Newsletter No 29 / 6 August 2021                           

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Sefa and Seda: not really like chalk and cheese

By Andile Ntingi

Two government agencies serve the small business market in different ways, so an amalgamation seems logical.

An old debate that small enterprise development experts and policymakers thought they had put to rest has quietly returned. The proposed merger between the Small Enterprise Finance Agency (Sefa) and the Small Enterprise Development Agency (Seda) into a single entity is back on the agenda.

There are two schools of thought vying for supremacy on the matter, with one camp arguing in favour of the merger and the other against. Those in favour argue that since both Sefa and Seda are serving the same market, it makes no sense to have them operating under two separate roofs. Therefore, the best course of action is to fuse the agencies into a single development agency capable of expanding its footprint at lower operating costs.

However, the proponents of the merger are facing the difficult task of convincing their opponents, who are unimpressed with the rationale for the proposed amalgamation. This group holds the view that the entities must be kept apart as they specialise in different mandates, with Sefa focusing on offering financial aid to small, medium and micro enterprises (SMMEs) and Seda on nonfinancial assistance.

The central thrust of their argument is that the merged entity will suffer from implementing a diluted mandate, rendering it ineffective and incapable of delivering its services effectively. Furthermore, there are concerns that the merger will result in the government pulling back from funding nonfinancial support, forcing Sefa to divert funds meant for providing loans to nonfinancial support.

The agencies are part of the small business support infrastructure of the department of small business development, where Seda assists SMMEs at prefunding level. Seda helps them compile business plans for capital raising purposes and prepares businesses for market expansion. The agency, which receives about 80% of the department’s budget, also manages its flagship incubation programme.

On the other hand, Sefa provides postinvestment support through a network of experienced mentors who provide industry advice and high-level mentoring to SMMEs to help them improve their operational and financial performance. Sefa’s postinvestment assistance ensures the agency recovers the bulk of its loans in the SMME sector, which is known for a high business failure rate.

As a development financier, Sefa takes a bigger risk than commercial lenders — they are often wary of funding borrowers who lack collateral and strong cash flows. Sefa finances small, less mature businesses compared with commercial lender Business Partners, which mainly finances established medium-sized businesses since they are  considered less prone to failure and therefore unlikely to default on their loans.

That is why Sefa has a higher number of bad loans on its lending book than Business Partners. It has a loan cap of R15m, but experts argue that the cap should be raised to R25m to maximise the agency’s impact in funding larger projects instead of relying heavily on loan syndication with private commercial banks.

The last time the merger debate flared up openly in public — unlike at present, where it is playing out in boardrooms — was in 2015, when the DA also weighed in. Its shadow small business development minister, Toby Chance, called for the amalgamation of Seda and Sefa to be carried out without delay. It has been six years since Chance publicly backed the merger but nothing has happened.

Small business development minister Khumbudzo Ntshavheni will have to ponder the question of whether the merger is in the best interest of the SMME sector. Her department has its hands full dealing with the effect of the Covid-19 pandemic on the SMME sector and implementing its flagship policy, known as the SMME support plan, which was introduced in 2019, the year Ntshavheni replaced Lindiwe Zulu as minister.

Over and above seeking to integrate township and rural economies into the mainstream economy, the plan aims to boost the participation of SMMEs in local manufacturing. In line with it, a list of about 1,000 products has been compiled and earmarked for production by local SMMEs, whose products will be put on the shelves of major retailers.

The list covers six product categories ranging from food and beverages to beauty, skin care and cosmetics, cleaning and hygiene, hair care, pharmaceuticals, clothing, leather and textiles. A closer inspection of Ntshavheni’s strategy clearly signals a desire by the department to involve the private sector in SMME development. This is a fundamental departure from Zulu’s strategy, which was premised on using state procurement to create markets for products and services produced by SMMEs.

Zulu wanted to implement tender set-asides through ring-fencing 30% of state procurement for SMMEs, particularly black-owned businesses. To give effect to this she revised Preferential Procurement Policy Framework Act regulations to boost the possibility of SMMEs benefiting from state procurement.

According to the Public Sector Supply Chain Review, the government spent more than R750bn in 2017 on the procurement of goods and services, as well as on construction works. However, SMMEs often complain that they get a small slice of the pie.

Whether SMME support is delivered through a merged agency or separate entities, the success of SA’s SMME development strategy will boil down to tackling the hurdles that led to the underperformance of previous strategies.

Ntshavheni will have to address the political interference that often plagues government agencies, which leads to mismanagement and poor performance. She must also resolve the issue of underfunding that plagues the agencies and ensure their boards are occupied by SMME development specialists and not incompetent political appointees. BL

• Ntingi is founder of GetBiz.

