Four of South Africa’s leading apparel retailers — Edcon, Foschini, Truworths and Woolworths — have announced the establishment of a Trust to help research and implement solutions to sourcing in the local apparel manufacturing industry, as well as confirming their commitment to local sourcing.
The retailers were responding to a memorandum delivered on September 17 by the South African Clothing and Textile Workers’ Union (Sactwu) demanding that the Sactwu declaration addressing local procurement be signed without the suggested amendments offered by the retailers in July.
Negotiations following the December-June declaration left the retailers unsatisfied, and they subsequently took the initiative, at the invitation of Nedlac, to offer an alternative statement. However, their proposals were subsequently rejected by union.
On Thursday, the four retailers all confirmed their ongoing commitment to sourcing locally manufactured goods, noting that this made good business sense.
They also said they were proud that their companies were able to contribute so significantly to the economy — particularly to job creation, improving the lives of their employees and their families and delivering rewards to their shareholders, which include South Africa’s pension funds.
“On the back of successful growth in their businesses, we are significant employers in the South African economy,” they noted.
“Creating jobs has been a consequence of an environment conducive to consumer spending and the companies’ solid returns.
“While imports for customers have increased, reflecting consumer demand, the growth in these retailers’ collective sales volumes over the last four years has also grown their procurement of domestically produced products. Each of the retailers buy the majority of their merchandise locally and believe it is essential for their businesses to have a strong local manufacturing industry. These procurement trends confirm the retailers’ increased requirements for a stable domestic apparel industry, which they fully support.”
The retailers said they remained concerned that the current strength of the rand and the lack of competitiveness and capacity in the local industry were “very real issues” that needed to be addressed more broadly by the South African clothing industry and should include manufacturers, government and relevant labour unions.
However, the four retailers also believed that South Africa possessed the basic ingredients for a strategically well-planned successful local industry, as it did potentially have competent and willing labour, management, stable and sophisticated government and infrastructure.
“What is missing is a well-coordinated strategy with all parties equally committed in a voluntary and constructive manner. Without this we believe the local manufacturing industry will continue its struggle for survival.”
Consequently, the retailers announced the formation of a Section 21 (not for profit) trust fund to research further ways of supporting local apparel procurement efforts, to help address the ongoing, systemic, structural capacity issues in the manufacturing sector.
The trust, to be seeded with an initial grant of R1-million, would aim to improve the performance of local suppliers and thus protect the interests of all stakeholders, including manufacturers, employees, labour, government, customers and shareholders, by working with the local industry to establish sustainable South African businesses.
The trust would function as an investigative body to propose solutions to resolve the capacity, training and productivity issues in the local manufacturing sector.
The retailers highlighted several challenges outside of their control faced by the manufacturing industry, including: the foreign exchange rate; the lack of adequate investment in the manufacturing sector over the past decade, which made it difficult for the industry to compete with international manufacturers primarily based in Asia; illegal imports flooding South Africa; insufficient use of, for example, tax incentives and training incentives for the long-term sustainability and development of the local apparel manufacturing industry; the trade climate evolving between China and South Africa promoting trade between these two countries; and inadequate planning and foresight by all role players resulting in lower productivity, higher costs and poor capability of the local manufacturing industry compared to international competitors.
“None of the challenges mentioned above are addressed in the Sactwu declaration — they are ignored and focus the solution on controlling the retail industry through quotas,” the retailers observed.
The retailers’ formal statement acknowledges that job losses in the local apparel manufacturing industry constitute a serious crisis and accepts that there is an urgent need for action to address this issue; it recognises that there are enormous benefits in having a stable South African apparel manufacturing industry from which they can source their apparel; it suggests the need for locally manufactured apparel producers to address productivity improvements and delivery times; it undertakes to use their efforts, particularly in their buying decisions, to promote higher levels of procurement from local manufacturers in an endeavour to create employment and save jobs in the industry; and it recommends further discussions involve commitments by all stakeholders, including trade unions their members and government.
“To remain competitive and responsive to the demands of customers, retailers need to continuously source innovative, top quality products at competitive prices. Forcing retailers to agree to specific targets for sourcing local product is anti-competitive and will ultimately be to the detriment of the retail customers, giving them a smaller range of choices at less competitive prices.
“Resultant price increases could also have an adverse impact on inflation and interest rates in South Africa and limit the country’s ability to compete more aggressively on the world stage,” the retailers concluded. – I-Net Bridge