linen and curtains.

Spinning: Frame Spinning is the largest producer of cotton spun yarns in the Southern African region, comprising state of the art spinning mills. The division boasts an installed capacity of approximately 53 000 Ring Spindles and 5 000 Open End Rotors, yielding in excess of 25 900 tons of short staple yarn per annum.

Weaving and finishing: Frame Woven Fabrics is a vertically integrated operation producing in excess of 33 million linear metres of fabric per annum.

Denim: Frame Denim is a vertically integrated operation specialising in the production of indigo denim supplying fabric to the local and export garment industry.

3. Reasons for the decision
It has been well documented that the South African Textile Industry is and has been under tremendous pressure for a number of years for the following reasons:
- Ongoing pressure on selling prices from cheap imported products sourced both legally and illegally, has undermined the local manufacturing base;

- Internationally the textile industry attracts significant subsidies with many international firms being state owned. Even in the local market, the textile divisions are required to compete with enterprises that attract state funding through the IDC;

- Structural deficiencies with respect to the DCC scheme, SACU and SADC arrangements have had a severe negative effect on the local industry;
- Massive hikes in input costs, such as electricity, have been experienced with an inability to pass these on to customers; and

- Non-compliance in applying the prescribed minimum conditions of employment as determined in the Bargaining Council Agreements by local competitors. These factors make it all but impossible to compete as a purely commercial enterprise.

The pressures experienced have translated into significant ongoing losses being incurred in the Affected Divisions. The Company, over a number of years, has looked at every possible avenue to remedy this situation including major reorganisations, restructuring and downsizing of the operations. Over the past 10 years over R360 million has been spent on plant and machinery in order to raise efficiency levels but it has become clear that improved efficiencies alone will not be sufficient to compensate for the structural issues facing the industry.

The Company has, also over this period made, directly and via the Textile Federation, representations to the various Government agencies for decisive and urgent positive interventions to assist the industry. Unfortunately all of these actions have been to no avail.

As there is no indication that there will be any improvement in the trading conditions or performance of the Affected Divisions in the foreseeable future we, regrettably, are left with no alternative but to close these divisions and sell the assets.

The Affected Divisions employ approximately 1 400 people and consultations with the Trade Union (SACTWU) on behalf of the respective Bargaining Units and Individual Employees, who are not represented by the respective Bargaining Units, have begun.

Timing
Subject to the consultation process with the interested parties, it is anticipated that the first of the Affected Divisions will be closed in early July 2009. Every effort will be made to ensure that the closure is handled in a responsible manner in order to minimise potential disruptions to the supply chain.

9 April 2009

ANC Unstitches South Africa's Clothing Industry

The ANC have denied that their T-shirts were made in China. How do they explain the alleged "Made in China" label found in the shirts? On Thursday, 9 April 09, the Daily News quoted ANC spokeswoman, Nomfundo Mcetywa "The ANC did not directly purchase its material but service providers did." Is this not a contradiction of what the ANC said earlier that all its suppliers are "South African"? The answer is simple look at the labels unless the ANC orders its members to rip out the "Made in …" label.

All the rhetoric about how important South Africa's clothing and textile industry is for poverty alleviation and the years spent around policy development for this industry sector has unbundled by the revelation that ANC election T-shirts were made in China.

The yarn spun by the ANC that they could not be held responsible because they did not order the T-shirts directly but used sub-contractors is an infantile excuse[1]. They could have placed provisions in their tender process that all T-shirts had to be made locally. The response from labour organisations and from the toothless buy local campaign Proudly South Africa will be interesting.

The South African government cannot call on its citizens to be patriotic by supporting Made in SA clothing or expect clothing retailers to support the local apparel industry when they have demonstrated such inexcusable behaviour. How will the ANC account for the hundreds if not thousands of job losses that will occur in this industry within the coming months?

It is clear from this action that government has no real intention of helping this stressed industry sector nor South African fashion designers who by the nature of the apparel value-chain are linked to the textile and clothing manufacturing sector. Recently the Department of Trade and Industry held workshops for the industry where they unveiled their new rescue plans. It was interesting to note that at one of the workshops it was suggested that the department should first concentrate on the illegal imports and under-invoicing taking place before they try to implement a series of complex policy plans. This suggestion was muted by the DTI who said systems were already in place to deal with this matter.

The intended rescue-package provides the opportunity for financial help through the IDC and increasing import duties. This is an indictment that the quotas were never intended to give the space for the industry to upgrade or that it would provide sustainable relief to the industry. The entire quota debacle and the way they were implemented smacks of political appeasement.

So while the quotas officially ended it has been revealed that the government was holding bilateral talks with the Chinese to discuss the possibilities of extending the quotas without any input from the industry. The saga around the banning of the Dalai Lama to visit South Africa is in my opinion a message to the Chinese government that South Africa will do anything to appease its new colonial master however, this subservient stance backfired when China showed government the middle finger by rejecting the request for an extension on import quotas.

Statistics reveal that more than 2000 people in the clothing and textile sector have already lost their jobs this year. Deputy Director General of International Trade and Economic Development from the DTI, Xavier Carim said that China's refusal to extend the quotas could "seriously harm local clothing producers." What about the ANC's decision to have nearly a million of their T-shirts made in China has this not harmed the industry? A SACTWU spokesperson felt aggrieved that China had blindsided the request for quota extension saying that South Africa accounted for less than 1% of all China's apparel exports. Why should China give preferential treatment to South Africa when their own industry is under strain and they have to compete with their Asian neighbours?

This latest debacle is a clear message to the apparel sector that they cannot be dependent on government for any bail-out. I think the industry, retailers and the fashion sector should hold an indaba to take matters in their own hands and find equable mechanisms to take this sector forward. One of the first issues such an industry sector meeting needs to do is weed out its own unscrupulous members who are undermining the industry from within. In so doing the industry will send a message to government that they will within the frame-work of the law find their own solutions with minimal government intervention to sustain this historical industry.



ANC: Party T-shirts made in SA09/04/2009 18:10 - (SA)
Johannesburg - The ANC's T-shirt suppliers are all South African, the ruling party said on Thursday after reports that it sourced T-shirts totalling millions of rands from China.
"We needed two million T-shirts, that was the order. We used the services of a group of people who buy and print them. The suppliers bought the T-shirts not the ANC," said party spokesperson Jessie Duarte.
"All our suppliers are South African. I don't know anything about the Chinese."
The Star on Thursday reported that T-shirt orders for the ANC, valued between R15m and R20m, were given to Chinese manufacturers, further damaging South Africa's already ailing textiles industry.
The report said 850 000 shirts which bore "Made in China" labels and were printed with ANC slogans had flooded the country ahead of the April 22 election.
It said the foreign order caused an uproar in the textiles industry as the ANC and its allies had, in the past, targeted large retailers for selling Chinese textiles saying they were undermining the job market.
The Star quoted Democratic Alliance parliamentary candidate Rory Macpherson, who was involved in the textiles industry, as saying he was made aware of the order by a "concerned member of the ANC".
"In real terms, this order of 850 000 shirts is worth about R20m. An order of this magnitude could keep several small CMT [cut, manufacture, trim] manufacturers busy for and alive for months," he told the paper.
The textile industry was one of the hardest hit manufacturing sectors in the slowdown in the economy.
Source: News24.com

[1] "ANC in Chinese T-Shirt Row" The Daily News, 9 April 2009