Gelmart leads sustainable intimates innovation with new sugarcane-based bra

By Anna Haines

With the growing awareness that the fashion industry is one of the worst culprits of climate change, sustainable apparel is no longer just a trend. The eco-friendly fashion market is expected to reach a value of $9.81 billion by 2025 and the lingerie category is no exception.

From Aerie swimsuits made of recycled plastic bottles to Parade’s carbon-neutral underwear, intimates brands, big and small, are increasingly considering the environment in their designs. But one product within the lingerie market continues to lag behind—bras.

“In a typical bra there are over 25 components which increases the complexities for wastage,” Yossi Nasser, CEO of intimates manufacturer Gelmart International tells Forbes. But it’s the bra pad in particular that Nasser says has a harmful impact on the planet, both in its production and disposal. “It’s definitely one of the most non-environmentally friendly pieces of that product,” the CEO tells Forbes, describing how the foam pad emits fumes and is difficult to recycle.

“The bra pad emerged over 40 years ago, but not much has changed in terms of the evolution of the material,” says Nasser. “Bras have been slow as a category to get onto the sustainability train.”

Gelmart is hoping to catch the category up with their new bio-based bra, launching August 10th through Kindly, a new line of sustainable intimates. With over 70 years of experience producing intimates for some of the world’s largest retailers, Nasser tells Forbes the company has long had their pulse on technological innovation occurring in the lingerie space. It’s no surprise then, that they would be the world’s first manufacturer to develop a plant-based bra cup.

The environmentally-friendly material of choice? Brazilian sugarcane. And while not yet 100% bio-based, the CEO says the product’s 80% sugarcane content still represents a significant improvement. “Our goal over the next few years is to get it to that 100% level, where everything in that product, as well as the packaging, is 100% sustainable, reusable and recyclable,” Nasser says.

“We worked on it for three years, it was a lot of trial and error, but we found a way to crack the code,” Nasser tells Forbes. The first hurdle was finding the right bio-based material that would retain shape when exposed to heat and temperature. But the greater, unexpected challenge was finding a material that would hold up at a larger size. “Supporting the bigger sizes was the challenge that took longer than getting that ‘ah-ha’ moment of this is the right substitute material,” the CEO says.

When chief product officer Eve Bastug first found a sustainable option for the bra pad foam, she quickly discovered the material was incompatible with larger sizes, “I didn’t feel it would be right to put all this work into it and then not be able to service a customer up to a size D.”

While it would have been easier for the manufacturer to adapt the design to the material by removing the pad altogether, Gelmart refused to sacrifice inclusivity. The new Kindly bra will run sizes 34A to 40DD. “We don’t want to lose the pad, it’s crucial, especially for women at a bigger size,” says Nasser. “There’s been a huge trend in wire-free or bralettes that don’t have a pad, but with that you are excluding a big segment of the market.”

It’s this challenge—of producing an environmentally-friendly product without sacrificing size-inclusivity—that Nasser thinks largely explains why the bra category continues to lag behind in sustainability.

With the growing body positive movement pressuring brands to accommodate non-straight sizes, Nasser says the intimates market has overemphasized inclusivity at the expense of other equally important issues. As a result, many brands end up greenwashing as they focus their energy on being size-inclusive, instead of investing the research into sustainable design. “There’s a complacency when it comes to the complexity of getting it done,” says Nasser.

The business structure of the bra category presents another hurdle to making sustainability mainstream. “It’s a sizeable category owned by a few, with ten players owning 85-90% of the market share,” explains Nasser. With just a few brands monopolizing the industry, there is less pressure to innovate in environmentally-friendly bra design. “That’s one of the challenges to having sustainability permeate the category,” Nasser says. “But on the flip side, if something like this happens, it can inspire others and we can see the impact in a shorter term.”

It’s this desire to sway the major players in the market that motivated Gelmart’s decision to partner with Walmart, a mass retailer who Nasser says, “by far produces the most amount of volume of bras in the marketplace.” The CEO hopes that by choosing a retailer with an expansive distribution network and affordable pricing (the Kindly line will retail between $11 and $14 USD), the product will be more accessible, in turn shifting the priorities of the industry at large. “We felt that starting with Walmart would then influence other players in the marketplace to follow suit,” the CEO tells Forbes.

Gelmart strategically partnering with a mass retailer is a move smaller lingerie brands are increasingly taking to make their product more accessible in an effort to shift industry norms. After seeing success with their Aerie partnership, intimates company Slick Chicks, for example, has started selling their adaptive underwear at Nordstrom. Rather than stick to their niche market, Slick Chicks founder Helya Mohammadian tells Forbes they care most about making the product accessible to as many people as possible, which means seeking out retailers with the most visibility.

