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GOVERNMENT ABANDONS BID TO SAVE FRAME

Effort to lure foreign investor fails as Asian party walks away from deal

THE Department of Trade and Industry has had to abandon plans to rescue the Frame Group, the textile arm of SA’s largest clothing manufacturer, Seardel, after it failed to convince an Asian foreign investor to take up a stake in the failed company.

Industry stakeholders were not surprised by the department’s announcement yesterday that its attempts to keep Frame running and save 1400 jobs had been defeated.

“The last gasp was trying to bring in a foreign investor, but the company did suffer huge losses and Seardel itself was sceptical that the business could be turned around,” one commentator said.

The Industrial Development Corporation (IDC) turned down an earlier plea for a bail-out from the firm as the business was unsustainable.

It is likely that Frame’s assets in KwaZulu-Natal and the Western Cape will be taken offshore.

Seardel CE Stuart Queen yesterday confirmed that the group had had some interest shown in its assets from groups in Bangladesh, China and India, and had also been approached by some local manufacturers.

However, liquidity problems in the current economic environment and a particular aversion in SA to extend credit to clothing and textile operations would make it extremely difficult for a local manufacturer to buy the assets, which means they are unlikely to remain in the Southern African Development Community region.

“We have not been pressing hard on a process (to sell the assets), because we were hoping that a solution could be found. But there has been some interest. Frame’s assets are very advanced, so we think we’ll get them sold,” Queen said. The company was hoping to complete the process in the next 18 months.

Some of the assets, such as some looms, would be kept and used at Seardel’s other operations, he said.

Frame — which was composed of spinning, weaving, finishing and denim divisions — was the biggest textile operation in southern Africa and there were concerns that its closure could lead to a dearth of fabric in the region.

However, the IDC’s Willie Fourie, who heads the strategic business unit for clothing and textiles, allayed such fears yesterday. The IDC had indicated that it would help clothing manufacturers who were struggling to secure fabric, while the corporation also had talks with local textile manufacturers Da Gama and Mediterranean Textiles about the possible need to expand production capacity.

However, the IDC had seen “no rush” for the need to increase textile imports, as most firms had made alternative sourcing arrangements when Frame’s closure was originally announced, he said.

Fourie was also confident that workers affected by Frame’s closure might be accommodated elsewhere in the value chain. “With a little more focus on clothing and other downstream activities, and some buy-in from retail, we should be able to make up those jobs fairly swiftly.”

Department of Trade and Industry officials could not be reached for comment yesterday, but earlier in the day the department said its attempts to rescue Frame had failed.

Interventions by Trade and Industry Minister Rob Davies and Economic Development Minister Ebrahim Patel were prompted by an attempt to “facilitate the preservation of strategic capacity and employment in a global and domestic environment, which is placing parts of our manufacturing sector under serious threat”.

The department said that the ministers would “similarly engage actively” in similar circumstances “where there are difficult and strategic decisions at stake within our manufacturing sector”.

An industry commentator said attempts should have been made to save some of Frame’s strategic assets.

Source: Business Day – Mathabo le Roux