18 of 2023

Newsletter No 18/12 May 2023                              


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Private sector injects R340m in support of South Africa’s localisation drive

By Terence Creamer

Trade, Industry and Competition Minister Ebrahim Patel

A new public-private initiative has been launched in an effort to support the growth and development of South Africa’s manufacturing sector, whose recovery from the Covid lockdowns is currently being undermined by intense daily loadshedding.

Known as the Localisation Support Fund (LSF), the non-profit company is being funded by the private sector, but has a board that includes government, labour and business representatives, including Trade, Industry and Competition Minister Ebrahim Patel, who is LSF chairperson.

The venture has already received funding support worth R340-milllion from Coca-Cola South Africa and Air Liquide, with former Coca-Cola South Africa CEO Bruno Pietracci having been a key initial driver of the initiative. Pietracci has since been appointed president of the beverage giant’s Latin American operating unit, but attended the LSF launch in Sandton on May 9.

Well-known business personality and LSF deputy chairperson Grant Pattison explained at the launch that the LSF’s goal was to help reduce imports, increase exports and promote industrial competitiveness in line with a localisation pact concluded at the National Economic Development and Labour Council in 2021.

The mandate, he added, was to support manufacturing as a whole and the LSF was, thus, not confining itself to any particular manufacturing subsector.

“The funds that we have will be spent and they are not invested for financial return, but we are looking for a manufacturing production return.

“That money will be invested in technical expertise and to assist in the identification of manufacturing opportunities and the customers who need to purchase those goods.”

LSF executive head Tahmi Moatshe reported that the organisation’s initial projects were geared towards opportunities in the renewable energy and electricity transmission sectors, as well as furniture manufacture.

In the electricity sector, the LSF is funding specialist research to confirm what renewables manufacturing capacity already exists in an effort to provide greater market visibility for domestic consumers, as well as to map the transmission and distribution value chains to provide a summary of in-country capabilities.

In furniture, the LSF will be appointing a specialist to introduce lean manufacturing principles to the sector, as well as to provide targeted technical resources to selected manufacturers.

Patel said the localisation concept was akin to industrialisation and that the LSF was geared towards addressing both the demand- and the supply-side constraints to industrialisation.

He said there were powerful social, economic, and commercial arguments in favour of localisation, including that the growth of manufacturing provided a sustainable way to address job creation and promote prosperity.

“The economic argument is about expanding the size of the South African economy . . . [while] the commercial arguments have become more important as corporations recognise the price they pay for disruptions in supply and, conversely, the advantages of a more flexible supply chain.”

However, the Minister acknowledged that the prevailing electricity crisis represented a threat to greater localisation and added that focused and expeditious resolution of the crisis was “critical for industrialisation”.

Business Unity South Africa CEO Cas Coovadia said that business was at one with government and labour on the benefits of localisation, which if done properly, “will be not just a catalyst, but a significant game changer”.  EN

Modern African design on display at London Craft Week

Merchants on Long, the Cape Town-based concept store that champions contemporary African design, is hosting an exhibition showcasing African brands to an international audience at London Craft Week, taking place from 8-14 May.

Launched in 2020, London Craft Week celebrates British and international creativity by bringing together over 250 established and emerging makers, designers, brands and galleries to present workshops and exhibitions that uncover an essential nature of design.

Curated selection of fashion and homeware

Merchants on Long is presenting an eclectic selection of locally-made homeware and fashion from across the African continent. From beadwork to intricate telephone-wire weaving and woodcarving, the curation introduces an exciting selection of modern African design.

All pieces move beyond an established idea of African craft. Hand-beaded décor pieces made by MonkeyBiz in South Africa and Sidai design in Tanzania have been selected for their quirky and stylish reinterpretation of this ancient craft. Both initiatives, as well as creating beautiful objects, work with employing and empowering women from local townships and rural areas to support their communities.

Crafts such as tie-dye, weaving, and batik are interpreted in modern fashion with looks from a range of African designers. Awa Meite of Mali, and NKWO of Nigeria, use traditional tie-dye techniques in elevated contemporary design pieces. Kente Gentlemen from the Ivory Coast is known for modern menswear made from traditional handwoven 100% Ivorian cotton. Sophisticated silhouettes from Ghanian brand 189 are made with age-old batik-worked fabrics.

Further brands include Frances VH which uses pure mohair in her blankets and throws, thereby working with a natural colour palette reminiscent of the semi-arid Karoo region of the Cape, where the majority of South Africa’s mohair is produced.

