Newsletter No 31 / 20 August 2021                           

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CBPEP  Skills Development  Dialogue Series : first dialogue  held on  23 July

Graham Choice and Johann Baard participated in this engagement.

Building collaborative partnerships: A case study of the clothing and textile industry

A representative from the South African Clothing and Textile Workers’ Union and one from the South African Apparel Association spoke to the ways in which they have been able to collaborate and partner around skills development priorities. Both representatives spoke to the way in which partnership was given expression in the implementation of the International Labour Organization’s Score project, which seeks to improve productivity and improve working conditions in small and medium-sized enterprises within the context of the DTIC-driven Master Plan process. In sharing their experiences, the following key elements emerged as being integral for building collaborative relationships:

• The sector was under enormous pressure and this led to the realisation that both parties cannot continue as they have done before if they want the sector to survive, hence the decision to “find different kinds of resources at one’s disposal”.
• An acceptance that “manufacturing is a team sport – if you want to go it alone you don’t get anywhere”.
• The building of trust, which has led to “a robust and very collaborative form of engagement”.
• The need to link human resource and manufacturing strategies to build effective relations on the shop floor: “If you are not people-centric, you are not going to get a stable workforce.”
• Exploring common interests that can bind parties together. For example, the parties identified the need to develop a strategy to “beat (global competition) or match them”. This shared imperative led to the development of common goals and an agreement on key interventions. One of these interventions includes that of skills development.
• Agreement around common goals requires an understanding that it “generates mutual gains outcomes” for workers and employers.
• The Master Plan process is focusing on demand-led skills required by the retail and manufacturing sectors, highlighting the skills required in the next 10 years and the kinds of programmes required in order to meet those needs

The next two dialogues will build on these discussions.

Dialogue 2 will take place on 3 September. It will focus on how different sectors and industries are embedding skills planning within economic development processes in order to improve skills anticipation so as to ensure that skills supply better responds to demand.

Dialogue 3 will take place on 17 September. It will build on insights from the sectoral processes and will consider to what extent the current systems for skills anticipation (and related tools and rules that are part of these systems) enable or hamper the interface between education and work, in ways that support employment, industrial transformation and growth.

Patel’s opague ‘master plans’ suit SA’s oligarchs – and few others

By Telita Snyckers

The master plans created by the department of trade, industry & competition may have laudable objectives – but have they just created a seat at the table for the lobbyists with the deepest pockets?

Red flags are being raised about how trade policy is being developed in SA right now.

It’s vital that we understand this, since trade policy determines to what extent SA adopts a protectionist stance; to what extent it integrates into global markets; and the extent to which it uses quotas, tariffs and other trade barriers to generate revenue and protect local enterprise.

It also determines how much we pay for commodities — including, by the way, pineapples, which have become increasingly important during the lockdown ban of alcohol sales.

Only, there are some alarming things happening in SA, not least of which is that the department run by minister of trade, industry & competition Ebrahim Patel has released a number of new “industry master plans”.

A service called Global Trade Alert tracks, among other things, the number of harmful trade interventions countries introduce. Its data hints at a wider story.

This reveals that since 2008, SA has been introducing increasingly more harmful trade interventions, and fewer liberalising ones.

In 2009, the government introduced only 14 measures that could be considered harmful. By 2020, this had grown to 44 in that one year alone.

In total, a staggering 58 harmful trade practices relate to metals, and 20 to sugar (coincidentally the two industries for which Patel has released “master plans”.)

But it’s not just the number of “harmful practices” – this debate goes to the heart of who crafts the policies that determine what we can buy, what we can sell, and at what price.

Now, there may well be some laudable rationale for Patel’s trade policy, but it’s becoming increasingly difficult to assess just what that might be.

We already have a body tasked with developing trade policy: the International Trade Administration Commission of SA (ITAC). By law, the ITAC is tasked with investigating customs tariffs, providing trade remedies, and controlling imports and exports.

By all accounts, the ITAC runs a fairly slick operation — or at least a transparent one. It has a set policy framework, does economic impact assessments, provides regular public reporting, and has skilled staff with diverse backgrounds in economics, trade law and other disciplines.

In other words, the ITAC shouldn’t be bypassed by some quasi process.

Patel’s table for rich lobbyists

Yet, increasingly, trade policy appears to be developed outside the ITAC. Patel seems to have taken a different route, seemingly bypassing the normal process.

It seems he’s being advised by a small core group of industry representatives and together, they’ve developed a series of industry-specific master plans.

