Newsletter No. 08 / 12 March 2021                          

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Helping Cape Town’s clothing manufacturing sector rebuild

ACA Threads

Local clothing manufacturing businesses across Cape Town are launching an online development programme that is being supported with funding from the City of Cape Town. The programme is focused on helping companies create first-line managers who will drive productivity, create stability and harness innovation.

Mayoral Committee Member for Economic Opportunities and Asset Management, Alderman James Vos, was invited to visit some of these businesses along with officials from the City’s Enterprise and Investment Department.

Vos visited Pep Clothing in Parow, the largest clothing manufacturer in South Africa; ACA Threads in Brackenfell, Southern Africa’s leading thread manufacturer; Performance Brands in Lansdowne, manufacturers of high-quality outdoor and technical sportswear; as well as Rogz in Montague Gardens, which exports pet products made in Cape Town to over 90 countries worldwide.

“Collectively, these four manufacturers employ over 2,500 Capetonians and I was impressed to hear how some of these companies even managed to employ additional residents during the course of last year,” said Vos.

The City supports 22 clothing and textile manufacturers via one of its Strategic Business Partners (SBP), the Cape Clothing and Textile Cluster (CCTC). This partnership is aimed at boosting the competitiveness of the local clothing, textile, footwear and leather (CTFL) manufacturing industry.

The City said it provides funding to SBPs in order to actively seek out opportunities to grow the local economy by attracting investment and create jobs.

Team Leader Development Programme

Vos commented, “I am pleased to confirm that in the next month, the CCTC is launching the online Team Leader Development Programme to help companies create first-line managers who will drive productivity, create stability and harness innovation. The City has provided support for 20 learners to complete the four-month course and the cluster aims to train at least 50 learners over the next six months.

“I am immensely proud of our partnership with the CCTC, especially how we were able to provide support to the industry through the various levels of lockdown. Over the last couple of weeks, I have seen first-hand how this support has resulted in the retention of jobs and embracing innovation to take advantage of new opportunities.”

Beyond recovery to sustainable growth

In 2020, throughout the pandemic, CCTC members were supported through an online risk mitigation and recovery support programme, which enabled them to quickly understand and adopt best practices, work safer and recover faster. With the support of the CoCT, the CCTC is guiding members beyond recovery to sustainable growth. Key to this is the cluster’s market-led industry support strategy, in which major retailers are part of the conversation and provide a clear commercial link to manufacturing upgrading initiatives.
The City of Cape Town also partners with the Craft and Design Institute (CDI) and recently launched the Cape Skills and Employment Accelerator project, which is focused on creating employment opportunities for youth and women in the clothing and textile industry in Cape Town over the next three years. The project will enable SMMEs to take on machinists at a greatly reduced cost to their business while creating learning and work opportunities for unemployed women,” explained Vos.

“Through our strategic partnerships, I aim to help this important sector to boost production, attract the investment it needs to create more jobs and thrive,” he concluded.  Bizcommunity

The human cost of Chinese cotton: how does it impact SA?

The Center for Global Policy released a report in December detailing how ethnic minority labourers in the Xinjiang region in China – which produces 85% of the country’s and 20% of the world’s cotton – are forced to pick cotton by hand through state-mandated schemes and which potentially could have devastating consequences for global supply chains that use the region’s cotton as a raw material.

In January, the British government indicated that they were going to tighten up controls regarding imports from the Xinjiang region and that companies will have to publish supply chain transparency reports or face the risk of being fined. This was followed by the US and Canada both banning imports from the Xinjiang region.

Brian Brink, executive director of the Textile Federation (Texfed), says considering South Africa’s close and tight diplomatic relationship with China, the chances are slim that there will even be a mild rebuke from South Africa regarding China’s alleged human rights record or practices.
Forced-labour product to seek alternative markets
“Given that the SA government has been unsuccessful in even addressing illegal, undervalued clothing imports from China over the last two decades, to expect them to control the origin of the cotton content of clothing originating from China is, I suspect, a rather forlorn hope,” says Brink.

