- February 6, 2012
- Posted by: admin
- Category: Clothing and Textiles
At least 1 500 jobs in the clothing and textile industry are on the line as Seardel proposes to retrench workers in the face of shrinking margins.
In a move that could dent the government’s efforts to protect and create jobs, the clothing and textile maker said on Friday that it had no choice but to retrench workers at its Western Cape and KwaZulu-Natal operations in an effort to combat low margins.
In its interim results for the six months to September last year, the company stated that its clothing operations delivered a R50 million operating loss, up from R20m in the corresponding period in 2010.
Meanwhile, the Southern African Clothing and Textile Workers Union (Sactwu) promised to “vehemently” fight the proposed job losses.
It is déjà vu for Seardel. In 2008 the company was rescued by Hosken Consolidated Investments (HCI) from financial distress. However, it still had to close some divisions and retrench 4 000 workers.
Seardel chief executive Stuart Queen said on Friday that the company proposed to the unions to right-size, citing margin pressures, which eroded selling prices.
He said: “The company has continued making a loss in its clothing division and this has squeezed our margins and input costs. We have decided to review this and eliminate low-margin production across the board.” He added that the move was also an attempt to balance its order books.
Queen said the textile industry found itself in tough trading conditions with rising input costs and retailers opting for imports.
Depending on the consultation processes under way, Seardel proposed to dismiss 1 000 workers from its Western Cape factories and 500 workers from the Ladysmith factory in KwaZulu-Natal.
The consultation process, which took up to 60 days, Queen said, would determine the outcome of the proposal.
Sactwu said the organisation received a notice on January 26, informing it that approximately 1 498 weekly paid employees across four factories might lose their jobs.
“We will vehemently resist these proposed job losses,” Sactwu general secretary André Kriel said.
The notice by Seardel stated that the firm’s clothing division had performed poorly and suffered substantial losses.
“The workers are not yet retrenched, the consultation procedure as required by section 189 of the Labour Relations Act is now being implemented,” Kriel said.
He added that the union was informed that Seardel anticipated a closure of one of its production lines, the Profortune operation, by the end of next month. In the event of retrenchments affected workers would receive all the retirement fund withdrawals due to them, Kriel promised. Meanwhile, Textile Federation executive director Brian Brink said the industry was facing continuous difficulties owing to illegal imports.
He said this made business extremely hard for the industry as clothes were sold below market price. “Even though we have customs controls, more effort is needed to strengthen security at all points of entry into South Africa.”
HCI, which owns Seardel, said in a statement earlier this year that 2012 “should hopefully see further operational improvements at this clothing and textile conglomerate without the shareholder (HCI) having to resort to drastic cutbacks in its operations”.
It suffered a major setback when its application for financial distress relief funds was rejected by the Industrial Development Corporation in 2009.
Seardel stock slipped 2.5 percent on Friday to close at 77c.
Source: Business Report – Nompumelelo Magwaza