18 of 2021


                             Newsletter No 18 / 21 May 2021                           

Click this link to access your Sourcing Directory https://newsbriefs.co.za/index/

Click on any ad to go to the advertisers website..


Patel says vision for R200bn in additional localisation has top-level corporate backing

By Terence Creamer

Trade, Industry and Competition Minister Ebrahim Patel announced that an “accord” had been reached at the National Economic Development and Labour Council (Nedlac) to drive progressive localisation of up to R200-billion of additional production over a five-year period.

Delivering his virtual Budget Vote, Patel said the strategy had the support of major corporates and that 30 ‘CEO champions’ – including Mamongae Mahlare of Illovo, Mark Cutifani of Anglo American, Vikesh Ramsunder of Clicks, Fleetwood Grobler of Sasol and Fortune Majapelo of Bushveld – had been nominated from the private sector to support the localisation push.

“An initial list of 42 products have been identified for localisation and R240-million has been raised from the private sector to appoint technical experts to drive localisation, bringing together industrial engineers, supply-chain managers, experts in dealing with illegal imports, and project managers.”

The CEO champions would not only advocate for specific product categories for potential localisation, but would also highlight the current constraints to domestic production.

No ‘one-size-fits-all’ approach would be implemented and Patel revealed that the pact with business also recognised that not every product category was suitable for localisation.

A ‘Policy Statement on Localisation for Jobs’ had also been published to clarify government’s overall approach to the issue.

The policy statement addressed local product development, cracking down on illegal imports and under-invoicing and implementing localisation modalities through a joint effort with the private sector.

“This will be complemented by integrated efforts with other Ministries to drive local vaccines development and the use of local components in the national infrastructure plan.

“Tariff adjustments and rebates are an important policy instrument available to the State to lower or increase import duties, but in future will need to be accompanied more clearly by binding commitments by applicants to improve their competitiveness, create jobs and price restraint,” Patel added.

The so-called Nedlac accord had been premised on an analysis showing that South Africa’s import to gross domestic product (GDP) ratio was too high, with R1.1-trillion in non-oil imports yearly ahead of the Covid-19 pandemic.

“We import goods worth 25% of our GDP – our propensity to import is out of line with peer countries and developed economies and more can sensibly and sustainably be produced locally. Compare our 25% with China at 14%, India at 16%, Brazil 10%, the US at 12% and  the EU at 14%,” the Minister said.

The accord was given further impetus by the progress made in developing local production capacity for personal protective equipment and medical products since the onset of the pandemic.

“In the past year, we built local production capacity – often from scratch – with more than R10-billion of local production of Covid-19 products, ranging from face-masks, hand sanitisers, ventilators and vaccines,” Patel said, reporting that R2-billion of that production was exported to other African countries.

Under the right conditions

In response to Patel’s indication to Nedlac in December that government would be aiming to set an import-substitution target of 20% for non-petroleum imports, Business Unity South Africa (Busa) and Business Leadership South Africa (BLSA) commissioned Intellidex to research the practicality of meeting the target.

The research report, which was published the day before Patel’s Budget Vote, indicated that higher levels of localisation were possible “under the right conditions”, including policy certainty demand consistency.

It also warned that an overly aggressive import-substitution policy will have negative consequences for domestic prices, raising them by up to 20%, and could undermine the country’s economic recovery.

“Our quantitative study shows that under the right conditions, meeting localisation targets within the next five years is possible for a number of key manufacturing sectors including paper, wood, motor vehicles, ceramic products, glass, basic iron and steel, and food and beverages.

“But other manufacturing sectors are highly unlikely to meet localisation targets without significant policy support and macroeconomic tailwinds. These sectors include printing and publishing, textiles, clothing, footwear, rubber and machinery and electronic equipment,” the report stated.

Busa and BLSA urged that priority be given to outputs such as cheaper energy, better infrastructure, improved competitiveness and consumer choice when pursuing the strategy.

Patel acknowledged that localisation should be rooted in competitiveness and industrial agility and indicated that the emerging sector master plans would contain the details of how to achieve such in the various industries covered.

“Last year we had three master plans in place, covering the auto, clothing and poultryindustries. Since then, we finalised three more, covering sugar, steel and furniture.

