22 of 2022`

 Newsletter No 22/17 June 2022                                 






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The inevitable and unsurmountable rise of China is put to the test by The Foschini Group

To me the strange thing about history is not that it repeats itself, or that nobody learns from it, or some other trite adage. The incredible thing is that nobody seems to learn the most obvious thing from history. And that is, ta-dah! things change.

To put it more completely, our beliefs about the future are invariably confounded, and nothing about our knowledge of history seems to help us very much to understand how things will unfold. Of course, history doesn’t repeat itself but it rhymes. But more profoundly, beliefs which we take as unimpeachable are as vulnerable as beliefs we take as undependable.

I will give you one such example. Here is a statement of fact: it’s impossible for the South African clothing industry to compete with China.

Done. Dusted.

Everything we know about how the world works would seem to underline that belief. China is huge, with large towns devoting themselves to one single product. One such example is “Sock City”, the town of  Datang, in Zhuji province, just south of Shanghai. The town had a population of 1000 people in the early 1980’s, but now has a population of around 100 000. By 2008, the town was producing eight billion pairs of socks each year, more than enough for a pair of socks for every person on the planet.

With that level of specialisation combined with those kinds of volumes, every economics journal would surmise that they could undercut every other factory on the planet. 

Yet times change and things change, and as proof I present the results of The Foschini Group, or TFG, which came out on Friday. For reasons best known to it, some time ago, the group decided on a radical new path; it would make clothes locally.

Part of the reason has to do with the dynamics of the clothing industry. One of the biggest curses of the industry is unsold stock. Every clothing line is built on the supposition of success, so every store has to have stock of the item in a range or sizes. One way to solve this problem is to import products from China very cheaply and sell them very cheaply and hope people will buy them. And they do.

But as clothing retailers around the world have discovered, there is another way; make only as much as you need. But this is a tougher call, and requires some absolutely fantastic – and I mean fantastic – stock control. Everything has to be aligned: your logistics, your advertising, your market intelligence. You have to know what is happening with every stock item at all times and you have to be able to create more stock very quickly because the only crime worse than having excess stock is having none at all. Trust me, this is not a game you play at home.

TFG has been nibbling at this problem for years, but I suspect the latest results show they are close to cracking it. For years, the proportion of clothing made locally by TFG has been rising. When President Cyril Ramaphosa made his State of the Nation speech in parliament earlier this year, he proudly mentioned he was wearing a locally made TFG suite and that the company produced 50% of its clothing locally. But the company is now heading for about three quarters local production for its African business. Ten more manufacturing business units will be built this year. This is all about supply chain integrity, and what has happened recently in China does demonstrate its value.

And the results are extraordinary. TFG helpfully tabulates its performance against its local competitors, something you presumably don’t do unless you are grinding their faces in the mud. Suffice it to say that TFG’s five year revenue compound growth is a lot higher than Woolies, PEP and Truworths.

Overall, the numbers are excellent; revenue is up to a record R42-billion, a 27% increase, and profit up around R5-billion. There is lots of Covid bounce-back in that, and a surprise pay-out for the looting, and the acquisition of JET. But a decade ago, turnover was R11-billion.  Debt is low, and to top it all, the company is succeeding in Australia. This is impressive stuff.

But what interests me is that unshakable, unquestionable wisdom that you can’t compete in clothing manufacturing with China?

Well, you know, things change. We change. History teaches us that.

Really tough day on the markets – blood everywhere. Hang onto your hard hat.

Good investing,

Tim Cohen









SARS sews victory protecting the textile industry

Tshwane-10 June 2022-The South African Revenue Service welcomes the unanimous judgment of the Supreme Court of Appeal (“the SCA”) which has affirmed its procedure and right to seize goods which have been under-declared when crossing South Africa’s borders.

 In the case of The Commissioner of South African Revenue Services and Others v Dragon Freight (Pty) Ltd and Others dated 7 June 2022, the SCA pronounced on the exercise of SARS’ mandate in terms of the Customs and Excise Act. In this matter a review application was launched in respect of SARS’ decision to seize, in terms of section 88(1)(c) of the Customs and Excise Act, 19 of 1964 (“the Customs Act”) 19 containers imported from China which had been under-declared for customs duties on import. These containers contained textiles and clothing goods, which were flagged by SARS’ electronic risk engine, designed to counter fraud and illegal activities, which was further investigated by Customs staff.

 Argument in the SCA from the Respondents was that SARS’ decision ought to be set aside on the grounds of “procedural unfairness, irrationality and unreasonableness”. The SCA wholly rejected this argument, overturned the High Court’s prior decision in favour of the agent and traders and issued a cost order in favour of SARS. The SCA ruled that SARS had acted within its mandated scope, that SARS had acted procedurally fairly and that SARS had acted on evidence gathered. 

The importation of clothing and textiles (“CTFL”) has been steadily increasing since the dawn of democracy due to the availability of cheap manufactured goods outside of South Africa. In recent years, there has been widespread speculations about illegally imported clothing and textile goods in South Africa.

