6 of 2016

 Newsletter No. 6 04 March 2016

A few have asked how Cape Town companies can get to meet with Enterprise Mauritius……….they will be at Source Africa again this year. 8 & 9 June at CTICC.

Budget strikes good balance, however needs further unpacking —SAIPA

The South African Institute of Professional Accountants (SAIPA) has welcomed the focus on austerity in the 2016 budget tabled in Parliament by the Minister of Finance, Pravin Gordhan. However, adds Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at SAIPA, the budget is weakened by a lack of clear targets and timelines.

No clear targets and timelines
“Certain parts of government are bloated and lacks specifics, and the Minister is surely right to make it the target for his strict measures. His repeated point that we cannot spend money we don’t have, and that we cannot borrow what we can’t repay, are welcome reality checks,” Retief says. “But I confess to feeling that the medicine could have been a little stronger, and the absence of concrete savings targets and timelines is a real missed opportunity.”

This lack of detail may be of particular concern to international investors and ratings agencies, he speculates. Similarly, while it was good to hear that SAA and SA Express might be consolidated, a firmer expression of intent with regards government funding would have been preferable.

Retief noted that the Minister chose not to raise the extra revenues needed through a VAT increase as many commentators expected. On balance, he felt that this was probably a sound political decision given the restless labour environment and the wave of student and service delivery protests currently under way. However, a VAT increase may still be in our near future.

The budget outlined several important growth initiatives, including continued spending on infrastructure, but was again short on detail as regards targets and deadlines. With the growth projection revised downwards to a barely visible 0.9 percent, a more concrete set of targets could have made a more convincing growth story for foreign investors and the battle-weary local business community.

Some wise moves
Retief says that the reallocation of R475 million to the Department of Small Business Development was one of the major positives of the budget, along with a recommitment to making it easier to do business generally. The Minister’s proposal to identify unspent government funds and reallocate them was also a wise move.

On the tax front, the Minister achieved a good balance by providing marginal tax relief for the lower-income earners while avoiding a direct increase for the rich. In fact, the rich will effectively pay more because there is no relief for inflation, and the increase in capital gains tax and the aggressive attack on the use of trusts for estate planning will naturally affect them the most.

In the same vein, the proposed extension of the existing Voluntary Disclosure Programme to include foreign assets, for a 6 month period starting October of this year, will give wealthy taxpayers with undisclosed foreign assets the opportunity to come clean, but will not offend compliant taxpayers as this is not an amnesty. This follows the HSBC Swiss leaked information, and the various information sharing agreements concluded with foreign jurisdiction.

“We have a disproportionate tax base, meaning only a small portion of taxpayers contribute the majority of the personal income tax revenue, and the Minister has to be careful not to alienate those taxpayers,” Retief concludes. “If I had to sum up the budget, I would say he has managed not to offend any major constituency, and that is a hard balancing act at a sensitive time for the country. Whether his strict measures and plans for reigniting economic growth and the proposed austerity measures will be enough for the international financial community, only time will tell.”

By My Newsroom in Business, Economy, Finance

Investment by international underwear giant boosts local clothing sector

HanesBrands Inc, the $6 billion global leader in the manufacture and marketing of underwear, has acquired Durban based DB Apparel for an undisclosed amount.

Managing director of DB Apparel, Andre van Vuuren, said the company’s name change to Hanes South Africa would be in effect from this month (February 2016).

He confirmed that the change of ownership and the name change would have no impact on the former DB Apparel’s operations. “We will continue manufacturing and selling high-quality underwear that has built our reputation.”

Becoming part of a massive international group which employs more than 53 000 people across the world and owns 23 top international brands including Playtex, Wonderbra, Barely There, FILA, Champion and Hanes, offered considerable advantages for a proudly South African manufacturer, he explained.

Created in 1970, DB Apparel is the only full assortment underwear manufacturer * in South Africa that supplies to both the male and female underwear markets. The company, which has its head office in Durban, produces around five million units per annum under five well-known global brands – Playtex, Wonderbra, Shock Absorber, BEAR and She Bear.

Despite being rocked by the many challenges facing the South African clothing and textile industry over the past two decades, DB Apparel has continued to grow over the years, adding brands to its portfolio along the way.

Van Vuuren said that the company had experienced an upswing in 2015.  Despite challenges such as electricity shortages and the general economic downturn in the country, it is now at a significant advantage as a local manufacturer in light of the depreciation of the rand. The plan is to double the size of the business by 2020.

99 percent of all garments produced by DB Apparel are made locally. The company’s exposure to risks associated with currency fluctuations is less than that of its competitors’ as only the raw materials needed to manufacture underwear are imported. Most underwear produced in South Africa is imported as completed garments.

The advantage of a lower rand off sets South Africa’s traditionally high labour costs, making local producers like DB Apparel more competitive, he said.

Becoming part of HanesBrands, which operates across all continents, opens up significant opportunities for the Durban-based company. Van Vuuren said that there was a strong possibility that the local factory could not only manufacture for the local and broader African markets, but also play a role in HanesBrand’s global business.

HanesBrands is listed on the New York Stock Exchange. Its global supply chain is balanced across the East and West, leveraging fewer bigger facilities operating at scale and producing products for markets in 30 countries. The group has been on the acquisition trail since 2007 and now owns over 50 facilities across the world. These produce over 2.2 billion units per year.

As one of South Africa’s largest remaining clothing manufacturers, DB Apparel employs 795 people at its factories. Of these, 80 percent are female.     Van Vuuren pointed out that, while the company will benefit from incorporation into this large global company, it still enjoyed the benefits that come from a strong local manufacturing base. These include staying in touch with its local market and catering to specific styling and sizing requirements as well as local tastes.

Pointing out that a bra, which is made up of between 35 and 40 different pieces, is an extremely complex product to make, van Vuuren said that the company valued its employees as skills were hard to come by.

The company is committed to training and up skilling its staff and has not only put in place extensive educational  facilities for existing employees but also regularly accepts and trains newcomers to the industry doing internships.

Positive changes that are already underway include the upgrading of both machinery and computer systems.

*A full assortment underwear manufacturer produces undergarments for “both top and bottom” including bras, panties and men’s brief, trunks etc.  

My Pressportal

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Did you know……..

Between 1450 and 1800, textile production was second only to agriculture in economic importance. It employed more people and produced more profit than any other manufactured product. Production and trade existed at two levels. Everywhere peasants and villagers turned locally grown wool and flax into fabric and clothing for themselves and their neighbors. The cloth they produced was of poor quality and not designed for export to distant markets. On top of this local market sat a large and lucrative luxury trade in silk, wool, linen, and (eventually) cotton fabric, the most important of which were heavy woolens. The customers for these fabrics were wealthy landowners, government and church officials, merchants, financiers, aristocrats, and master craftsmen in Europe, Asia and the Levent.

Did you know……

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Before 1850 The skirt is the second oldest women’s garment in history.

Clothes were hand stitched by those that wore them. Clothes were not made for fashion, but rather for commodity.

In the 1500’s fashion designers showed off their designs by making doll size clothing versions of their own fashions

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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:

Carla Finlay

carla@newsbriefs.co.za

0724055930