THE acquisition of Seardel’s loss-making clothing division by the Southern African Clothing and Textile Workers Union (Sactwu) is an interesting development in the South African business landscape which deserves to be closely watched. The union is about to find out that it is often easier being on the opposition benches than in the ruling seat when it comes to running a business.

The union bosses will now have to make decisions on matters which they are often at loggerheads with management. Issues such as linking wages to productivity, executive remuneration and the wage gap to factory workers, decisions on costs and profitability, among others.

Of course the union isn’t new to the business world. Its investment arm has been very successful with its HCI investment. But this time it will be occupying the corner office. It will be required to make decisions which will have a direct effect on the running of the business and its staff, who happen to be Sactwu’s members. It’s not going to be easy.

The clothing industry is in terminal decline.

It is drowning under illegal and cheap imports.

It has a labour force that is both expensive and unproductive compared to counterparts in China and Southeast Asia. There is rampant noncompliance with minimum wage rates as set by the bargaining council, meaning those that comply are uncompetitive.

The odds are stacked up against Sactwu. In the past financial year, Seardel’s clothing unit lost R34m. In the prior year it lost R101m.

Despite taking some R450m in costs out of the business in recent years, Seardel CEO Stuart Queen says its future is questionable. Even shrewd and tough businessmen like John Copelyn and Marcel Golding of HCI, both of them former union leaders, have washed their hands of the business, offloading it to Sactwu in a sweetheart deal.

But it is important for Sactwu to succeed and we hope they do, if not only to save the 2,000 jobs under threat. But it will be naive for the union to believe it can run the business on a philanthropic basis. It will have to make some tough decisions in the not too distant future.

When it does, it might finally gain a better insight into what business leaders have to face. That in its own will be a welcome, and we hope, instructive development.

Source: BDLive