Furthermore, Brink believes that as a consequence of countries like the US’s embargo on cotton goods from Xinjiang, there will be increased volumes of forced-labour-produced product seeking alternate markets throughout the world.

This does not bode well for countries like South Africa where illegal, undervalued clothing imports is already a big problem.

Paul Theron, acting executive director of the Apparel Manufacturers of South Africa (AMSA), says it is a complex issue with apparent allegations, but no proof, although the industry is highly suspicious of China’s practices.

Local clothing retailers

South Africa’s prominent clothing retailers – including Woolworths, Mr Price Group, Pepkor, TFG and Truworths International – were approached for comment on the policies they have in place regarding the raw cotton used in their merchandise.

According to Woolworths spokesperson, Silindile Gumede, the group has no supplier relationships in China’s Xinjiang province and does not source finished garments made using slave labour from the region or from North Korea.

“We audit our suppliers via independent third parties to ensure that the group’s own Code of Business Practices is upheld and are committed to partnering with suppliers and industry stakeholders to protect and improve conditions and promote worker empowerment. Woolworths does not under any circumstances tolerate forced labour, and we will act quickly to address unjust labour practices should concerns arise within our supplier base,” says Gumede.

Pepkor – the holding company of retailers like Pep and Ackermans – says its sourcing office in China follows a process that includes inspecting and rating compliance levels of suppliers on a bi-annual basis to ensure that the group complies with the necessary labour laws and regulations across its value chain. The group says none of its retailers source from the Xinjiang province.

The Mr Price Group, through its group head of investor relations and corporate communications, Matthew Marriner, declined to participate for the purpose of the article. The Foschini Group and Truworths International did not respond to the request for comment.

Cotton value chain is highly complex

Theron says he sees challenges in identifying cotton originating from the Xinjiang region as cotton is a generic fibre. “And as China is also a major importer of cotton, it becomes even more problematic in identifying the source of fibre once blended and processed further.”

The cotton value chain is highly complex, with blending of the product happening as it makes its way through the value chain. This makes it difficult to identify the original source of the raw cotton picked on the farm, in the final, manufactured product. This means that, for instance, a cotton t-shirt that says it is manufactured in China, Bangladesh, Eswatini or South Africa, can include raw cotton that has its origin in different cotton-growing regions and countries.

The blending of cotton happens at the spinning process, where lint is converted into yarn, at the knitter/weaver where the yarn is converted into greige fabric and even at the manufacturing stage, for instance in the case of a pair of cotton trousers, where the inner lining of the pockets can be made from different cotton than the outer shell.
Retailers can do more

Despite the difficulty in tracing the origins of cotton used in manufacturing the final product, Thomas Robbertse, founder and executive director at iQ Logistica – the agtech company which developed the cloud-based SCC Operations Visibility Platform that integrates the local cotton supply chains – says retailers can do more regarding the visibility of their supply chains.

“Technology like ours allows for greater visibility of supply chains right through, from the farm to the customer. However, in order to function optimally, it is essential that every role player in the supply chain commits to the process. It is good and well to claim that there are no abusive labour practices, or for that matter also any sustainability shortcomings, in one’s supply chain, but the only way to instil confidence, is to prove it, which traceability platforms like ours facilitates.”

Offer full traceability – Better Cotton Initiative

The Better Cotton Initiative (BCI) – the largest cotton sustainability programme in the world which locally includes Woolworths and Pick n Pay Clothing as their retail members – says legislation requiring businesses to demonstrate knowledge of their supply chains is becoming more common around the world. It says companies are not only being asked to know more about the origins of their materials but also about the conditions under which they are produced.

“Increasing media and academic attention on geopolitical issues, including the treatment of Uyghur Muslims in the Xinjiang area of China, has further demonstrated that production location and sustainability are crucially interlinked,” says Amy Jackson, BCI director of membership and supply chain.

