S&V Weekly Newsletter Vol.7 No.21, May 24 2021

This Newsletter is sponsored by SAFLIA

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Component prices jump, 'but chains won't allow price increases', say factories

South African component suppliers and manufacturers say many of the hoped-for gains for footwear from the DTIC's Masterplan are being lost because they can't meet the price expectations of some chains.
      Globally, some component prices have gone up steeply, with the anticipation of more to come. PVC for soling has reached a 35-year high, Sasol says. Synthetic upper materials, almost all sourced from China, have risen 7.5% to 10%, according to a supplier, who said the increases would have been higher if the Rand hadn't strengthened. Leather prices have risen by 14% to 20% since the beginning of the year. On top of it, manufacturers face a higher wage bill depending on negotiations between SAFLIA and unions.
      Now, several manufacturers said last week, some chains are refusing price increases and they want manufacturers to commit to prices for up to 6 months.
      One manufacturer said his biggest problem was with women's footwear for medium-price chains. "They want prices lower than we're quoting, and they won't accept increases," he said. "There are a lot of little pump and sandal factories opening up, undercutting us to get a foot in the door."
      He said women were buying into lower value footwear. "The R450 to R550 retail women's shoe category is bleeding. R299 to R350 is the price point that's working." To reach that price point and give retailers their expected margin was difficult.
      "It means we have to start deconstructing the shoe to reach the price point, and by the time we get there, the shoe doesn't look the same, and it doesn't sell at retail."
      He said there was "lots of interest" in higher heels, "but local heel prices are higher than the cost of a complete imported shoe".
      He said there was opportunity with synthetic upper men's formal footwear, but less with men's casuals.
      A second manufacturer, who specialises in women's synthetic upper footwear for chains, said there had been "a move away from the bottom end by my customers", but that they were reluctant to order volumes.
      "Nobody is committing to large programmes like they did previously," he said. "They would rather order for two months at a time."
      He said for manufacturers of basics, "margins are very, very thin".
      "There have been huge increases in prices for PVC and upper materials, so overall there will have to be an increase in price of like-for-like product over last year. But there's a lot of uncertainty."
      A third manufacturer, who specialises in men's footwear for chains and wholesalers, said he had asked chains for an 8% increase, "but they only want to give me 3%".
      "I believe they give their Chinese suppliers whatever increase they ask for."
      He said he had to accept. "At the moment we need the work, but how do we recover our labour and fixed overhead costs?"
      Said SAFLIA executive director Jirka Vymĕtal: “If one considers all the facts, it is very concerning to see how the Masterplan in practice will work. So many meetings, so much theory, but the actual reality is somewhat different.”
      The stronger Rand is providing some relief.
      "Leather prices have increased for the first time in 5 years," said Mossop Leather CEO Gert Kruger. "This is being driven by a shortage of hides globally and a steady demand from mainly automotive and upholstery markets.  The demand for shoe leather is definitely lagging behind these 2 other sectors, but starting to see a recovery in developed markets.  Leather prices in South Africa have increased by 14% to 20% since the end of last year in response to the increases seen on raw hides.
      "Hide prices have stabilised globally at the current higher levels and I don’t foresee local hide prices being able to 'buck the trend' so to speak as these are globally traded commodities which are linked to global market prices.  I think the strengthening of the Rand will also help keep hide prices in line and should assist local tanners to avoid short term price increases to local manufacturers."
      Leather and PVC are mostly locally sourced, but synthetic upper materials are currently all imported. A supplier said higher shipping costs had added to higher ex-factory costs, and he supplied this list of price increases for shipping a 20' general purpose (GP) container from China to SA.

