Fresh from his position as Sactwu boss, new Economic Development Minister Ebrahim Patel wants to tip money into a company Sactwu jointly controls.

Two weeks in the post and Economic Development Minister Ebrahim Patel has managed to rustle up renewed support for the rescue of a company that his former employer, the South African Clothing and Textiles Union (Sactwu), jointly controls.

On Tuesday talks began afresh between the Industrial Development Corporation, the department of trade and industry, Patel, Sactwu, and textiles and clothing manufacturer Seardel to find a rescue plan for Seardel’s embattled subsidiary Frame Textiles.

Seardel is 70% owned by HCI, and Sactwu owns about 40% of HCI. Towards the end of last year Seardel, suffering under tough trading conditions, attempted to recapitalise its business through a R300-million cash injection — this for a company which now has a measly market value of R200-million.

Through the r i g h t s issue R50-million was underwritten by former chairman Aaron Searll, with HCI underwriting the rest, thereby gaining of control of Seardel.

HCI, managed by former unionists John Copelyn and Marcel Golding is closely associated with Sactwu. Along with Sactwu, Copelyn and Golding own about 50% of HCI. A sprawling investment, holding company, it is capitalised at R5-billion and has extensive casino interests. E a r l i e r this year Seardel approached the IDC for aid in keeping Frame afloat, but a workable agreement could not be reached and it was announced that Frame would close.

Frame employs about 1700 people and produces a vast array of textiles and textile products.

Meanwhile, Seardel itself has continued to struggle through a tough 2009, with its interim results, released in March, showing that it continues to operate in the red. However under the new administration which includes Patel as a member of Cabinet, new options to rescue Frame are being explored. Both Patel and the new DTI Minister, Rob Davies, have indicated intentions for a broader and more effective industrial policy aimed at assisting key sectors such as clothing and textiles manufacturing.

The IDC, however, remains coy about the likelihood of a solution to Frame’s woes.

Of its previous negotiations the IDC said that “due to the strategic nature of the company and the number of jobs involved” it gave talks with Frame and Seardel management high priority, but a deal could not be reached.

How circumstances have changed between the first round of talks and these renewed attempts remains unclear.

“The meeting decided on a process that will be followed to explore possibilities. It is therefore too early to speculate on whether IDC would provide any support and, if so, what form this support would take,” said Willie Fourie, head of textiles and clothing at the IDC.

“If, through this process, a possible solution is found that requires further IDC involvement, IDC would be happy to consider it on its merits,” said Fourie.

The DTI, however, denies that the possibility of a rescue for Frame is a bailout for Sactwu interests. DTI head of industrial policy Nimrod Zalk argues that to lose Frame would be a significant “blow to the capacity of the sector” as a whole, not to mention the 1700 jobs at stake.

“It would erode confidence in the South African textiles sector,” he told the Mail & Guardian. Nor is this a case of “throwing good money after bad”, he said.

Zalk said government expects conditions in the sector to improve and it is simply a question of what it will take to keep businesses running through strategic interventions until conditions ease up. According to Zalk, Seardel is not the only company in talks with the IDC and DTI.

“[Seardel] would also need to bring significant improvements and efficiencies to the table,” said Zalk.

Some industry players have welcomed the move, though not without reservations.

Insiders are concerned about the message being sent out in singling out one company for assistance with one source saying government has not “applied its mind” to the ramifications for the sector as a whole.

“In terms of assisting the industry we are in favour of any such programmes,” said Brian Brink, executive director of the Textile Federation.

“But assistance for single companies? There may be a problem with that.”

The DTI has long been criticised not implementing its customised sector programme for clothing and textiles, intended to improve the competitiveness and skills base of the sector.

Zalk admits that the DTI has “lost a lot of time”, but argues that “over the last year work around the clothing and textiles sector has gained momentum.”

A number of elements of the CSP have begun roll out, says Zalk.

They include: the clothing and textiles competitiveness programmes, administered by the IDC, which provide funds for companies to either upgrade capital equipment or implement processes and product improvements aimed at making them more competitive; intensive work with Sars to curb illegal imports; a refined tariff structure which includes duty rebates for companies importing textiles not mass produced in South Africa, but manufactured for export; and a skills upgrading programme being finalised with the department of labour.

“To home in on one company is missing the impact of a broader set of support measures being introduced,” Zalk said.

Seardel and Patel had not responded to requests for comment by the time of going to press.

Source: MAIL & Guardian – Lynley Donnelly