Broadly speaking, these master plans have laudable objectives. They seek to secure industrialisation and localisation for everything from sugar and steel to poultry, automotive, furniture and clothing. They are aimed at getting SA to produce more locally.

But the trouble is, they seem to be developed in a vacuum using an opaque process.

The working groups that have created these plans seem potentially to be little more than an echo chamber that reflects the sentiments of large companies — which means these plans are often created at the expense of smaller industry players.

Critically, the master plans often appear to be thin on research and impact assessments, and big on boardroom groupthink. They reflect the views of connected captains of industry who have a stake in the outcome, and who use their clout to secure policy positions that are best for them.

Their work lacks the transparency and rigour of an ITAC investigation — and yet, often, these plans have a far greater impact on the market.

The suspicion is this: has Patel simply created a seat at the table for those lobbyists with the deepest pockets?

These working groups have no legal status, yet SA runs the risk of their “industry master plans” effectively usurping the role of the ITAC. No matter how well-intentioned, these master plans should not be allowed to take the place of proper policy.

And yet this is exactly what is happening: policy decisions that have a significant and harmful effect on the Southern African Customs Union (Sacu) are made without any consultation with Sacu, as happened with the debate about clothing rebates.

And when it came to scrap metal, implementing a price preferencing system and banning scrap metal exports wiped out R6bn in annual export revenues — with little engagement and even less apparent commercial substance.

It illustrates exactly why Patel’s approach to consultation has been described as being inconsistent at best. Sometimes he calls for comment, sometimes he doesn’t. Often he sets unsuitably short timeframes for comment, technically satisfying the requirement for consultation, but not substantively.

And Patel has reportedly refused to disclose details of the members of the various working groups — even to affected industry insiders.

Judging by their reports, the ITAC has not actively been involved in developing the master plans. Instead, Patel has introduced far-reaching tariff measures which appear to be based on the say-so of the connected few.

Policies for oligarchs

It’s not meant to be like this. Social compacts are powerful tools; engaging with industry is a powerful tool; and responsive policies are powerful tools. But the critical caveat is that this must be integrated into the appropriate policymaking forums – not sit opaquely alongside them, or bypass them entirely.

We do not need trade policies developed by oligarchs.

Globally, we’ve seen how this kind of administrative capture has the fox guarding the henhouse. It allows big business to bend the government’s policy objectives to suit its own preferred outcomes.

And it illustrates the holes in our policy process. As it stands, we need far greater participation in the development of our trade policies, using processes that are far more transparent, through government institutions that are legislatively mandated to do so.

We need trade policies that produce outcomes for the greater good; we don’t need more opacity that allows ministers to sidestep protocols.

Snyckers is an independent illicit trade expert

Smart Fibres, the future of textiles?

The textile industry is developing more and more each year. Using the latest technologies to develop better performing fibres and fabrics, suppliers and producers are trying to combine traditional know-how with cutting-edge technology. Offering stronger, more durable products, eliminating rotten fibres for some, and improving comfort, textiles with intelligent fibres continue to impress and develop.

While some textiles are still being researched and prepared, such as the MIT researchers who are developing fibres capable of storing and analysing body data, others are being used and are being put up for sale. In the sports world, we will find fabrics with a thermal signature that change colour when in contact with the skin. We will also see ultra-resistant fabrics based on spider webs for bullet-proof waistcoats, anti-stain textiles or even waterproof complementary jerseys.

There are so many innovations yet to be discovered. Intelligent textiles are and will continue to improve, with a view on perfecting everyday life and thus the capabilities of our clothing. It remains to be seen whether all these textiles will remain sustainable and eco-friendly over time.

HomeChoice interim results June 2021

Revenue for the interim period rose 7.4% to R1.7 billion (R1.6 billion) whilst operating profit declined 4.3% to R176 million (R184 million). Profit and total comprehensive income for the period attributable to owners increased by 11.0% to R121 million (R109 million). Furthermore, headline earnings per share went up 19% to 124.2 cents per share (104.4 cents per share).
Dividend

Notice is hereby given that the board of directors has declared a final gross cash dividend of 47.0000 cents (37.6000 cents net of dividend withholding tax) per ordinary share for the six months ended 30 June 2021.

Outlook – accelerate digital momentum in FinTech with Retail recovery focus

The economic outlook for South Africa remains muted. The acceleration of the vaccine roll-out is expected to provide relief to the country and support growth in GDP and there are early indications of improvements in South African consumer credit health.

