SA's clothing industry confronts Covid-19: Closures, adaptation and hope for a revival


Five weeks is a long time for clothing retailers to stop operating and arguably will lead to the closure of many stores while forcing others to adapt to an online retail future.

But at the same time, the Covid-19 pandemic and the subsequent global recession may be the catalyst that gets South Africa to reinvest and revive its clothing and textiles sector, according to an analyst.

When President Cyril Ramaphosa initially announced the 21-day lockdown, clothing retail was not regarded as part of the essential goods and services residents would have access to. As the lockdown has progressed, baby clothes were included in the list of essential goods.

With the next stage of Covid-19 crisis management involving the partial lifting of the lockdown, there are also expectations for the definition of essential goods to be expanded, according to investment analyst Chris Gilmour. "The definition of 'essential' needs to be more loosely defined."

Spike in sales

Gilmour expects there to be "pent up" demand for clothing items among consumers and suggested that there might be a spike in sales in the first few days of the lifting of the lockdown. However, the rush to stores won't last as consumers are also going to be battling with "little spending power" as some have been retrenched, Gilmour pointed out. "Spending power is going to be significantly lower than it was at the start of the lockdown. Retailers are going to need to balance pent up and replacement demand, and the ability of consumers to buy," he added.

Once the economic reality sinks in, some retailers will have to close shop. Market commentator Wayne McCurrie said some stores may survive but at a lower profitability level or even report losses.

Troubled clothing retailer Edcon, which owns Edgars and Jet, said its turnover declined 45% compared to the same period last year and was R400 million below the sales and cash forecast for March, this after Ramaphosa's initial announcement on the managing the Covid-19 crisis on 15 March. "The Presidential lockdown order means Edcon will lose a further R800m in turnover during the lockdown period, thus placing significant strain on Edcon’s liquidity," said a spokesperson. The retailer has not made any online sales since the lockdown was instituted either.

Gilmour said some parts of Edcon might survive, but he isn't very optimistic. Similarly, McCurrie is of the view that Edcon is among the retail stores which are "vulnerable". Edcon said it is prioritising paying the salaries of employees, so far CEO Grant Pattison took a temporary 100% cut on his salary, with exco members agreeing to 30% cuts to their salaries. The move is not unique to Edcon, with retailer Woolworths and Mr Price Group executives also foregoing parts of their salaries to support employees.

In order to save costs, clothing retailers Truworths, Mr Price Group, Woolworths and Pepkor have also reached an agreement with landlords to pay 20% of their rental during this lockdown period, Fin24 previously reported.

Rise of online retail

With rent comprising between 10% to 15% of costs for retailers, Gilmour thinks that retailers may possibly explore alternative channels such as online shopping to save costs. "I think that will definitely be a way forward for certain retailers," he said.

Woolworths said it has seen a spike in online clothing sales and intends to implement deliveries after lockdown. "There is definitely a demand on items our customers want and need for winter," a spokesperson said in an emailed response. Woolworths in the meantime has introduced a contactless drive-through service for its food business. It has been rolled out at select stores, with consumers ordering groceries online and picking them up at selected collection times.

Gilmour said that clothing retailers in SA have been "their own worst enemy" when it comes to making the most of opportunities in the online shopping space, with the exception of Mr Price which has been a shining example of constructing a "decent" online shopping experience. "They've really exploited that channel beautifully, better than anyone else in the country."

There may be some obstacles related to logistics and broadband access for retailers to transition to online shopping, or to at least make it an integral part of their business, but Gilmore said these things are not "insurmountable". Gilmour believes that increasing online retail even slightly could make a huge difference for businesses.

Revival of clothing and textiles?

Speaking of opportunities, the Southern African Clothing and Textile Workers' Union (Sactwu) is of the view that the Covid-19 crisis could present an opportunity to scale up local procurement, particularly for medical textiles and personal protective equipment, said general secretary Andre Kriel.

While the local clothing manufacturing industry may find it difficult to compete against cheaper imports from China, the Philippines and even India, Gilmore said there is definitely an opportunity to revive the domestic clothing and textiles sector. Referring to a knitwear factory in Epping, near Cape Town, which  "competes head on" with China, Gilmore said that domestic factories could be resuscitated as a lot of skills still exist in the country. "It can be done, with enough investment and the right machinery and the right technology, we can compete with the Chinese," Gilmour said.

One factor driving such a revival will be the weaker rand - which will render imports more expensive. Secondly, there appears to be a growing anti-China sentiment worldwide, as part of the aftermath of Covid-19. Gilmour said that not only South Africa, but other countries may look into controlling their own supply chains as there may be a trend of deglobalisation that follows the global recession.

It will however take commitment from government, unions and the workforce to make this revival a success, Gilmour pointed out.

Sactwu's Kriel said that labour is exploring new market opportunities in medical textiles and clothing, especially export opportunities in the rest of the continent in terms of the African Continental Free Trade Agreement and to other parts of the world.

"We have no illusion though that things will be tough for our industry. But for us, lives first matter. The industry can be rebuilt, but not dead families," said Kriel.

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