How LSF boosted Cape Union Mart and others with retail sector master plan

Localisation Support Fund (LSF) has outlined plans to help strengthen the retail sector through its Retail-Clothing, Textile, Footwear, and Leather (R-CTFL) Masterplan.

The sector is understood to give employment to 14% of South Africa’s manufacturing workforce, while it generates an estimated R74 billion in Gross Value Added, or 1.7% of Gross Domestic Product (GDP).

The plans were outlined at the LSF’s roundtable on Wednesday in Sandton, where the Non-profit organisation also noted how it has worked with retailers including Cape Union Mart and Karma Clothing.

Retail sector masterplan by LSF

Thami Moatshe, the Executive Head of LSF said the vision of the masterplan is to develop a competitive, sustainable, and dynamic R-CTFL value chain that provides its customers with compelling products invested in growing employment and advancing inclusion and transformation.

She listed one of the challenges the sector has experienced as an increase in imports into the country, which has impacted the productivity of manufacturers. However, through the master plan, they aim to expand local retail procurement of local CTFL products from 45% to 65%, equalling R66 billion.

The report into the master plan includes key objectives to create employment of up to 330 000 and to grow local retail sales to R250 billion by 2030.

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Challenges experienced by the retail sector

Moatshe said the sector has experienced many challenges throughout the years.

“One of the biggest challenges to manufacturing localisation is the cost of production in the country and the impact of cheap imports on the local industry.”

She acknowledged that there are policies in place to protect local manufacturers in the sector, but the enforcement of these policies remains a challenge and, in turn, this impacts the entire manufacturing ecosystem.

The non-profit organisation aims at unblocking and accelerating localisation opportunities through targeted interventions for local demand and global exports. They measure their success in different ways, a few being through the reduction of South Africa’s Import Bill and Increase in Exports; and the increase in jobs created in the manufacturing sector.

Interventions made in the retail sector

During the roundtable, LSF outlined how its interventions into Green Thread, umbrella company to Cape Union Mart, Old Khaki, and Poetry have panned out.

Before their intervention, Green Thread was experiencing problems such as loss-making, there wasn’t room for a price reduction, and efficiency was below 45%, which is below the breakeven target.

Cape Union Mart

Andy Thorvaldsen, Supply Chain Executive at Cape Union Mart Group said that LSF’s interventions made a big difference. The company started experiencing financial issues two years ago after it decided to repurpose from manufacturing children’s clothing to women’s leisure fashion.

“This transition required a different construction approach, skill set, and machinery.”

“The factory has experienced considerable financial losses over the past two fiscal years. We realised that the inefficiencies were not confined to the sewing line and that we needed to optimize the end-to-end value chain. Our priority was to establish a design centre that serves as a bridge between retail buyers and manufacturing.”

Thorvaldsen does acknowledge that their ambitions for growth were quite aggressive, therefore they encountered challenges, especially when it came to establishing the necessary processes, standardised ways of working, and global manufacturing standards of excellence that would allow us to scale.

“To address this, we sought assistance from the LSF, acknowledging that we had exhausted our internal expertise,” he said.

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Karma Clothing

Another company that LSF intervened at was Karma Clothing, which permanently employs 55 people. Karin Clark, founder and managing director of Johannesburg-based Karma Corporate Wear said it was heavily affected by COVID-19, and as the company was trying to recover from the pandemic, came load-shedding.

“However, Karma managed to overcome these challenges and regain continued growth within the industry. The new challenges involved rethinking and drastically improving production and timelines. LSF stepped in, and the inspiring process began.”

Clark said that the business has been going well since the absence of load-shedding. However, the rising cost of electricity is becoming a thorn for the factories.

Data centric approach

Carleine Van der Vyver, Head of Manufacturing at Green Thread Manufacturing said the LSF adopted a data-centric approach, to accurately identify the core challenges that hampered efficiencies and created time-consuming bottlenecks in their production process.

“This approach ensures that once a style is completed, it is not revisited. In a nutshell, the outcome of the intervention was the development of seamless and fluid processes that ensured line balancing and that negated all the production bottlenecks the company had to contend with,” she added.

Through the LSF’s intervention, Green Thread Manufacturing managed to turn the corner and record a profit for the first time in four years.

“With the support from LSF, we have successfully engaged specialist industrial engineering skills, transforming a previously unprofitable operation into a factory that has achieved profitability for the first time in over four years. So, for the first quarter, which ended in June 2024, the factory was profitable.”  

The company has now set its sights on increasing efficiency levels from the current 65% to 70% to enhance competitiveness. Furthermore, the company is on track to improve on-time delivery performance from 93% to a target of 100%.

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