We will continue to invest in technology to support the FinTech’s vision to be our customers’ favourite digital financial services provider. The Retail division is focused on the execution of our recovery plans, product innovation and excellence combined with ongoing digital transformation.

The group is positive and focused on further accelerating the digital growth momentum, enabled by data-driven credit decisioning, scalable technology platforms and its strong cash and funding position.

Truworths – trading statement and business update

Investors are referred to the business update for the 52-week period ended 27 June 2021 (the ‘period’) published by Truworths International Ltd. (the ‘Group’) on SENS on 20 July 2021 (the ‘update’). In this update it was advised that the Group was in the process of finalising its results for the period and that the Group would provide an update on earnings for the period when it had reasonable certainty in this regard. The Group now has reasonable certainty in this regard and reports as follows.

Earnings
Amidst the challenging trading conditions referred to in the update, the Group’s headline earnings per share (‘HEPS’) and earnings per share (‘EPS’) for the period are estimated to increase as follows:
HEPS
*52 weeks to 27 June 2021 (cents) – 503 to 523
*Estimated increase on prior period (%) – 23% to 28%

EPS
*52 weeks to 27 June 2021 (cents) – 463 to 483

Update on impact of civil unrest
Further to the update, the Group announced that it has been able to reopen 30 of the 57 stores that had been impacted directly and severely by the civil unrest in South Africa in July. The Group expects to have reopened a total of 48 of the affected stores by the end of August. Three more stores are scheduled to reopen around the middle of September, while the reopening dates of the remaining six stores is unknown due to the severe fire damage to the shopping centres in which they are located. All stores that were closed as a precautionary measure have resumed trading.

The Group is in the process of quantifying the losses resulting from damage to stores, the loss of stock (predominantly winter stock) and the loss of profits as a consequence of the inability to trade. The Group is working closely with its insurers to submit and finalise all claims as speedily as possible and believes that it has adequate insurance cover to mitigate much of these losses.

Annual results
Shareholders are advised that this trading statement and business update do not constitute an earnings forecast, that the financial information provided herein is the responsibility of the directors, and that such information has neither been reviewed nor reported on by the Group’s external auditors. The Group expects to publish its audited annual results for the period on Thursday, 2 September 2021.

Massmart – sales update and trading statement

For the 26-week period ended 27 June 2021, Massmart’s total sales amounted to R41.3 billion, representing an increase of 4.4% on the same period last year, with comparable store sales increasing by 4.8%. Sales over the same period in 2020 were impacted by various levels of trading restrictions as a result of the CO-19 level 5, 4 and 3 lockdown restrictions effective from 27 March 2020 until reporting date.

Total sales from South African stores for the 26-week period increased by 5.9%, while comparable stores sales increased by 6.6%.

Total sales, measured in Rands, from our Rest of Africa stores for the 26-week period decreased by 10.1%, with comparable store sales decreasing by 11.2%. Sales performance in the Rest of Africa, in Rands, have been impacted by currency fluctuations over the first half of the year. When measured in constant currency, total sales relating to our Rest of Africa stores have increased by 1.6%, with comparable store sales increasing by 0.3%.

Whilst the partial easing of Covid-19 related trading restrictions marked slightly better trading conditions for the reporting period, further Covid-19 waves of infection prompted more liquor bans, extended levels of lockdowns and curfews, rising unemployment, and has consequently adversely impacted consumer confidence.

In Makro, total sales of R13.7 billion increased by 13.5% over the prior year, while total sales in our Cash & Carry business of R9.3 billion were 2.3% lower than the same period last year. Food sales remained under pressure, decreasing by 2.9% in Makro and 8.0% in Cash & Carry, as a result of ongoing lower activity in the corporate, hospitality, restaurant and catering industries. However, liquor and general merchandise sales have performed well. Total liquor sales in our combined Wholesale business are 39.6% higher than last year, which was impacted by the ban on liquor sales in place in April and May 2020.

Builders have continued to see strong sales performance, with total sales of R7.2 billion being 24.0% better than last year, with comparable stores sales growing by 22.0%, driven mainly by strong retail demand. Trade sales continue to be muted due to the slowdown in the construction industry. Builders was restricted from trading for most of April 2020.

                                 Did you know……..

FLAX

Flax is the earliest known natural textile fabric seen used in about 5000 BC. Flax is the material used to make linen which is seeing a huge come back today in drapery and upholstery.

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