NEWSLETTER

QUARTER ONE 2019

04 08
Digital Industrial Recent Events
Policy Dialogues
Practical Implications for
South African Clothing and
Textiles Industry

10 12
Back To The Basics: SME Boost
Lean Boot Camp Programme
- Recruitment Drive

14
Industry News
Supply Chain News

Retail News
DIGITAL INDUSTRIAL
POLICY DIALOGUES
DIGITAL INDUSTRIAL POLICY DIALOGUES
PRACTICAL IMPLICATIONS FOR SOUTH AFRICAN CLOTHING
AND TEXTILES INDUSTRY

Author: Lisa Higginson

The KwaZulu Natal Clothing and Textiles Cluster (KZN CTC), B&M Analysts, and the Centre for
Competition, Regulation and Economic Development (CCRED) have partnered in the development
of a Digital Industrial Policy Framework for the Department of Trade and Industry (Dti). This
framework looks at the practical and policy implications of value chain disruption in South Africa’s
key economic sectors.

In the first phase of the project industry experts prepared policy briefs to understand how new
technologies are being applied across the globe and assessed the positioning of local firms
in relation to these developments. Potential disruptions in relation to the clothing and textile
industries were explored through five interconnected themes:

1. Increasing data availability through object linked sensors;

2. Object interconnectivity generating large data sets and associated powerful

business analytics;

3. The application of artificial intelligence to big data to enable machine

learning algorithms to generate insights;

4. New materials availability and capability;

5. The increasing use of additive technologies and robotics capable of working

either autonomously or with human collaborators.

Quarter One 2019 | 5

Digital technologies are also driving changes
in consumer behaviour. This is evident
as Consumers increasingly seek apparel
and fashion products that support their
individual preferences and biomechanics
through competitively-priced customisation.
This growing trend in personalisation and
customisation can already be seen in smaller
batch runs as C&T retailers reduce their reliance
on long-term forecasting and associated
purchasing models and turn towards
higher levels of mass customisation and the
introduction of rapid response systems to
reduce inventory redundancies and fashion
irrelevance. The rapid advancement of digital
disruptors on a global scale will accelerate
this trend.
The second phase of the project was focused
on understanding the practical implications
of advanced technologies on the South
African Clothing and Textiles Industry. To
facilitate this, the KZN CTC hosted a policy
dialogue in Durban on the 18th of October
2018. The dialogue brought together a group
of diverse stakeholders, including executives
from leading South African clothing retail
and manufacturing companies, local and
national government, skills and training
entities, researchers and labour unions. Dr
Justin Barnes from B&M Analysts opened
the dialogue with an overview of the
project process, anticipated outcomes of
the dialogue and an introduction to global
trends in new digital technologies reshaping
the clothing and textiles industry. Stuart
Bird, CEO of the Mr Price Group and Adriaan
Verhagen, CEO of Ninian & Lester, shared
their experiences and perspectives around
current and future disruptions in the clothing
industry. Participants were then provided the
opportunity to ask questions, make comments
and share their own insights on the practical
implications of technology disruptions.
Panelists identified and emphasized
growing awareness around environmental
sustainability and social responsibility.
Consumers are becoming more concerned
about what they wear, how their garments
are made, what they are made of, and
what happens to garments when they are
no longer needed. Future production may
put more emphasis on “green” materials,
less consumption and digital technologies
applied across the value chain in anticipation
of the pace of change.
Globally the shift to more sustainable
production is starting to influence policies
and regulations. This has serious implications
on export markets who will need to comply
with increasingly onerous regulations and
standards which limit access to markets
and participation in global value chains.
Regulations around pollution control and
packaging are being explored in South Africa
and local suppliers, manufacturers and
retailers will need to remain informed on
these in order to respond appropriately.
The consensus between participants is that change will occur in pockets, including the
development of new products for new market segments. We are not likely to see radical,
disruptive change in consumer preference soon. While the future profile of the global clothing
and textiles industry in relation to the advancement of new technologies is unclear, this project
raises some clear medium-term lessons for the South African industry. These can be used to
respond to emerging opportunities and threats, while simultaneously laying the foundations
for the development of robust government policies and proactive firm level strategies to
prepare for the future. Four lessons are presented below.

1. First movers in the retail space have already secured an advantage by developing
powerful, intelligent online aggregation platforms that enable them to engage the
consumers’ attention and customise their experience using Big Data and AI. This
will assist in rapidly meeting demand through highly automated and digitalised
global distribution networks. If South African retailers and producers are to remain
relevant, they will need to establish their own digital platforms for connecting with
one-another and the consumer.

