- April 14, 2009
- Posted by: admin
- Category: Clothing and Textiles
ALEC HOGG: Johnny Copelyn joins us now, the chief executive of HCI. Johnny, on Thursday, just before the long weekend, the announcement came out of Seardel, the big textiles group, to say that it it’s going to be closing down part of the Frame operations. Let’s just recap a little – the reason for your involvement in this – what kind of a stake does HCI own in Seardel?
JOHNNY COPELYN: HCI owns about 70% of Seardel, and Seardel owns 100% of Frame.
ALEC HOGG: Why did you go into Seardel in the first place?
JOHNNY COPELYN: We went into it to avoid it closing down altogether.
ALEC HOGG: What happened at that time – because we need to recap history? You are getting a lot of flak for what you are doing with Frame at the moment.
JOHNNY COPELYN: Well, look, Alec, this is a real sore area for me. I’ve spent more than 30 years of my life focusing on Frame. My entire union career was centred around getting involved with the Frame workers, and this has been – to be the guy to pull the plug on the thing has been the most horrific decision I’ve ever had to take. So public flak is a minor piece of my troubles with it.
ALEC HOGG: Old Phillip Frame, who started it, wasn’t exactly what you would call a model employer.
JOHNNY COPELYN: You know, they’ve said the biggest responsibility of an employer is to provide work for people, and by the time he died he employed 35 000 people. So, one way or the other, this group was a very vibrant growing group under his leadership. I mean, no question about it. He was very anti-union, he paid terrible wages, all the rest of it, but the fact of the matter is he built the group to the biggest blanket manufacturer of the world and all the rest of it. Since 1979, when they employed 35 000 people, the group has shrunk to less than 3 000. So its fortunes have been pretty bad all along, and a large part of what’s left is now being closed – half of what’s left is being closed down now by us.
ALEC HOGG: If Phillip Frame was still around, if he’d still fought with the unions as he used to back in those days, would he have been able to achieve that No 1 objective, as you say, of any employer – which, as you say, is to keep people…
JOHNNY COPELYN: The key to Phillip Frame’s success was his relationship with government, admittedly a different government, and it’s gone out of favour right now. But certainly their industrial policies were something you could hang your coat on a lot more easily than the current economic policies.
ALEC HOGG: Mmm. Johnny, what can be done, if anything, to turn this around? We’ve heard the good news today that Pamodzi Gold, which looked like it was going into liquidation, is being rescued by an American. Are there any white knights possible to come to Frame’s rescue?
JOHNNY COPELYN: Um, you know, Alec, one doesn’t want to say no to things you don’t know about – so, if there is one, all I can say is it’s about time he stepped forward. But I believe that this factory will in the end close down, and I do think it is a significant drop in industrial capacity of the country. I think once it’s closed you never get it back again. You know, I think to start a factory with the capacity that Frame has got would cost well over R1bn, and I don’t see anybody investing that kind of money into the textile industry in the future. So once it’s gone, it’s gone forever – and whether that’s a good thing for the country I’ve got the biggest doubts. I feel that protecting existing jobs is a helluva lot easier than trying to create new ones, and I think that for a government that gets R100m in PAYE taxes, R100m in VAT, and R100m in customs out of this operation, to simply turn their nose up at it and say, well, it must stand or sink by itself, I think is a very, very short-sighted view of the world. And particularly when you are competing in a sector where countries that are competing with you are subsidising their industries tremendously I think is a very, very short-sighted view of the world, and one that we are going to live to regret in time.
ALEC HOGG: Your investment … would have been absolutely brilliant at HCI, except with the Seardel investment that you made there – the share price of Seardel down a negative ten-bagger in the last year. Was there sentiment involved in perhaps what you did here?
JOHNNY COPELYN: Obviously, you know, there is a lot of sentiment in it, but in HCI we invest in things that we think can be turned to lucrative directions, and we are pretty confident in the end we’ll get Seardel right. But you’ve got to work out – have you got a vision for turning things around? We took over Seardel in November. Here we are four, five months later, it’s having gone through budgets for the next year, and I think we have come to a point where we recognise that outside of certain changes to government policy there is no potential for the Frame Group to survive. And we spent quite a bit of time trying to implore government to focus on this area, but everybody sees it the way they see it. You know, we are very caught up in it, it’s a big thing for us, and perhaps we just haven’t got the balanced perspective that you get if you stand outside it. But we tried pretty hard to save it. It is a heavy loss-making business in the short term and it’s beyond the reach of a small empowerment company like ours to absorb losses like that long enough to have the chance to turn it around.
ALEC HOGG: Any lessons in this for other businesses, or indeed for the country as a whole?
JOHNNY COPELYN: Well, look, I think that the main lessons are that if you get to a point where you need help from government you are in big trouble. That lesson we’ve learnt out of it. Other than that, not really. I think that the current environment puts a lot of pressure on all manufacturing areas to be more efficient, to be more streamlined and to be smart and so on. But within the framework of doing your best in those areas I think that there are some industries that need more protection or they are gone. And this is one that to me just looks like it’s gone.
ALEC HOGG: Johnny Copelyn, chief executive of HCI, a former unionist himself and, he says, a very sad day for him.
Source: Moneyweb – SAFM Radio