                                "Note that the shipping price changes week to week. I have given you per month so it’s a lucky dip. If you want urgently, then you pay. If you're prepared to wait, then they play the game.
      "The price of materials has been smoothened by the exchange rate. Therefore the actual increase is approx. 7.5% to 10%, depending on the quality of the PU material you're buying."
      The PVC price increase is linked to the pandemic. At the AGM of the Southern African Vinyls Association (SAVA) in April, David Mokomela, vice-president of base chemicals at Sasol, offered some insights into the current state of the PVC industry in South Africa and the rest of the world.
      “The global pandemic and government lockdown measures have not only severely hampered GDP growth, but also had a catastrophic impact on PVC consumption in 2020,” Mokomela said. He explained that the supply of PVC was further hampered by a disastrous hurricane season in North America and the significant drop in commercial and industrial construction experienced last year. Although the demand for PVC rebounded faster from the Corona virus lockdowns than caustic soda, Mokomela said that outages, planned maintenance and other international events kept chlorine production low. This negatively impacted on the supply of PVC and resulted in prices reaching a 35 year high.
      “We are hoping that PVC stocks in the USA will normalize by May or June 2021, although it could possibly take up to 6 months to get back in line.”
      “Supply of ethylene-based PVC out of China is improving, but prices will remain firm in the short term due to global supply shortages and upcoming planned shutdowns in Asia. Global prices are likely to peak in May, but will then begin a gradual decline to the 'new normal', he added.
      He said that Southern Africa had a positive market growth over recent years and future expectations indicate that demand will continue to outpace local PVC supply. Although PVC imports declined through last year, they are expected to pick up in 2021 as global supply eases.
      “Unfortunately, we must acknowledge that Sasol is operating a plant that is 43 years old. Intensive maintenance shutdowns are therefore a major annual requirement, which have due impacts on our supply profile at certain periods.  When unplanned outages occur, we have limited catch-up capacity on stock levels. Future market growth and capacity expansion by the conversion sector will necessitate alternative sources of PVC supply to supplement local production and meet the overall market demand profile,” he warned.

Wage talks: No agreements yet

By Gerald Naidoo, General Secretary/Principal Officer, National Bargaining Council of the Leather Industry
Durban, KZN, SA – The first round of the General Goods & Handbag Sector wage negotiations took place on 10th and 11th May. The parties are engaging with their members for fresh mandates. The next wage negotiating meetings will be held on 7th and 8th June 2021.
      Stakeholders in the Tanning Sector agreed to meet on 17th June to consider SATEO’s request for a stakeholder engagement with the intention to review the implementation of the 7.5% wage increase from 1 July 2021.
      The parties in the Footwear Sector had a stakeholder engagement on 14th May to consider SAFLIA’s revised wage increase offer. The parties will be engaging with their members and will revert on a date still to be decided.

SETA offers CTFL manufacturers trainees for 12 months

The FP&M SETA has granted 167 work integrated learning opportunities to the CTFL sector. Interested CTFL-registered factories will have the opportunity to have a graduate/student placed in their business for 12 months and the SETA will provide a stipend of R3000 monthly. CVs will be forwarded to interested companies, and they will do selection themselves.
The skills offered for work integrated learning or internships are:
Mechanics machine operator (mechatronics)/robotics, industrial engineers, footwear designers, fashion designers, SHEQ practitioners, quality controllers, quality managers, environmental scientists.
Download the Invitation to participate in SETA Funded WIL opportunities for the CTFL Sector here

Financial

Woolworths trading statement

Cape Town, W. Cape, SA (May 20, 2021) – Shareholders and noteholders are advised that the earnings per share ('EPS') and headline earnings per share ('HEPS') for the 52-week period ending 27 June 2021 are expected to be more than 20% (more than 11.64 cents and more than 23.96 cents respectively) higher than the reported EPS and HEPS for the prior year of 58.2 cents and 119.8 cents respectively.
      This is as a result of the sale of the Elizabeth Street and Bourke Street Mens properties in Australia, which were previously announced on the Stock Exchange News Service ('SENS'), an improved trading performance compared to the 52-week period ended 28 June 2020, as well the lease exit and modifications gains reported for the 26 weeks ended 27 December 2020.
      A further trading statement will be issued in July 2021 providing specific guidance.
      Woolies' results for the current period are scheduled to be announced on SENS on or about 26 August 2021.

They Said It

"Sadly, it was announced today that all team contact sport like soccer, rugby, netball etc., is banned until further notice. ☹ Definitely all schools but probably amateur as well but not professional." - Mike Augoustides, partner in Mike's Sports, just after being quoted in S&V Footwear & Leather Goods on the steady improvement in sports goods retailing. The statement by the Department of Basic Education on May 19 said: “This is a decision made by the Council of Education Ministers that has taken a decision to suspend all contact sports in schools with immediate effect. Non-contact sport training in schools can continue provided that all social distancing, hygiene and safety measures are observed and that there is no physical contact between participants during training. The decision follows calls made by education experts and activists as a result of the looming third wave. The risk of the spread of Covid-19 is expected to increase due to the cold, wet weather."