This case is an important reflection that SARS performs its functions for the benefit of South Africa and her people and is a reminder that SARS is an integral component in the economy. The judgment confirms that SARS is dedicated to enforcing its mandate to control the importation of certain goods to support and promote the macro-economic policy objectives of the Government.

SARS is firmly committed to service excellence and this includes not being deterred by aggressive litigation that undermines the fiscal and economic fabric of the country.

SARS is dedicated to its mandate to combat tax evasion and affirms its warning to non-compliant traders and clearing agents to desist from the practice of false declarations in attempts to defraud the state of what is due to the fiscus.

The impact of illicit activities on imports includes under-invoicing resulting in lower revenue to the fiscus given that not all customs duties and value added tax (VAT) due to the government are paid, and trade mis-invoicing involving.

SARS Commissioner Mr Edward Kieswetter expressed his satisfaction with is important decision. He said, “There are concerted attempts by those engaged in these illicit activities to circumvent the support put in place by government for local industries thereby eroding productive capacity in the country with accompanying job losses, particularly in the local manufacturing sector. This limits the country’s potential to grow and create jobs, and leads to unfair competition for legitimate trade”.

In conclusion, he said, “SARS is continually refining its capacity to detect this non-compliant behaviour, and will do all in its power to make it costly to non-compliant taxpayers, while facilitating legitimate trade”.

Finally, the Commissioner thanked the Department of Trade, Industry and Competition, the textile and clothing industry and the Trade Union in the sector for their valuable contribution in this success.

For further information, please contact SARSMedia@sars.gov.za





SAAA comment on SCA Judgement in SARS & others v Dragon Freight Ltd & Others 

Johann Baard  Executive Director  SAAA

“The organised clothing manufacturing sector notes with great relief the landmark decision handed down by the Supreme Court of Appeal after many years of hard work and collaboration with SARS Customs to bring perpetrators of illicit trade particularly in respect of cheap clothing imports, to book”.

 “We sincerely hope that this sends a strong message to those who do not play by the rules. Illegal imports and illicit trade pose a significant threat to the sustainability of compliant clothing manufacturers who employ many thousands of people domestically. We remain resolute in our fight to level the playing field and also to seek via our recently concluded CTFL Master Plan program, to grow the domestic footprint of apparel manufacturing in SA.”










Dress up in Rich Mnisis New Homeland Collection in collaboration with Adidas

By Nokubonga Thusi

Female-focused streetwear keep active this winter with this Tsonga heritage aesthetic inspired.

If you need a bit of motivation to keep active during winter, local designer Rich Mnisi has just the thing. After the global success of his first-of-its-kind collaboration with Adidas on the Homeland Collection, Mnisi again joins forces with the sports brand for a second instalment. Still in keeping with the use of recycled materials and the designer’s recognisable aesthetic inspired by his Tsonga heritage, the new Homeland Collection features female-focused streetwear pieces and some of Adidas’s hero pieces such as Her Court, Astir, and the Adilette slides, all dressed up in a bright rose print that celebrates love, romance, and beauty.  





Mr Price final results April 2022

Revenue from continuing operations for the 52 weeks ended 2 April 2022 jumped 23% to R28.1 billion (2021: 22.8 billion) and profit from operating activities shot up 28% to R4.9 billion (2021: R3.9 billion). Profit attributable to equity holders of parent grew 26.4% to R3.3 billion (2021: R2.6 billion). In addition, headline earnings per share from continuing operations went up 19.8% to 1 282.1 cents per share (2021: 1 070.3 cents per share).

Final cash dividend declaration

Notice is hereby given that a final gross cash dividend of 524.9 cents per share was declared for the 52 weeks ended 2 April 2022, an increase of 13.4%.

Group prospects
The way forward is likely to be characterised by ongoing volatility. Global supply chain challenges, rising inflation and interest rate hikes are expected to continue, placing pressure on forecasting efforts and the cost of doing business. These knock-on effects will be felt domestically, amidst other previously communicated local challenges, exerting pressure on businesses and households. A constrained consumer environment is anticipated to persist for most of 2022 as post year end trade has reflected.

The group will continue to strive for its operating model to be supportive of its value roots and it aims to minimise as far as possible, the impact of rising input costs on its customers and operations. Adequate cover has been taken to protect the group against elevated exchange rate, freight rate and other key cost pressures. To ensure price leadership it has invested in key defensive departments and is holding certain price points while striving to preserve overall margins. High single digit input inflation is expected in H1 FY2023.

The group’s extensive experience and track record in its primary market South Africa, has shown that despite the challenges outlined above, opportunity exists for organisations who embrace uncertainty and pursue growth. The group’s vision is clear, and it is focused on executing its strategic plans which include exciting organic and inorganic prospects. The group’s business model is well positioned to navigate an adverse economic climate. It will continue to differentiate itself by delivering its brand promise through fashion and value at Everyday Low Prices. This gives it the advantage of attracting customers trading down from higher price points as well as aspirational value shoppers, supported by its convenient omnichannel store footprint












The most talked about Oscars dresses of all time



Madonna, 2011

Fans wanted to know where Madge put her pants, but a black leotard under a see-through skirt seems quite tame by today’s standards.





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