Handcrafted in Ghana, AAKS creates handbags that seek to conserve the provenance of weaving as an art form, accentuated with the bright exuberant colours of Africa.

Okapi’s range of accessory and lifestyle products is strongly committed to raising awareness around community and the environment all with the goal of long-term sustainability. Using available resources that include the off-cuts and by-products of the South Africa’s ostrich farming industry such as feathers and leather, Okapi offers new life to materials that would otherwise be discarded.

Bridging worlds with artisanal products

Altogether, the showcased brands tell a story about the many African creative scenes that can be found on the continent, reflecting how ultra-contemporary labels can bridge different worlds by creating desirable artisanal products that resonate with different markets.

“All the brands chosen raise awareness that designers in Africa can create and thrive on a global platform,” says Neïth Assogbavi of Merchants on Long. “These creatives can also be seen as activists who use their medium to produce attractive products and contribute to the cultural preservation and jobs creation in their respective countries. As a result, they open a truly meaningful conversation between the past and the present and invite customers to discover African design through a nuanced and curiosity-led lens.”

The Merchants on Long exhibition is taking place at the Frieze Art Gallery on London’s Cork Street. There are two parts to the activation – an intimate breakfast followed by a full open day on 10 May. Christine Checinska, lead curator of the Africa Fashion exhibition at the V&A Museum, will also present a talk on African fashion.  Bizcommuity

TFG – trading update

Salient features
– Pleasing Group retail turnover growth of 14,3% achieved in Q4 FY2023, compared to Q4 FY2022, despite the unprecedented levels of load shedding experienced in South Africa and global macroeconomic challenges;
– The Group delivered retail turnover growth of 19,4% for the twelve months ended 31 March 2023;
– TFG Africa recorded retail turnover growth of 15,6% (6,0% excluding Tapestry*) in Q4 FY2023, compared to Q4 FY2022,which was negatively impacted by the high levels of load shedding experienced in Q4 FY2023;
– Per the latest RLC market share figures, TFG continued to grow ahead of the market during Q4 FY2023 and the twelve months ended 31 March 2023, further expanding market share by 0,3% in respect of both these periods, for those categories reported. Given the superior growth of TFG’s Sports Division and the acquisition of Tapestry Home Brands (neither reported via RLC), TFG Africa further entrenched its footprint, customer base and market leadership positions in all its key categories;
– Cash retail turnover growth for TFG Africa in Q4 FY2023 of 17,8% compared to Q4 FY2022. Cash retail turnover for Q4 FY2023 now contributes 74,5% to total TFG Africa retail turnover and 82,5% to total Group retail turnover;
– TFG London’s retail turnover declined 5,2% (GBP) in Q4 FY2023 compared to Q4 FY2022, which period was influenced by pent up demand following Covid-19 lockdowns. This decline in turnover was not however unexpected, in light of the repositioning of the TFG London business model towards a smaller but more profitable business;
– TFG Australia delivered a 6,7% (AUD) growth in retail turnover during Q4 FY2023 compared to Q4 FY2022;
– Group online retail turnover grew 17,7% in Q4 FY2023, whilst online retail turnover contributed 10,8% (Q4 FY2022: 10,5%) to total Group retail turnover;
– TFG continued to invest in capital expenditure to improve logistics infrastructure, local manufacturing, ecommerce capabilities and its store network (new and revamped stores); and
– Strong balance sheet position maintained despite the acquisition of Tapestry, strategic capital investments and higher levels of load shedding.

Outlook: consolidation phase and defending gross margin
TFG has endeavoured to mitigate as much of the load shedding challenges it has to deal with on a daily basis. The year ahead, however, is expected to remain challenging especially for the South African business where load shedding and increasing consumer pressure are expected to worsen.

Despite the Group’s high level of conviction around a number of clearly defined and identified growth levers and organic investment opportunities, the Group, in light of the current load shedding and global economic uncertainties, is adopting a very prudent approach and treating FY2024 as a year of consolidation and focusing on improving operating leverage.

Operationally, considering the current macroeconomic conditions and the likelihood of continued high levels of load shedding, there will be a continued focus on controlling inventory purchases so as to defend gross profit margins and reduce the absorption of working capital, with FY2024 inventory purchases expected to be below those of FY2023 on a like-for– like-basis. Expense control is also a key lever and during the second half of FY2023, support and administration expenses of approximately R220 million were frozen. Similar cost savings initiatives are planned for the year ahead. We also revisited our planned capital allocation for the year ahead, and have curtailed our planned new store openings, with the result that our store capital expenditure is likely to approximate half of what we spent in FY2023. TFG’s future brand and store roll-out pipeline remains as robust as ever, however, current market conditions require a slower execution of this roll-out.

