Newsletter 23 of 2019

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           Newsletter No. 23                                                     21 June 2019

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Plans to reshape the clothing industry

By Karen Pretorius

A master plan submitted to the Department of Trade and Industry (dti) aims to improve the country’s ailing clothing and textile industry.

A panel discussion at the 5th Source Africa and Apparel Textile and Footwear expo at the Cape Town International Convention Centre heard how the plan aims to reshape the industry which had shed between 140000 to 160000 jobs in recent years – although job losses had stabilized over the last decade.

The exhibition attracted 130 companies from across Africa, from manufacturers, suppliers, service providers and buyers.

Simon Eppel, a researcher at the South African Clothing and Textile Workers’ Union, said the “master plan” had been drafted to reshape the clothing and textile industry.

Among other issues, it aims to stop the influx of illegal imports. One of the ways this could be done is to limit the ports of entry through which these goods are allowed into the country.

Eppel said the intention is to finalize the plan this year.

He said clothing sector wages in South Africa are lower than countries such as Brazil and Turkey.

Michael Lawrence, executive director of the National Clothing Retail Federation (NCRF), said they have “huge support for local”.

He said the 10/11 year target through the master plan is to create 60000 new jobs by 2030.

Lawrence said reviving the clothing and textile industry “is not meant to be a race to the bottom, to find the cheapest labour”, but instead, they want to drive an intelligent agenda to consumers, who are increasingly aware of sustainability such as the case regarding single-use plastics.

“Consumers use their existing realities to make buying decisions. So sometimes it’s just about price. But consumers can increasingly be allowed to make smart decisions,” said Lawrence.

Deputy Minister of dti, Noma- lungelo Gina, said Source Africa aims to boost regional investment to ensure sustainable job creation in the sector.

“The South African textiles and clothing sectors constitute an important sector of our economy,” she said.

In mid-March, executives at Brimstone, owners of clothing manufacturer House of Monatic, said it could face closure if a “right-sizing” process does not improve operations. The factory, based in Salt River, is 100-years-old.

Chief operating officer Iqbal Khan said part of the restructuring at House of Monatic involved operating at a lower capacity. Some 140 staff would be impacted by the “right-sizing” as the group was over-staffed, demand for locally produced clothing was slack and production inputs were too high.

In April, the provincial government allocated R132million in stimulus funding over the next three years to support manufacturing, including the clothing sector. But it would also support operations outside of the cities across the province.

The former MEC for Economic Opportunities, Beverley Schäfer, said: “We import too much and we produce too little”.

“As a country, our imports of clothing, textiles, and leather goods have sky-rocketed from just over R5billion in 2000 to almost R60bn now,” she said.

Schäfer said there is a plant to rebuild the industry in the province. IOL

Woolworths share price recovers on renewed optimism

By Nick Hedley

Shares in Woolworths have rebounded in recent weeks, thanks to a recovery in the sector and optimism that the worst may be over for the high-end retailer, whose foray into Australia has proven costly for investors.

Despite the rally, Woolworths’s shares remain more than 50% below the highs of over R100 seen in 2015, soon after it finalised the acquisition of Australian department store chain David Jones.

The company, led by Ian Moir since 2010, has written down the value of David Jones by as much as A$713m (about R7.3bn), having paid about R21.5bn for it in 2014, and has cut head office jobs there in a bid to stabilise the chain.

Announcing the David Jones write-down in early 2018, Woolworths said the business had been hurt by the “cyclical downturn and structural changes” affecting Australia’s retail sector, and “poor or delayed execution” on major projects.

But analysts say the resulting share decline appears to have been arrested at the least.

Since dipping to a low of R43.05 in February — the worst level in seven years — “the share has been holding up well”, said Lester Davids, a trading desk analyst at Unum Capital.

After edging slightly higher from February, the stock has led a broader relief rally among South African retailers over the past two weeks, lifting 11.5% since May 29 to R48.91 on Wednesday afternoon. The retail index has advanced 9% over the same time and the JSE all-share 7.6%.

“It does appear that the market continues to support the share above the R44 level, most likely continuing to believe that the business will find its footing after a tough three years,” Davids said.

To turn the company around in the face of rising competition from online players, David Jones has been adding food halls to its stores and investing as much as A$200m (R2.06bn) in its flagship store in Sydney, using funds from the sale of another outlet.

“David Jones has undergone a significant period of transformation and investment,” a Woolworths spokesperson told Business Day this week, asking not to be named.

“The bulk of the heavy lifting has now been done,” the person said, citing new systems and processes, a new online platform that “is trading well”, the addition of new brands, the flagship store refurbishment project, and the relocation of the chain’s head office with “a new and fresh team”.

“David Jones is now well positioned and we expect performance will benefit as the business moves out of the transformation phase to deploy its new capabilities.”

“The executive team, with Ian, is committed and focused to leverage off the solid platform we have established for the future growth of our business.”

But Davids said Woolworths’s share price — which was probably being capped by tough trading conditions in SA — could “reverse its downward trend from bearish to bullish” if investor confidence returns to SA.

Investment manager Allan Gray has been building up its Woolworths stake in recent months because the stock has been trading at a discount, said Andrew Lapping, Allan Gray’s chief investment officer.

Despite the recent retail rally on the JSE, “we still think it’s cheap”, Lapping said.

For now, other investors are comfortable to simply hold the stock.

“We don’t think now is the right time to sell,” local money manager Vestact said in a note to clients last week. “The bad news is priced in and they still can turn that Australian business around. If the South African economy turns, both Woolies and Mr. Price will enjoy solid gains in sales.”

The Woolworths spokesperson said the company’s foods business in SA “continues to deliver good growth” while the fashion unit, which recently decided to drop the David Jones brand in SA, had started to show an improvement in the current six-month period to end-June.

US bank JPMorgan, which sees Woolworths shares rising to R57 by January 2020, said in a research note in February the clothing business in SA was likely to continue improving.

“We are now comfortable with three of Woolworths’s four businesses,” the bank said, adding that the stock was cheap. “However, David Jones continues to be a meaningful risk given slowing Australian clothing, footwear, and accessory sales, and execution problems.” Business Live

Mozambique seeks investors for cotton sector

The Mozambique Institute for  Cotton (IAM) is seeking investors to revive cotton production in the Zambezia province. The aim is to transform Mozambique into one of the biggest cotton producers, according to Helina Massengele, IAM representative for the northern province of Nampula, who also oversees the central Zambezia province and the province of Niassa.

Zambezia province, a former leader house in cotton production, is now relegated to the second place in the cpuntry.

Massengele said IAM plans to launch international public tenders for the occupation of areas abandoned by companies and farmers, according to a newspaper from Cameroon.

The Zambezia province plans to produce about 1,200 tonnes of cotton this year, a 68 per cent reduction from the previous harvest of about 3,800 tonnes.

However, cotton production remains considerably lower than at its pre-independence peak of 144,000 tonnes in 1974.

Classifieds

Can you help with woven cotton fabric

Please help, I’m trying to find a supplier or manufacturer that does woven cotton fabrics for kiddies dresses at reasonable prices.

Mike Pengelly,  Pengelly Pleasure Wear  pengelly@telkomsa.net  021 – 788 5408 / 071 – 629 7540

Did you know……..

Japanese warriors wore their hair up in a small ponytail after shaving the front of their heads. However, unlike the man bun of today, this wasn’t just for fashion. It helped to keep their helmets secure.

The long, fluffy wigs which are commonly seen worn by judges today derived from the days of King Louis XIII. The French monarch suffered quite badly with bald patches, and wore a massive wig to appear macho and powerful.

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