"It keeps me out of trouble." - Monique Holtzhausen, newly appointed CEO of the Southern African Vinyls Association, on running that association and her own marketing company.

Directory and Calendar updates

The S&V Directory and the S&V Calendar are dynamic documents, undergoing ongoing constant updating. Readers are therefore advised to refer to them at least once a week.
      Changes last week, May 17-23, included 1 updated entry for Namibia, 2 for Zimbabwe, and 4 for South Africa. In addition, there were 2 new entries for South Africa. There were also 6 email address changes.

Got anything you'd like to share?

Do you have any suggestions, comments or experiences about the lockdown that you'd like to share with the industry? We will publish the throughout the lockdown, so please let us know. - tony@svmag.co.za

24/05/1965: Wayne Stanford, agent, East London, E. Cape, SA.
24/05/1970: Carla Maritz, Mott! Shu’s, Pretoria, Gauteng, SA.
24/05/1972: Terry Fowler, BBF Safety Group, Cape Town, W. Cape, SA.
25/05/1961: Gerald Naidoo, National Bargaining Council, Durban, KZN, SA.
26/05/1951: Wessel Nolte, formerly Cedar Shoes & Accessories (closed), Bloemfontein, Free State, SA.
26/05/1966: Manoj Morar, Impressions, Vryheid, KZN, SA.
27/05/1944: Richard Bunyard, left the industry, formerly GW Cowie & Co, Durban, KZN, SA.
27/05/1969: Dean Tharman, Ten Digits, George, W. Cape, SA.
28/05/1958: Brigitte Davidow, Nakara, Windhoek, Namibia.
29/05/1964: Bevan Lamb, left the industry, formerly Waye Rubber, Palmer Rubber and Egoli Gumboots (all closed), Amanzimtoti, KZN, SA.
29/05/1966: Prakash Chapaner, KG Chapaner & Co, Gweru, Zimbabwe.
29/05/1980: Andrew Lang, Rolfes Chemicals, Germiston, Gauteng SA.
29/05/1987: Saahir Bhamjee, Sbzee Global Trading, Johannesburg, Gauteng, SA.
30/05/1940: Subramonia Balakrishnan, Malar Industries, Ndola, Zambia.

In Memoriam this week

24/05/2013: Casper Louw (b. 11/04/1944), Busy Bag (closed), Stanger, KZN, SA.
27/05/2002: Stan Austin (b. 28/11/1915), Austin Shoes (closed), Pietermaritzburg, KZN, SA.
28/05/2011: Charles Chavkin (b. 20/03/1930), Charles Chavkin Agencies, Johannesburg, Gauteng, SA.

Have you let us know about your birthday, or the birthdays of your colleagues? Our readers love this section, so please become part of it. This also applies to the In Memoriam section. Help us remember former colleagues.

3. Malawian Kwacha (MWK)

Source: https://www.xe.com/currencyconverter/

4. Zambian Kwacha (ZMW)

Source: https://www.xe.com/currencyconverter/

5. Zimbabwean Dollar (ZWL$)

Source: https://www.xe.com/currencyconverter/

ABSA Agri Trends: Hides & skins prices

Johannesburg, Gauteng, SA (May 20, 2021) - The current average hide price decreased by 0.5% to R7.82/kg from R7.86/kg a week ago. The current price is 6.5% lower than the average price a month ago and is 1094% higher than the average price a year ago. NB* Hide prices are determined by the average of the RMAA (Red Meat Abattoir Association) and independent companies. - Abrie Rautenbach, head Absa agribusiness, Marlene Louw, senior agricultural economist, Absa group.

Have a look at these links

We invite businesses to send us links to websites, Facebook pages and the like which they feel would be of interest to others. The links below are from our database:
Moda Shoes, Pretoria, Gauteng, SA. Family footwear.
Mode by Mel, Vanderbijlpark, Gauteng, SA. Women's boutique.

Classified Adverts

Contact us

News & Classifieds: Tony Dickson, +27 (0)31 209 7505, tony@svmag.co.za

Next newsletter: May 31, 2021.

SAFLIA enquiries: Tel 0800SAFLIA * Email info@saflia.co.za * Website http://www.saflia.co.za

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