2. Clothing and textiles value adding processes are likely to fundamentally change
as new materials, additive manufacturing, Nano-technologies, machine learning,
Artificial Intelligence, robotics and the application of Internet of Things (IoT) within
value chains change the economics of production and consumption. Many of the
digital disruptions cut across all manufacturing sectors and need to be supported
at that level, but their specific combinations within the C&T industry also need to
be understood and responded to at a specific value chain level.

3.
Sustainability pressures within the clothing and textiles value chain will continue
to grow in terms of environmental impact, ethical trade and localisation pressures.
Disruptive technologies will enable the close monitoring of, and adherence to these
standards, which could fundamentally change the economics of production i.e.
compliance standards and the nature of Global Value Chains. Production locations
unable to verify their sustainability credentials may be increasingly locked out of
leading global markets.

4.
Clothing and textiles value chain digitisation pressures require appropriate
institutions to research, engage, interpret and frame the national policy
implications of emerging developments (using reliable Monitoring and Evaluation
methodologies and Big Data). Given the long-term and sometimes (at least initially)
esoteric nature of such engagements, and the short-term view of private sector
investment horizons, incentives and funding from the public purse will be required
to enable digital progression within the value chain.

Read the full Clothing & Textiles brief HERE.

RECENT EVENTS
RECENT EVENTS
PRACTICAL IMPLICATIONS FOR SOUTH AFRICAN CLOTHING
AND TEXTILES INDUSTRY

The KZN CTC’s fourth quarter featured the following events:

Lean Basics Workshop (23 October 2018)

The Lean basics workshop was extremely well attended with all attendees developing their Lean
thinking and problem-solving capabilities. Some projects in factories have already been launched
based on the learnings.

eThekwini and Newcastle SME Boost Tours

The SME Boost Programme hosted in eThekwini and Amajuba municipalities equipped 10
participants with lean manufacturing basics, business basics, and facilitated improved market
access. A Tour was facilitated at the end of this programme to showcase the improvements made
in the SME’s businesses, and to provide an opportunity for potential buyers to network with these
emerging suppliers. Both SME Boost Tours were attended by over 30 potential buyers and support
agencies resulting in at least two major customer linkages, as well as one funding agency linkage
to date.

Upcoming Events:

DATE: EVENTS:

INNOVATION SESSIONS

04 Mar – 08 Apr 2019 Lean Boot Camp (Amajuba)

06 Mar – 10 Apr 2019 Lean Boot Camp (eThekwini)

EXECUTIVE SESSIONS

16 May 2019 Annual General Meeting

SMALL AND MEDIUM ENTERPRISE SUPPORT

April - August 2019 SME Boost Programme (eThekwini)

April - August 2019 SME Boost Programme (Amajuba)

SKILLS DEVELOPMENT PROGRAMME

25 - 26 June 2019 Introduction to Fabrics (eThekwini)

09 - 10 July 2019 Introduction to Fabrics (Amajuba)

Quarter One 2019 | 9

BACK TO BASICS
BACK TO THE BASICS
LEAN BOOT CAMP

eThekwini (06 March – 10 April 2019) and Ladysmith (04 March – 08 April 2018

One of the KZN CTC’s strategic objectives is to upgrade firm-level efficiency, and Lean is a
systematic approach within the organization to minimise and eliminate waste in order to create
a flow to improve customer value. The key to achieving this is through structured and continuous
development of your valued employees. Unlock unprecedented improvements within your
organization through the Lean Boot Camp in 2019.

Don’t miss this amazing opportunity, Register Now on KZNCTC@bmanalysts.co.za

Quarter One 2019 | 9

SME BOOST PROGRAMME
SME BOOST PROGRAMME
RECRUITMENT DRIVE

A Call to all KZN CTC Members

We would like to invite KZNCTC members to recommend participants for the annual KZNCTC
SME Boost Programme.

This programme is designed to upgrade the competitiveness of Small and Medium Enterprises in
the clothing, textile, footwear, and leather value chain through training, business coaching, and
improved market access.

Participants will undergo rigorous screening before being selected and will be provided with
ongoing coaching and monitoring throughout the programme. Participation is free of charge as
it is fully funded by the KZNCTC’s valued funding partners; eThekwini Municipality, and the KZN
department of Economic Development, Tourism, and Environmental Affairs.

Recommended participants are requested to be sent to KZNCTC@bmanalysts.com by 15 March

2019.

Pre-qualifications for applicants are:

1. To be employing between 10 -150 employees, or less than R10 million annual turnover.

2. To be operating within the clothing, textiles, footwear, or leather manufacturing industry.

Preference will be given to Black-owned SME’s, located in eThekwini, Ladysmith, or
Newcastle, as well as SME’s which are linked to KZNCTC cluster member’s value chains
(e.g. suppliers of product, raw material, or other products), so please indicate if any of
these conditions apply.