Up to now, the BCI has made use of its Chain of Custody (CoC) framework that incorporates the concept of “mass balance” – a widely-used volume-tracking system that allows Better Cotton to be substituted or mixed with conventional cotton provided equivalent volumes are sourced as Better Cotton.

“But as our world progresses, we recognise that it is time to explore going beyond this mass balance CoC model to offer full traceability and even more value to Better Cotton farmers and companies. For Better Cotton, this means that, at minimum, we seek to determine the region in which the seed cotton was produced and identify the businesses involved in its transformation to a finished good,” says Jackson.  Bizcommunity

Pepkor – results of annual general meeting

Shareholders and noteholders are hereby advised that at the annual general meeting of the Company held entirely by electronic communication at 09:00 am today, Wednesday, 10 March 2021 (“AGM”), all of the resolutions placed before the meeting were passed by the requisite majorities of the Company’s shareholders

HomeChoice – update on release of results

Shareholders are advised that COVID-19 related work from home challenges have impacted the finalisation of the Group’s annual financial results and audit process for the year ended 31 December 2020.

The Company´s annual financial results, originally scheduled for release on the Stock Exchange News Service (“SENS”) on Monday, 15 March 2021 will now be published on SENS on Wednesday, 24 March 2021.

The annual financial results will also be presented virtually via webcast at 11h00 on Wednesday 24 March 2021.

The guidance contained in the Company’s trading statement published on SENS on 12 February 2021 remains unchanged.

Massmart final results December 2020

Sales for the year decreased 7.7% to R86.486 billion (2019: R93.660 billion), trading profit before interest and taxation increased 5.5% to R1.173 billion (2019: R1.111 billion), loss for the period fell 35.3% to R1.753 billion (2019: loss of R1.296 billion), while headline loss per share lowered byoutlook 19.3% to 426.8 cents per share (2019: headline loss of 529 cents per share).

Dividend

Our current dividend policy is to declare and pay an interim and final cash dividend representing a 2.0 times dividend cover, unless circumstances dictate otherwise. Due to the headline loss reported and the need to preserve cash, as a result of the uncertain economic outlook, no final dividend has been declared. No final dividend was declared in December 2019.

Outlook and trading update

Total sales for the nine weeks to 28 February 2021 of R13.9 billion represents a sales decline of 6.6%, with a 6.5% decline on a comparable sales basis. This decline is attributed mainly to the liquor ban in January and delayed reopening of schools.

We expect the uncertain operating environment, constrained consumer financial health position and negatively impacted economy related to the Covid-19 pandemic to persist. While trade in all our categories is currently permitted, the imposition of new restrictions remain uncertain. We however remain, confident that we will continue to effectively navigate through this difficult period and with the support of our exceptional employees we have a renewed focus on our number one priority, our customers.

Mr Price – change to board

The Group is pleased to announce the appointment of Jane Canny as an independent non-executive director to the board of directors (Board) and member of the Risk and IT Committee, with effect from 8 March 2021. Her appointment ensures that the Board maintains the information and technology skills necessary to support the Group’s growth.

Pick n Pay – retirement of executive director

Shareholders are advised that, on reaching the Group’s normal retirement age, Richard van Rensburg will be retiring from his position as executive director of Pick n Pay Stores Ltd. with effect from 31 March 2021.

The Group has well-planned internal succession arrangements in place that will ensure successful delivery of these important functions in the future.

Did you know……..

“The effort that fast fashion brands put into sustainable production measures is decreasing” (Global Fashion Agenda, 2019)

The general trend of fast fashion brands trying to “do sustainable” is unsatisfying, to say the least. In reality, little to no retailers focus on making production transparent and eco-friendly. Don’t be fooled by baby steps like recycling and conscious collections, which may be no more than greenwashing.