These Master Plans cover about 700 000 workers with a combined industrial output of about R300-billion.”

Patel said future master plans would seek to support growth in new economic sectors, while consolidating existing sectors.

Hydrogen & Electric Vehicles

The extended portfolio will cover global business services, film animation, the chemical and plastic sectors, green industry, medical products and capital goods.

Particular attention would be given to green industrialisation and facilitating a just transition to a more climate-resilient economy.

“We must recognise the urgency of the situation and take action accordingly. We must not get left behind, with stranded assets and a carbon-dependent economic model,” Patel said, highlighting the urgent need to build full electric vehicles locally so as to maintain the country’s capacity to export to key markets such as the EU and UK.

Patel also saw a major opportunity for South Africa to advance technologies based on green hydrogen, which is produced by using renewable electricity to split water into hydrogen and oxygen using an electrolyser.

He reported that Toyota’s Johan van Zyl, who has returned to South Africa following a stint in Europe, would head a panel on green hydrogen, which would focus primarily on what was required for South Africa to unlock a large-scale domestic hydrogen industry.

“If the 20th century becomes known as the century of crude oil and nuclear energy, the 21st century may be known as a century of renewable energy and green hydrogen.

“South Africa is well-positioned to become a key player, with our reserves of platinum group metals used as a catalyst in green hydrogen fuel-cells; as well as vanadium used in battery storage technologies.”  EN

Govt could curb imports in favour of more 100% local goods

Small Business Development Minister Khumbudzo Ntshavheni says the department is in talks with the Department of Trade, Industry and Competition to designate more products under the 100% local content category to support SMMEs in the local manufacturing sector.

The Minister said this when Ministers in the economics sector replied to oral questions in the National Council of Provinces (NCOP) on Tuesday. Ntshavheni said South Africa runs an open economy, which means it competes internationally and products are allowed to be in the country.

However, the Department of Trade, Industry and Competition designates certain products for 100% local content, which means that products that are produced in other countries in certain categories cannot be allowed into South Africa because the products that must be in the country are those products that are produced locally.

“For instance, we are working with the Department of Trade, Industry and Competition to designate more products for 100% or 80% local content to minimise the entrance of other products in the country. In addition, we are working with SA Revenue Service and customs to make sure that those products that are designated for 100% local content are not allowed in our shores to protect local companies.”
She said the department’s primary responsibility as a department is to ensure that SMMEs in this country who are operating in the manufacturing space can produce products that are of good quality which are also competitive in terms of pricing to ensure that products that are made outside of the country do not find traction with our consumers.

Support for youth, women-owned SMME’s in manufacturing

The Minister said, meanwhile, that the Department of Small Business Development has been supporting SMMEs in manufacturing through the SMME-Focused Localisation Framework.

This includes the Small Enterprise Manufacturing Support Programme, which is aimed at providing financial and business development support to small enterprises in the manufacturing industries sub-sectors.

She said through the Small Enterprise Development Agency (Seda), the department supports a total of 23 manufacturing-based incubators in the chemicals, steel and stainless steel-based metals, aluminum which has metal fabrication, biofuels, clothing, footwear and leather, food, bakery and confectionary, tech hardware and furniture manufacturing.
“These manufacturing incubators, for the period under review, have supported 737 manufacturing SMMEs that generated 267,886,172 in total revenue and sustained 527 manufacturing-based jobs and created 1,364 new jobs.

“To ensure that SMME manufacturers continuously produce high-quality products, the Seda Conformity Assessment Programme supported a total of 207 manufacturers for product testing, certification, design and quality management and different national SANS [national standards] and international standards organisation compliance.”

Ntshavheni said the Seda Technical Assistance Progrogramme supported a total of 684 manufacturers with product and process technology to the value of R15 million. From the 2019/20 financial year to date, the Small Enterprise Finance Agency (SEFA) has disbursed R68m to youth-owned enterprises and disbursed R167m to women-owned enterprises in the manufacturing sector alone.

“Cooperatives operating within the manufacturing sector produced clothing and textiles, bricks and blocks, ice, toilet papers, bakery and confectionery products, cosmetics, steel, arts and crafts.

