EDDELS SHOES/CELROSE CLOTHING: Localisation is Key in Economic Recovery

Truly African manufacturers will have welcomed President Cyril Ramaphosa’s economic reconstruction and recovery plan, and the sentiment he stitched into his announcement, claiming that the economy can be better than it was pre-Covid, and not just return to futile growth and stagnation. His idea is to rebuild and grow, becoming the world’s partner in Africa. By focusing on infrastructure development, localised manufacturing, improvements in energy production and reversing unemployment, Ramaphosa will look to reinstate the country as Africa’s largest economy, and combat the economic fallout of the global pandemic.

 Following the election in the USA, SA’s President spoke at a virtual business and investment roundtable where he told attendees that America was South Africa’s third largest trading partner, South Africa is the largest source of African imports to the United States, and the country is home to more than 600 American firms.

 “We look forward to further strengthening our ties of friendship and cooperation with the incoming administration,” he said.

 South Africa’s growers, producers, makers, creators and manufacturers have had a tough time of late. With retailers forced to close – locally and around the world – and consumers forced to buy online only, for those not providing ‘essential items’ (food and medicines) demand had dipped.

 News that government plans to boost manufacturing and local industrialisation as well as stimulating exports to key wealthy markets like the US is much welcomed. Ramaphosa’s government announced in April a plan to plunge R500 billion into economic stimulus.

 Key in his message was localisation. South Africa imports around R1.1 trillion of goods each year and a small change, manufacturing just 10% of these imports locally, would add an estimated 2% to annual GDP figures.

 In the textile sector, this is only too well known. For many years, the industry has been flying the South African flag high, stating clearly that its products are higher in quality, affordable, flexible, and job creating, but the lure of basement pricing from the East has been too much for some retailers to overlook.

 Perhaps now, with the country looking for something of a reset, local clothing manufacturers can thrive.

 MANUFACTURING IN KZN

In Tongaat KZN, 40 minutes north of Durban, John Comley – CEO of Eddels Shoes and Celrose Clothing is clear about the importance of manufacturing locally. 

 “Manufacturing and great manufacturing companies are vitally important for the future of this country,” he told us. “We need manufacturing to get back to 25% of our GDP contribution.

 “Yet ironically every year we are seeing manufacturing shedding jobs and becoming a smaller part of the GDP contribution, and all the time unemployment growing.”

 By the end of 2020’s third quarter, unemployment in South Africa reached 30.8% with 2.2 million jobs shed as a result of the Covid-19 pandemic.

 Eddels Shoes and Celrose Clothing hopes to lad the fightback, bringing jobs to South Africa, creating products that the country can be proud of, while contributing to economic development.

 “We work very hard with our customers to prove to them that we are a value-added supplier and offer a point of difference.

 “We work extremely hard on product diversity, flexibility, and become that first name or phone number in the customer’s mind. Not only will they get top service quickly, they will get guaranteed quality and after sales service and support,” said Comley.

 This is a business with a long and rich South African history. Founded by Charles Eddels as a shoe and boot retailer in 1904. Becoming a limited company in 1913, the company went on to become fully constituted as Eddels Shoes in 1948. After years of growth and a subsequent slowdown, by 1999 it was time for a change and John Comley took over the business in 2000, installing new ideas and processes. By offering ownership to employees, Comley quickly improved productivity and the business became more efficient.

 Celrose Clothing was established in KZN in 1975 as the manufacturing arm of the Edcon group. In 2006, Edcon divested and Comley came in as CEO. By 2015, he helped turn the company from substantia losses to profit, by investing in technology, modern processes and new managerial thinking.

 “Interestingly enough, Edcon decided to open its own manufacturing division. There were a number of unemployed ladies in the Tongaat area and they thought it would be an ideal opportunity to create work for these ladies – that was the birth of Celrose.

 “We have chosen to take on board and become the custodians of the South African retailer’s own brands,” he says.

 CASH RELIANT

 But despite historic success, and even with a loyal labour force and modern facilities, the company has come under pressure like most as retailers were forced to close during lockdown and the supply chain was halted.

 “In the manufacturing environment, it is very cash reliant, particularly as you start expanding. Your volumes grow, you need capital equipment, you need to employ people to meet the expansion, you need funding for raw materials, and all these things come long before you actually get paid for the turnover you have committed,” explains Comley.

 “The South African industry is highly competitive, and since 1996 our industry has been under particular pressure having to compete against international competition.”

 For many in the industry, the hope is that short term relief will come from government as it injects cash into the economy to drive out of the downturn. In turn, this should drive confidence and encourage people to spend, which will result in retailers calling on manufacturers to supply in large quantities again. In the mid-term, positive news of investment into the sector will be welcomed. Longer-term, the hope must be that government and businesses align to aid local manufacturers and avoid mass imports, creating a sustainable and self-sufficient industry for all manufacturing.

 In September, the Foschini Group announced it would purchase 382 Jet stores from Edcon, saving thousands of jobs. This was a real positive for South Africa’s fashion industry and many see the deal as a saving grace for Jet which faced potential closure if a sale could not be reached. In November, Secha Capital – a South African investment firm – said that it sees major opportunities in what it called ‘boring’ sectors such as footwear, hair and food.

 “We see the most opportunities in the sectors of agribusiness, healthcare, manufacturing, energy and business-enabling services,” MD Brendan Mullen told How We Made It In Africa. “We also see localisation as an important global trend; we look for sectors where South Africa can leverage local resources to provide import substitution. For instance, there used to be a lot of footwear and textile manufacturing in South Africa and as tariffs increased elsewhere and China became a less secure production source, we saw a massive opportunity to grow existing companies here. Offering a locally designed shoe allows us to charge a higher price and expand our profit margins.”

 MAKE YOUR OWN SUCCESS

 For Comley and Eddels and Celrose, the news that investment companies see the value of local manufacturing will be a boost after what has been a difficult year, and unlike many before.

 “In the last couple of years we have managed to show some considerable growth which has been very exciting and we have created a large number of jobs over the past four or five years.

 “This company really started to find itself. For the first time in 2011, we did R240 million turnover and that has steadily grown to R745 million in 2018 which is exceptional when one considers the amount of competition out there,” he details.

 Reports from the likes of Citi Economics and others suggest that South Africa should see an improvement in its economic position through the third quarter and into the final quarter of 2020, and then longer-term growth potential remains the same as it always has been: enormous.

 “As a businessman, a captain of industry, and as a citizen, you’ve got to determine your own success,” he said.