Trade since the year-end has been muted across all three of our trading territories. For the trading month of April 2023 (compared to April 2022), TFG Africa had retail turnover growth of 12,5% (3,2% excluding Tapestry*), TFG London had negative retail turnover growth of 14,3% (GBP) and TFG Australia had negative retail turnover growth of 3,6% (AUD. Both TFG London and TFG Australia are up against a very high base in the comparative period which was driven by a post COVID-19 heightened demand for occasionwear and back to work shopping as mentioned in the previous paragraphs.

Annual financial results
Shareholders were advised that the Group expects to release its annual financial results for the 12 months ended 31 March 2023 on SENS on Friday, 9 June 2023.

A live webcast of the annual financial results presentation will be broadcast at 10:00 am (SAS) on Friday, 9 June 2023. A registration link for the webcast will be available on the Company’s website at www.tfglimited.co.za. The slides for the annual financial results presentation will be made available on the Company’s website prior to the commencement of the webcast. A delayed version of the webcast will be available later the same day.

Pick n Pay final results February 2023

Group turnover for the year increased to R106.6 billion (2022: R97.9 billion) and trading profit grew to R3.0 billion (2022: R2.9 billion). Profit for the period came to R1.2 billion (2022: R1.2 billion). Furthermore, headline earnings per share lowered to 242.37 cents per share (2022: 289.64 cents per share).

Dividend declaration

Notice is hereby given that the directors have declared a final gross dividend (number 110) of 140.30000 cents per share out of income reserves.

Summary and outlook

FY23 was an intensive period for the Group as it launched and began execution of its Ekuseni strategic plan, and simultaneously dealt with unprecedently high levels of load shedding during the second half. The results achieved in year one of the multi-year plan have been encouraging, particularly in respect of our growth engines, Boxer, omnichannel, and Pick n Pay Clothing. Extensive progress has been made within our core Pick n Pay supermarkets business, including the successful launch of QualiSave, and the full revamp of 131 supermarkets to their new CVPs via the accelerated refurbishment programme. While the results are not yet visible on the Pick n Pay top line, within this there are very encouraging signs from QualiSave and the CVP converted stores.

The Group has made substantial progress on Project Future Phase 2, saving R800 million within FY23. The groundwork has been laid for further efficiency gains in FY24 and FY25 via multi-skilling implementation, opening the new Eastport DC, preparing for the December 2023 support office consolidation, and the VSP and Junior Store Management restructurings which began in March 2023.

When taking account of the net generator diesel costs that enable us to continue serving customers during load shedding, FY23 underlying earnings were ahead of the broadly flat guidance that we had communicated to the market earlier in the year.

Looking forward, the Group recognises that much work remains to be done to deliver the Ekuseni plan in terms of sustaining the momentum of our growth engines, rejuvenating Pick n Pay supermarkets, and optimising our cost base. The Group will continue to drive its capital investment programme while carefully balancing investment against gearing levels. Unprecedently high levels of load shedding, particularly diesel costs to keep stores open, add to the operational challenge. The Group is working intensively to reduce monthly diesel costs, but the results will ultimately depend on the levels of load shedding experienced.

The Group will incur FY24 restructuring charges related to the VSP and Junior Store Management processes, after which associated efficiency gains will contribute from H2 FY24. The FY24 earnings outlook will largely be driven by load shedding diesel costs and increased finance charges from higher gearing, offset by savings from the multiple Project Future initiatives. Overall, FY24 earnings (before restructuring charges) may not exceed FY23 pro forma headline earnings, depending on the levels and frequency of load shedding experienced during the year. Turnover growth for the first eight weeks of FY24 was broadly in line with H2 FY23 for Boxer, and slightly softer for Pick n Pay, where we have adjusted promotional activity to a new calendar, while continuing to hold prices below CPI food.

We thank all Boxer and Pick n Pay colleagues, and our valued franchise partners, for their commitment and contribution, and for their dedication to customers and communities. In particular, we thank our colleagues and partners for the energy they are bringing towards realising the Ekuseni goals.

All women should be thanking Mary Phelps, a New York socialite, for creating the modern bra. The ones she made and patented in 1914 were very unlike the ones we wear today, though. Hers were made of handkerchiefs.


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