“Through the Cooperatives Incentive Scheme, a total of 118 cooperatives with 77 majority-women beneficiaries and 18 majority-youth beneficiaries were supported to the value of R34.5m.”  Bizcommunity

Investment firm Birimian launches to help African luxury brands

Operational investment firm Birimian has been launched to connect African heritage and luxury fashion brands with international investors. It aims to boost the presence of African designers and brands in the international luxury fashion circuit. Founded by an all-female executive team, it is led by Laureen Kouassi-Olsson and Michelle Kathryn Essomé.

Birimian will work towards addressing challenges like capital, production and international distribution that the African designers face, said the company in a statement. It will establish an ecosystem of experts and professionals who specialise in value creation for independent labels and international brands.

Women’s apparel and accessories brands like Christie Brown from Ghana, Loza Maléombho and Simone et Élise from the Ivory Coast, and Belgium-based bag brand Yeba have already joined Birimian portfolio.

The firm will invest between $30,000 to $3 million in African brands and creative enterprises. It will also offer brand consultations and coaching; help strengthen production and distribution capacity; and streamline the brands’ internal control and financial planning processes.

“Birimian is an invitation to discover and embrace a universe: that of exceptional African creativity. Our mission is to combine investment, mentorship and operational support to help our brands realise their true potential and gain international visibility. Birimian is a call to action for the luxury fashion industry to contribute to the emergence of African heritage brands, and move towards a more diverse, creative and modern landscape,” founder Kouassi-Olsson said in a statement.  F2F

Truworths – board changes

The board of directors of the company (“board”) is pleased to announce, in compliance with paragraph 3.59 of the Listings Requirements of the JSE, the appointment of Mr Thabo Mosololi and Ms Dawn Earp as independent non- executive directors of the company, with effect from 20 May 2021.

Executive Director Retirement
The board further announces the retirement of Mr Doug Dare as an executive director of the company.

Following his retirement with effect from 31 May 2021, Mr Dare will serve in a part- time project consulting role to the business.

TFG – trading statement and update

As a result of the COVID-19 pandemic, the past financial year was characterised by unprecedented global economic, political and social turmoil. Consumer sentiment, although in the process of recovering, has remained muted and spend remains suppressed.

While all three of our main territories, South Africa, the United Kingdom (UK) and Australia, continue to be impacted by COVID-19, TFG Africa and TFG Australia continued to trade strongly in Q4 FY2021.

The UK continues to be the hardest hit with no stores operating during Q4 FY2021. As previously advised, the third UK national lockdown (announced on 4 January 2021) was in place for the full fourth quarter of the financial year, with non-essential retail only reopening on 12 April 2021. In total, the UK lost approximately 50% of its available store trading hours during the past financial year and experienced severely depressed footfall and consumer confidence for most of the remainder of the year. Following the review of the carrying value of the investment in the fourth quarter, the impacts of the above-mentioned uncontrollable circumstances, coupled with the significant deterioration in Weighted Average Cost of Capital (WACC) rates used, due to an increase in the business risk rates applied and confirmation of the closure of a number of department store concessions through which we had previously traded, a decision was taken to impair approximately 56% of the carrying values of TFG London’s goodwill and intangible assets.

Despite the challenges described above, the Group, in line with its strategic intents, continues to invest for the long- term and to further strengthen its digital and local supply chain and manufacturing capabilities. Now that the UK has reopened for trading, most of our brands are currently trading above expectations as consumers start to return to stores.

Group performance update
Overall, the Group delivered a strong performance during Q4 FY2021 with Group turnover growth of 21.0% compared to the same period in the previous financial year. Excluding Jet, turnover for the quarter grew by 6.0%* compared to the same period in the previous financial year.

Online turnover for the Group continued to excel with growth of 49.5% for Q4 FY2021 compared to the same period in the previous financial year.

For the 12 months to 31 March 2021, total Group turnover declined by 6,7% compared to the same period in the previous financial year (excluding Jet: -13.0%*) due to the impact of lockdowns in April and May in all countries of operation, and subsequent periods of lockdowns in the UK and Australia as previously reported. Group cash turnover declined by 0.8% compared to the same period in the previous financial year, contributing 78.7% (comparable prior period: 73.9%) to total Group turnover for the 12 months to 31 March 2021.

