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MINISTERS WEAVE FRAME BAILOUT

MINISTERS EAVE FRAME BAILOUT Enslin-Payne, Samantha Pressly, Donwald – Business Report Davies and Patel meet Sactwu to discuss multimillion-rand plan to save Seardel unit and its 1 400 jobs

In a renewed effort to save jobs at troubled Frame Textiles, Trade and Industry Minister Rob Davies and Economic Development Minister Ebrahim Patel have been meeting union representatives to draft a bailout package for the company, which employs 1 400 people.

Should the expected multi-million-rand package be agreed, it would be South Africa’s first bailout of a private company using state resources.

The intention is to draw the Industrial Development Corporation (IDC), the state financier, into preventing the KwaZuluNatal-based company from being shut down. A team of experts will meet again this morning before reporting back to the two ministers on Monday.

Davies and Patel met Trade and Industry Department officials and representatives of the Southern African Clothing and Textile Workers’ Union (Sactwu), which has an interest in Frame’s parent, Seardel, through its stake in Hosken Consolidated Investments (HCI).

A year ago, when Patel was Sactwu’s general secretary the union was directly involved in raising R250 million through HCI to rescue Seardel from bankruptcy. Seardel was previously run by Cape Town clothing magnate Aaron Searll.

Incoming Sactwu general secretary Andre Kriel said yesterday that the action had saved 14 000 jobs at Seardel.

Kriel said he was not at liberty to disclose the size of the mooted Frame bailout as the details were still being discussed.

Pan African Advisory Services chief executive Iraj Abedian, a key architect of the government’s Gear economic policy, said the intervention of the ministers mirrored a global pattern taking place in the UK, France and the US.

Governments were “getting involved in micro and sectoral rescue operations”, Abedian said, but the jury was out on whether these interventions would, in fact, rescue jobs in the longer term. It was questionable whether such action was advisable and in South Africa’s case “a bigger road map” for rescues needed to be forged. “We don’t know what that is at the moment.”

In February the government announced a state plan to help certain sectors suffering from the global recession. Industries targeted for specific support were the automotive, mining and clothing and textile sectors.

Colen Garrow, the chief economist at Brait, said there was an argument that “exceptional measures” needed to be considered in the prevailing economic climate.

Such interventions might indeed be advisable, especially in the clothing and textile industries, which had been “hammered” by a relatively strong rand, cheap Chinese imports and quota systems that had not worked particularly well.

“The momentum of the (South African) economy is under threat. Maybe a different approach is needed,” argued Garrow

Stuart Queen, Seardel’s incoming chief executive, said yesterday: “If there is going to be a future for Frame, we can be involved, but not solely. We are looking for an equity partner for Frame.”

If Frame was to be rescued any assistance would need to materialise in days rather than weeks, Queen said. “Once you announce the closure of a business it is difficult to reverse it as customers find alternative suppliers.”

This is not the first time that Frame has sought state help. Earlier this year Seardel approached the government for assistance before announcing last month that it intended to close some Frame divisions.

In February the IDC did a due diligence on the business but said it could not assist, according to Queen. HCI now owns 70 percent of Seardel.

The renewed impetus to save the business was due to the new ministers, who had shown a willingness to help.

Nimrod Zalk, the chief director for industrial policy at the Department of Trade and Industry said efforts to assist Frame were being considered because it was one of the major players in the industry.

“As soon as you start to lose industrial capacity it damages the sector as a whole,” he said. Brian Brink, the executive director of the Textile Federation, said: “I would not agree with a specific deal for one company” All 600 companies in the textile sector were under pressure, he noted.

Source: Business Report – Enslin-Payne, Samantha Pressly, Donwald