As the boundaries of retail become more blurred, the brands that are successful in driving change will likely be the ones who recognize shoppers these days increasingly care less about the brand name and more about having the best choice of a product in the quickest time. The easier it becomes for shoppers to find eco-friendly options at an affordable price, the more pressure mainstream lingerie companies will feel to catch up. “As the topic of sustainability becomes more important for the consumer, they’re not going to have a choice,” says Nasser.  Forbes

Woolworths lays out next set of sustainability amibitions

Woolworths Holdings Limited (WHL) has announced its next set of Good Business Journey sustainability goals, which focus on traceability, transparency, circularity, diversity and inclusivity as well energy and carbon emissions.

The group states that the new goals include future-focused, measureable targets aimed at making a meaningful difference in critical social, environmental and supply chain issues.

“Sustainability is core to our business – it impacts everything that we do. It has been entrenched into the culture of our organisation and is put into action through our Good Business Journey (GBJ) programme. We believe that setting ambitious sustainability goals, such as the ones we are announcing today, not only stretches and challenges our own business to do more but also inspires others to collaborate and join the cause for good.

“Profound, sustainable impact and progress requires deliberate collaboration among all our stakeholders. Our new GBJ goals provide a relevant, revitalised platform where our business, employees, suppliers and partners can all work together to create a better future for everyone,” says WHL group CEO, Roy Bagattini.
Launched in 2007, the GBJ programme is the driving force that has already significantly reduced the business’ environmental impact and increased its social and economic impact across the entire value chain, notes WHL. The GBJ focuses on improving nine key areas of the business: energy, water, waste, sustainable farming, ethical sourcing, transformation, social development, packaging and health and wellness, with over 200 targets supporting these areas.

“For us the sustainability imperative is clear and compelling. Alongside the positive environmental and social impact, it ensures that our business is more resilient and adaptable to change. Our GBJ has had a cumulative financial impact of almost R2bn in savings since its inception and we have received global and national recognition for its ongoing meaningful impact,” adds Bagattini.

4 primary goals
WHL’s new ambitions have three key focus areas including a commitment to the environment, a commitment to a fully transparent, traceable and ethical supply chain, and caring for people, employees, customers and communities.

In order to realise these ambitions and following the accomplishments made over the last five year goal cycle, WHL has a developed new goals for the business that will stretch and challenge the way the group operates.

The primary GBJ goals are:

1. Fully transparent and traceable supply chain by 2025
2. All private label fashion and home products designed to be reused, repaired, repurposed or recycled by 2025
3. All energy to be from renewable sources by 2030
4. Net zero carbon emissions by 2040

While these goals focus on the environmental and supply chain aspects of the group’s sustainability strategy, the profound impact of the Covid-19 pandemic on humanitarian issues has again highlighted the widespread socioeconomic disparities in our communities and the imperative to continue to work towards real and meaningful societal change.

“The Covid-19 pandemic has had a catastrophic impact on humanity and we have therefore deliberately reconsidered and elevated the ‘people’ aspects of our sustainability strategy, for our own employees and the communities around us. We are on a journey to clearly articulate our deeper response to issues that are important to all our people and we look forward to sharing more on this soon,” says Bagattini.
WHL group head of sustainability, Feroz Koor, adds, “Our new GBJ goals elevate our group into challenging, yet exciting sustainability territory which will ignite collaboration, creativity and problem-solving.

“We know that for meaningful societal change and optimum impact we can’t walk this path on our own. We need to work together with other industry leaders, our suppliers, customers, employees, government, businesses and NGO partners. It is imperative for everyone to take action for the greater good of the planet and its people,” concludes Koor.  Bizcommunity

TFG – Trading update

– Group turnover growth of 15.8% compared to Q1 FY2020;
– Strong performance from TFG Africa and TFG Australia with turnover growth of 26.8% (ZAR) and 32.7% (AUD) respectively, compared to Q1 FY2020;
– TFG London’s trade since the re-opening of most outlets on 12 April 2021 has outperformed expectation across all three brands, with the business generating positive cash flow in Q1 FY2022;
– Cash turnover growth for TFG Africa of 55.5% compared to Q1 FY2020. Cash turnover now contributes 69,6% to total TFG Africa turnover;
– Encouraging like-for-like turnover growth for TFG Africa of 11.1% for May and June combined compared to May and June 2020**;
– Continued market share gains in the Mens and Womens categories according to the Retailers Liaison Committee (market share of 16% for Q1 FY2022, compared to 10% for Q1 FY2021);
– TFG Africa opened 71 new stores during the quarter while 29 stores were closed; and
– Group online turnover growth of 23.2% compared to Q1 FY2020, contributing 9.8% (Q1 FY2020: 9,2%) to total Group turnover.

** April has been excluded from this calculation as the majority of stores did not trade during April 2020 due to the South African government-enforced nationwide lockdown.

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