Local footwear manufacturer has winning strategy to beat imports, says Zwelinzima Vavi.
Johannesburg - In the mid-1990s, our country threw open the doors of international trade by acceding to the World Trade Organisation (the successor to the General Agreement on Trade and Tariffs). We were lauded for lowering trade barriers – both tariff and non-tariff – much faster than our peers in the developing world, and in the protectionist north. Perversely, this action also marked the start of the steep decline, and at times death, of some of our industries such as the clothing and textile as well as the footwear sectors. It was during this period that we were told by the champions of this strategy that we must “face the chilly winds of globalisation”.
Throughout the last 15 years or so, we have wrung our hands as once-thriving factories shut down one after the other, sending tens of thousands of workers home. Some factory owners chose to transform their factories into import businesses to keep their doors open in the face of cheap imports from the East. Some of us never accepted that our economy should mutate into a services one, and give up on the dream of building a decent manufacturing base.
Last Tuesday, my suspension travels took me to a shoe factory in Pietermaritzburg, Eddels Shoes, which has seen the worst and the best of both the new and old South Africa. Set up in 1904, the factory, which was founded by a British soldier, is, in my humble view, emblematic of what is possible when the love of our country and true passion for manufacturing drive our actions. Amid adversity, a deadly cocktail of cut-price imports from China and poor enforcement of anti-dumping laws, the company’s workforce and management joined hands to not only cheat extinction, but to steer the factory towards a growth path.
The company has survived the management challenges of the 1970s and most recently the avalanche of cheap imports.
Just to give you a picture of the odds against footwear makers, consider these stats: In 1994, 88 million shoes were consumed in South Africa and 64 million pairs of shoes were produced in South Africa. The local shoe industry then employed 34 500 people and supplied 80 percent of South Africa’s market.
However, by 2003, of the 180 million pairs of shoes sold in the South African market only 23 million pairs were produced locally. The jobs bloodbath saw the footwear industry’s workforce shrink from 34 500 in 1994 to only 5 300 in 2003. It is estimated that the contribution of South Africa alone in creating jobs in China through imports, including dumping, is in the region of 200 000. Staggering!
It was during this dark hour that the chief executive of Eddels, John Comley, had a spell as the president of the footwear industry.
Now, the Eddels stakeholders – workers, owners and management – could have chosen the easy path; change their business models and become importers. They didn’t. Instead, once the factory’s ownership had changed hands, they re-brigaded themselves into a strong partnership poised for growth. Today, workers own 5 percent of the company.
What changed? Many things; the business model changed, as did the ways of work. And most importantly, the mindset changed and there was a shared definition of the problem: the China challenge. Workers’ skills and expertise built over many years were harnessed, and the silos were broken down. Various departments were consolidated under the same roof. The incentive schemes have been changed to promote team work and share, on a weekly basis, the gains achieved.
A new production model, known as the “quick manufacturing” technique, which is based on the Ford lean manufacturing methodology, was developed and implemented. In essence, this work methodology made workers multi-skilled, and this was at the centre of the strategy.
Thanks to these changes, I’m told that, today the production of finished products – which is made up of 150 “steps” – takes a day and half at best or at worst three days. This is a remarkable improvement from the 21-26 days cycle a few years ago. I was glad that there was very little, if any, technological reliance in this success story. Instead, the entire success was mainly the result of recasting relationships between the employer and employees, and the manufacturer and the retailers.
Of course, key ingredients to this transformative story include trust, communication and team work – all of which are the by-products of manufacturing. Today, the firm, which employs some 300 people, is a supplier to the country’s major retailers and some 600 independents.
Typically, when I visit plants, on walkabouts, workers and shop stewards pull me aside to whisper how bad their lot is. In a long time, I’ve not seen cordial management-worker relations like I witnessed last Tuesday.
I was also most impressed by the fact that, although the company has taken on debt, it is bullish and investing in future growth. I was struck by their ambition and spirit of optimism for the future. They produce 3 000 pairs of shoes per day and are looking to double this in two years. The company’s officials are confident that the industry’s workforce can grow back to 35 000, and that the manufacturing base of our country can be grown by 30 percent in 2020. This capital investment is facilitated through access to government funds for this embattled industry.
There are many lessons from the Eddels story. Contrary to what I have become accustomed to – namely, to blame every ill on workers – the management of Eddels recognised the centrality of training management. There are three pillars to their strategy.
First, they have convinced the retailers that local sourcing doesn’t mean less quality. The shoes they produce are of high quality (John Drakes) and compete with the best models in the world.
Second, they may not be the cheapest in relation to imports from China, but they have convinced the retailers that logistically it makes more sense to source shoes from South Africa. In the case of factory fault it’s far more easy and convenient to lodge complaints and get these rectified than to wait for weeks for orders from thousands of kilometres away.
And third, they have shortened the speed of delivery more than what China possibly can.
My other observations are that the war against de-industrialisation is winnable; it is important to win it first before we even talk about industrialisation; and we shouldn’t accept a defeatist mentality that suggests our future lies in high finance, and the fortunes of our extractive mineral and energy industries. Indeed, I’m not suggesting for one minute that financial services and mines aren’t important; they are – but not as important as manufacturing, which is crucial to tackling poverty and unemployment.
Optimism is an important ingredient to a strategy. But it isn’t a strategy. We need to overcome a few hurdles. Key among these is tackling the education crisis that sees dropout rates, in the poverty-stricken areas of our country such as Manenberg, as high as 80 percent. We need to align training to suit the needs of the workplace; and the government needs to strengthen the enforcement of trade laws if we are to rescue our manufacturing sector.
* Suspended Cosatu general secretary Zwelinzima Vavi writes here in his personal capacity.