Factory closures: IDC responds
S&V asked the Industrial Development Corporation to comment on the closure of Cape Town factories in the leather industry. Spokesperson Zama Luthuli responded:
The recent liquidation of Jensen Belts is the fourth leather industry factory in Cape Town to go into liquidation or close in the last 4 or 5 years (the others were Uber Gruvi, Chic, and at the end of last year, Green Cross Manufacturing). All had been, so far as I know, heavily funded by the IDC. Is the current model that the IDC is using to fund footwear and leather goods manufacturing flawed by being too focused on upgrading manufacturing without developing sustainable markets?
IDC’s funding model considers the challenges facing the footwear and leather industry and includes assisting distressed businesses, however continuation of business’ is dependent on management as well as prevailing economic conditions.
The IDC has played a significant role in saving some of the jobs in the industry given the challenging economic environment.
As you may be aware, consumer discretionary spend has dropped over the last few years and is anticipated to continue declining in the next two to three years. Due to, among other factors, a challenging economic environment, most consumers are prioritizing spend on essential items and/or opting for cheaper imported semi-durable products.
Please note Jensen Belts and Green Cross did not receive IDC funding. However all companies mentioned received funding from the dti’s Grant Scheme, which is designed to increase competitiveness through improved manufacturing capabilities.
Should the IDC have tighter management control on businesses it is supporting?
Adequate due diligence is always conducted on any successful applicant for a funding facility. While we do keep a close watch and monitor performance of beneficiaries, we do not normally acquire equity in these businesses to influence their operations. As indicated, the challenging economic environment has largely impacted this industry.
Is there any news on Celrose and its footwear division, Eddels Shoes, and when (or if) the IDC plans to sell its share?
As you are aware, we just recently acquired Celrose. We remain a committed shareholder with absolutely no immediate plans to divest from the business.