* Pro forma management account numbers used to calculate an indicative turnover growth

Group online turnover grew by 33.4% (comparable prior period: -1.9%) for the 12-month period, contributing 12.0% (comparable prior period: 8.4%) to total Group turnover.

We continue to focus on enhanced cost control and prudent working capital management and from an inventory perspective, we are adequately provisioned leading into the new financial year.

The Group continues to reduce net debt owing to strong cash generation, working capital optimization, deliberate paying down of debt and the successful rights offer concluded in July 2020.

Update on JET
As announced on SENS on 25 September 2020, 5 November 2020 and 19 January 2021, the Group acquired certain commercially viable stores and selected assets of Jet in South Africa (effective 25 September 2020) and in Botswana, the Kingdom of Eswatini, Lesotho and Namibia (effective on various dates in December 2020 and January 2021). The integration of these 425 Jet stores and the other key back-office integration workstreams have all been satisfactorily completed within planned budgets and timeframes.

Macroeconomic conditions in all territories in which we operate are likely to remain constrained, and changing customer needs will continue to disrupt traditional business models and accelerate digitalisation.

The impact of lockdown measures has further caused a structural shift in the way we conduct business and how our customers interact with us. This will determine in the future how we operate, where we invest and what, strategically, we prioritise.

However, the past year has also demonstrated that TFG remains resilient under extremely difficult and unprecedented circumstances.

We remain committed to the prioritisation of our strategic investments in digital transformation and localised quick response manufacturing. We are satisfied with the manner in which we have de-geared our balance sheet, both as a result of the successful rights offer as well as from strong trading conditions since the reopening of the various economies in which we trade. We will continue with our strong focus on expense control and capital management.

We are well positioned to benefit from the expected recovery in the UK, which will be aided to a large extent by the extensive vaccine roll-out.

Trade since the year-end has been encouraging across all three of our trading territories. For the trading month of April 2021, TFG Africa had turnover growth of 25.7% (excluding Jet +3.0%*) and TFG Australia turnover growth of 41,6% (AUD), both compared to April 2019. As previously announced, since most of the Group’s trading outlets across all our major trading territories were closed in the month of April 2020, turnover growth for April 2021 has been calculated on April 2019. TFG London’s turnover decreased by 42.0% (GBP), considering that non-essential retail only re-commenced on 12 April 2021 (19 days), versus a full trading month in April 2019.

* Pro forma management account numbers used to calculate an indicative turnover growth

Trading statement
As per paragraph 3.4(b)of the JSE Ltd. Listings Requirements, shareholders are advised that the Group’s basic and diluted headline earnings per share for the year ended 31 March 2021, which by definition excludes the impact of the non-cash impairment of the carrying values of TFG London’s goodwill and intangible assets, are expected to fall within the following ranges:

Reported Year ended 31 March 2020 Restated^ Cents, Expected Year ended 31 March 2021 Cents and %
Basic headline earnings per ordinary share – 1 029.3; 154.4 to 257.3; -75.0% to –85.0%
Diluted headline earnings per ordinary share – 1 024.6; 153.7 to 256.2; -75.0% to –85.0%

Annual financial results
Shareholders are advised that the Group expects to release its annual financial results for the 12 months ended 31 March 2021 on SENS on Thursday, 10 June 2021.

A live webcast of the result presentation will be broadcast at 10:00 am (SAS) on 10 June 2021. A registration link for the webcast will be available on the Company’s website at www.tfglimited.co.za. The slides for the annual results presentation will be made available on the Company’s website prior to the commencement of the webcast. A delayed version of the webcasts will be available later on the same day.

Did you know……..

Inventions that changed fashion once and for all


Paris, 1946. A model walked the fashion runway in a two-piece swimsuit created by designer Louis Réard, causing a wide controversy with her provocative bikini debut. At the time, such revealing attire was seen as highly promiscuous. The swimwear got its name from an atoll called Bikini, where atomic bomb tests were held. Only a few years later did the swimsuit stop shocking the public, as soon as Brigitte Bardot and Marilyn Monroe added it to their wardrobes.

To Advertise…..   Click here to see fact sheet with advertising rates. 

Editorial Submission:

Please remember to send me your news so that we can share it with all our readers in the weekly newsletter. Although editorial is neither guaranteed nor implied, suitable editorial for consideration may be submitted to:-