Quarter One 2019 | 9

INDUSTRY NEWS
INDUSTRY NEWS
SUPPLY CHAIN NEWS

DTI Incentive plan, a major boost to cars and clothing sectors

Linda Ensor, Business Day, 26 February 2019

Rob Davies has stressed the need for a well-resourced industrial policy and for incentives to be
scaled up to create jobs in struggling sectors

https://www.businesslive.co.za/bd/national/2019-02-26-dti-incentive-plan-a-major-boost-to-cars-
and-clothing-sectors/

This young entrepreneur sold out all his luxury leather bags after a single tweet - even Cyril
Ramaphosa has one
Timothy Rangongo , Business Insider SA, 12 February 2019

A young Johannesburg-based entrepreneur has launched a bespoke leather bag range. All the
bags are made locally and even come with a customised scent. His entire stock has been sold out
following a single tweet.

https://www.businessinsider.co.za/inga-gubeka-inga-altelier-african-luxury-leather-bag-
designer-2019-2
ABA’s new factory to bloster black Industrialists
Tasneem Bulbulia, Creamer Media, 23 January 2019

The Trade and Industry Deputy Minister Bulelani Magwanishe has described the opening of Africa
Bespoke Apparel’s (ABAs) R81-million factory in Verulam, KwaZulu-Natal, as a historic moment
and a crucial milestone in the roll-out of the Black Industrialists Programme. ABA has recently
joined the KZNCTC and are looking forward to learning best practices from clusters members.

http://m.engineeringnews.co.za/article/abas-new-factory-to-bolster-black-
industrialists-2019-01-23/rep_id:4433

Outlook 2019 – Apparel Industry Challenges and Opportunities

Leonie Barrie, Just-Style, 15 January 2019

It won’t come as any surprise that uncertainty, complexity and volatility in the global economy,
US-China trade and Brexit, along with rapidly changing consumption patterns, are pushing the
global apparel industry and its supply chain into unchartered territory in the year ahead. But
according to feedback from a panel of executives consulted by just-style, disruptions also present
huge opportunities for retailers and brands to rethink their business models and explore new
ways of working – especially when it comes to using new technologies and data.

Marc Compagnon, Executive Director & Group President, Li & Fung

The unpredictable geopolitical environment will be a major challenge facing our industry in 2019.
The US-China trade war is on a lot of retailers’ minds and has taken a few turns now, with costs
starting to rise. Apparel companies must act fast and diversify production strategies to position
themselves to absorb any shock from possible trade conflicts. With a global network of 15,000
suppliers in over 40 markets, Li & Fung is well positioned to help our customers diversify their
sourcing portfolios to offset any impact from the trade war.

https://www.just-style.com/analysis/outlook-2019-apparel-industr y-challenges-and-
opportunities_id132645.aspx
INDUSTRY NEWS
RETAIL NEWS

Oops! Woolworths does it again

Nompu Siziba, SAfm Market Update with Moneyweb, 11 February 2019

Retailer Woolworths today announced that two of its non-executive directors have resigned with
immediate effect. The announcement follows the resignation of Woolworths’ Australian based
company CEO, David Thomas last week. The retailer is also facing some flak around allegations
that it has plagiarised a certain type of coffee. This comes not too long after the firm took a baby-
carrier range off its shelves after an entrepreneur claimed that Woolworths had copied her design.

https://www.moneyweb.co.za/moneyweb-radio/oops-woolworths-does-it-again/

JSE closes weaker as retailers flag lower festive season sales

Musa Makoni, GT247.com, 17 January 2019

The JSE retreated on Thursday as pressure mounted on local retailers following the release of
weaker trading statements from some of the bourse’s largest retailers. Trading updates from Mr
Price [JSE:MRP] and Woolworths [JSE:WHL] reflected lower than expected sales volumes during
the December holidays. This came as a shock to most market participants given the jump that was
recorded in South African retail sales data for the month of November released on Wednesday.

https://www.fin24.com/Markets/JSE/jse-closes-weaker-as-retailers-flag-lower-festive-season-
sales-20190117
Edcon News
Julian Gwillim, Aprio, 21 December 2018

Edcon CEO, Grant Pattison said: “The restructuring and recapitalisation of Edcon has passed its next
hurdle. The Edcon Board has approved the structure of the proposed recapitalisation plan, and in
response lenders have extended waivers to allow time for implementation. This will allow enough
time for the number of necessary due diligence and governance processes to be completed. At this
stage, we can’t release any additional detail as we remain subject to Confidentiality Agreements.
The Board fully appreciates the support that is being received from all Group stakeholders and the
commitment that has been shown. We will make further announcements in due course.”

www.rns-pdf.londonstockexchange.com/rns/2672L_1-2018-12-21.pdf
CONTACT DETAILS
T: +27 (0) 31 764 6100 | F: +27 (0) 86 607 4510 | E: kznctc@bmanalysts.com