The bail-out of embattled clothing-maker Rex Trueform was stitched up this week: while the legendary factory will survive, over three-quarters of its workers are likely to get the chop. In addition, the last-ditch deal rests on the company’s commitment to stock its retail outlets with garments from the factory.
Rex Trueform owns the Salt River, Cape Town, factory plant where 1 000 jobs are currently at risk. But it also owns the profitable Queenspark retail stores. In early March it announced the possible closure of the factory owing to R60-million losses sparked by exchange rate fluctuations and cheap imports. Queenspark was always to remain in its control.
On Thursday Rex Trueform management and the Southern African Clothing and Textile Workers Union resumed discussions, which had been adjourned the previous Monday. The focus is on putting together a “sustainable package” to save the factory. Continued orders from the factory for the Queenspark stores are said to be an essential issue. Thursday’s meeting is seen as crucial to concluding the deal.
Interviewed by the Financial Mail this week, Bear Kumalo of Siga Capital said that job losses were still necessary and said that the lifeboat will consist of three separate deals: between his company and Rex Trueform; between Rex Trueform and the union to manage the retrenchments and between the union and his company.
The importance of secured orders was highlighted in the BEE-rescue deal of the Tej knitwear factory last year.
While the factory is still in a precarious position, a long-term order from a South African retail giant is keeping it afloat.
The Western Cape provincial administration, which helped broker the Tej BEE deal, has been involved in facilitating the BEE acquisition of Rex Trueform.
This week there were indications that a second buyer could join Kumalo in the bail-out. On Tuesday Rex Trueform management confirmed continuing negotiations with “a BEE consortium”, which it could not name, and indicated its willingness to offer “attractive terms for the lease of the Salt River building and equipment for continued operations”. The company did not comment further.
Local content remains a politically sensitive issue. Following the full-page adverts in weekend newspapers by Edcon, owner of Edgars and Jet stores, the Foschini Group on Monday called an unprecedented media briefing to explain why it opposes any quotas.
Foschini Group financial director Ronnie Stein said it was wrong to “disrupt our business with strike action … [this] is destructive to all parties”.
Similarly, it was “not right to be told what to do” about local content.
“It is a fiction to say our company assists job losses,” said Stein. Only 1,2%, or four million, of the estimated 400-million garments imported were destined for its stores; 70% of Foschini’s clothing is produced in South Africa, he said.