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SAFLEC AGM – ‘recovery after the storm’

Published: 28th Aug 2024

Leather is the unsung hero of the leather value chain’s exports, as this slide from the presentation by Dr Jaywant Irkhede, Director: Leather & Footwear at the DTIC, shows. 85% of sheep skins and bovine hides, 85% of ostrich leather, 95% of crocodile leather, and 80% of game skins in various forms are exported. By contrast, 95% of footwear, leather goods, handbags, belts and luggage is for the domestic market.

Sponsored by the SA Footwear & Leather Export Council (SAFLEC). 

Durban, KZN, SA – This year’s SA Footwear & Leather Export Council (SAFLEC) AGM – the 22nd – was a much smaller occasion than in previous years, an acknowledgement of a reduced budget. It was, however, quite upbeat.
              Exports to non-African destinations grew 6% by volume (to 3 584 000 pairs) and 23% by value (to R682 000 000), but exports to SA’s biggest market – its fellow Southern African Customs Union (SACU) members, Botswana, Eswatini, Lesotho and Namibia – dropped by 42% in value (to R1 308 000 000), and 2.3% in volume (to 11 332 000 pairs), which SAFLEC attributed to those countries largely sharing the same depressed economy as SA.
              The rest of Africa, however, will remain the main focus of SAFLEC’s export efforts.

Nerisha Jairaj and Tavonga Gonyora

“The financial year 2023 brought more headwinds than tailwinds with a constrained consumer landscape, higher inflation both on the domestic and export market, persistent load shedding and some infrastructure failures such as water and port maintenance,” said chairman Tavonga Gonyora.
He said manufacturers were adapting in a highly competitive environment. “We had some great success stories with the articles of leather category emerging as the star performer and gaining further increased export market share having come from a negative growth position in the previous financial period. While focus is on footwear this category is growing and it is an important enabler of growing South African leather exports.”
He said the Tech Fund 12-month contribution holiday, which came into effect at the start of 2024, “created some uncertainty in our ability to meet our matching grant requirements which we require to meet our various deliverables. We have our members to thank for diligently paying their memberships and enabling our business model.”
He said sustainability was “a business imperative”, and that “we will continue to make responsible choices in how we encourage our members to source their various raw materials. Through partnerships with SEDEX we have been able to roll out limited certification initiatives to successful members who applied, and it is our hope funding allows we can look at onboarding more members for this ethical initiative.”
“Looking forward, we acknowledge that our growth will come from export initiatives focused on Africa.”

eThekwini Footwear & Leather Cluster (EFLC) programme manager Nelisiwe ‘Nelly’ Magubane received awards for the EFLC’s ongoing support for SAFLEC.


 
“Post covid, the world’s footwear industry has experienced challenges brought about by changes in consumer buying patterns, and also by increased supply and reduced demand,” SAFLEC executive director Nerisha Jairaj said.
              “We’re working with members, the eThekwini Municipality, through eflc, and the dtic to further assess and hopefully find solutions.”
              On the upside, she also said SA’s handbag manufacturing industry, though much smaller than the footwear industry, was getting noticed globally for its quality products. “It’s because of niche and differentiation.  South Africa makes a quality product. Our successful global footwear exporters sing a similar song, but a very select group of manufacturers are moving in this direction. We are encouraging more to do so, if interested in global exports.
“The export journey has not been easy. The world sees us as part of Africa rather than as a country. This makes it very difficult to enter global markets because they seem to judge us the same as any other African country. So it takes much more effort to prove ourselves.”

Africa as a whole still remains SAFLEC’s focus, but SA exporters aren’t taking their opportunities, she said: “This year, we’ve offered outward selling mission opportunities to 19 destinations in Africa, including setting up business meetings for exhibitors, but we’re only getting 3 or 4 applicants in each case.

Former vice chairman Stuart Hopwood, who retires from Bolton Footwear at the end of August, received an award for his services to SAFLEC.


“However, we have very good uptakes for all other destinations, which showed in our increase of exports to that segment.  We want to encourage more Africa engagement as well though, as these are priority markets.”
              She said the world had changed and online presence was vital. “Therefore exporters have to maximise information technology, and one of our missions is to drive social media and the AI way of doing things. If you aren’t on Instagram or similar platforms, you don’t exist to the world. Another important fact is that consumers want to know the story behind the product. Example: ‘It was made in Africa, by a company that prioritizes upskilling, and workers are empowered through the making of the product to sustain their families’.”  
               An export-orientated manufacturing industry, making higher quality footwear and leather goods, was a credible option, she said. Citing Portugal as an example, she said: “Export markets aren’t easy to create, and there are many hurdles, but in the long run, it’s a successful strategy.”
              “Despite the difficulties, I’m optimistic for the future,” she said. "After the storm comes the recovery.
“We do hope we can get back to normal after our 12-month Tech Fund holiday as no contributions were made by footwear this year and our matching grant is directly affected.  Our portion of the Tech Fund serves as the footwear industry’s membership fee that helps us to do the best we can for industry.”

Benjamin Ross, director of auditor Marwick & Co.

 
Auditor’s report
 
SAFLEC’s 2 major sources of income, a grant from the Footwear Industry Tech Fund, via SAFLIA, and a matching grant from the DTIC, were cut last year.
Benjamin Ross, director of auditor Marwick & Co., said: “The highlight of the audit is the disclosure of the directors on the directors’ report regarding the going concern of SAFLEC which states:
1. The company have prepared financial statements for continuance for 3 years. However, the directors are concerned about the financial stability due to funding from SAFLIA being put on hold for 2024 and its effects on the collection of our R1 million matching grant from the DTI, which will affect income and may cause us to dip into reserves that have been set aside for the continuity of 3 years.
2. This will be monitored very closely by the auditors as a high risk for continued future engagement to determine if and when SAFLEC no longer meets the definition of a going concern entity.”

Tags: SAFLEC, Tavonga Gonyora, Nerisha Jairaj, Dr Jaywant Irkhede, Nelisiwe Magubane, Benjamin Ross

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