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Euro Industrials: For the industry to recover, we all have to do 'the right thing'

Published: 1st Jun 2020
Author: Sergio Guerrera

Westmead, KZN, SA – We, as all non-essential businesses, had to close our doors on the 26th of March. We continued to work from home but in reality, as we are a manufacturing concern, all we really did was apply for TERS, Saft and the SMME Finance Relief Fund. The TERS was a nightmare to apply for as different formats were required and then 2 weeks into the application process it changed and we had to re-submit. We did, however, receive the correct payout with the payment schedule in the last week of April. TERS for May opened on the 28th of May and we have lodged our claim.
       Saft was straightforward and our staff are receiving their weekly amounts. The SMME FRF only sent through a communication this week telling us that we must apply to TERS for our wage bill expenses but no mention of any relief mechanisms for fixed operating costs such as rent etc which, as I understand it, is what the fund has been set up for.
       Two of us returned to work on the 4th of May to assess our position and plan a way forward. We contacted every customer to ascertain their position as well as get an update as to their order requirements. A number of customers cancelled orders, some reduced the quantities and/or pushed the delivery dates back. At least 60% of our customers are still not operational.
       What is very frustrating is the lack of communication from a number of customers, many of them well established enterprises. There has been no or little feedback on WIP order requirements, payment of outstanding accounts - many don’t reply to emails or return phone calls.
       We also proceeded with an aggressive cost reduction strategy to contain and reduce any overheads that are not directly related to manufacturing. We foresee some very lean months ahead and in order to try to survive, we cannot carry any expenses that don’t assist in the generation of income. Due to non-payment from most of our debtors for April and May - as well as some from February and March - we have not been able to cover most of our commitments to our creditors for April and May. I contacted each supplier personally to explain our position. Most are understanding but we are on a COD basis until we can bring our accounts up to date.
       We approached our landlord, ITHALA, prior to lockdown to discuss options for assistance as we knew that we would be very negatively affected by the lockdown and subsequently reduced turnovers. We have not generated any turnover since the 26th of March. We have not legally been allowed access to our premises since the 26th of March. Although we were allowed back from the 4th of May, running with 30% of our staff is not feasible for our particular production process.
       I put forward some proposals to the landlord and we were finally informed last week that we could take a payment holiday for April, May and June and cover the shortfall over the next 6 months in equal payments. As much as I understand that an agreed rental amount is in place and that the property rental business, like any other business, has expenses, it needs to meet halfway if your customer has had no income and their reserves are low -which is the case for many SMMEs. Surely commonsense will dictate that one cannot pay without funds available? Nor in this current climate can an astute landlord expect to find a replacement tenant at the drop of a hat. Rather negotiate with the existing tenant to achieve a cost effective compromise?
       We are only at the beginning of this catastrophe in terms of damage to our economy, as well as infection and death rates. This is the time for us to work together to save as many businesses, jobs and lives as possible. This is also an opportunity for us to change our economy in terms of localised production. Far too many retailers import large percentages of their stock. This is short-sighted and they are merely chasing short term profit. Who do they expect their customers will be if our unemployment rate tops 50%? It may explain why so many of them have and are pursuing opportunities outside our borders.
       That said, I fear that it may be too late for a number of industries who, over that last 20 years, have been decimated by imports. What manufacturing capacity is left?
       While I don’t share many of President Trump's ethics and viewpoints, I do resonate with his call to “put your country first”. Not to the detriment of others, but look after your own first. Globalisation in some ways has become a way of chasing cheap labour in countries and regions that don’t always meet the OHS and remuneration standards of the region that the products are sold in.
       Many companies seem to have double standards - one set for their “corporate face” and another for their business model. Doing the right thing cannot only apply to your employees. Doing the right thing means ensuring that your suppliers are working to your and your customers' standards. Locally a number of manufacturers use CMT shops avoid paying their particular sector's wage rates and levies, etc.
       Life is going to be tough and challenging in the months and years to come. We have an opportunity to make a difference to the lives of many South Africans if we choose to look after own first and do the right thing.

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