FIFI PETERS: Quite often when we speak about inequality, we speak about from gender lines or racial lines, less so from the perspective of those with disabilities, which is why the story is so important to me.
The Foschini Group, or TFG, has opened a new clothing factory in Gauteng for the hearing impaired, and this will help address some of the barriers that people living with disabilities face when finding employment. The factory will also contribute to TFG’s push to increase its local manufacturing footprint.
I am joined by TFG CEO Anthony Thunström. Anthony, thanks so much for your time. I really love what you guys are doing here from an inclusion point of view, because often we side-line the disabled when we talk about economic empowerment. Just tell us what you’re hoping to achieve.
ANTHONY THUNSTRÖM: Hi, Fifi. Thanks very much for having me on your show. I think the background really started for us about seven years ago. We saw an economic benefit first and foremost for TFG to onshore as much production as possible, mainly because the lead times out of the Far East are just so long. And if you’re running a fashion business, you want the shortest possible lead times.
I think we saw as we expanded our factory and manufacturing capacity in South Africa just how increasingly important employment was becoming in the country. We currently employ close to 5 000 people in our manufacturing division. And, as unemployment has become a bigger and bigger problem in the country, the upside of seeing those people employed has just become more and more obvious. And then in terms of the factory that we’ve just opened, the one that you’ve referenced, I think this for us is very much the icing on top of the cake.
If you look – and you’re quite correct – if you look at the employment prospects for people in South Africa overall, they are poor. When they graduate, or they leave school, if you look at anybody with any form of disability, to be quite frank, they are really, really poor. I think we’ve created an environment where we are going to be employing in this case only hearing-impaired or deaf people working in our Johannesburg factory.
It’s starting off relatively modestly. The current factory will have a capacity of 150. But over time there’s absolutely no reason why we wouldn’t see that increasing in scope and in the number of people who can be employed there.
FIFI PETERS: Certainly especially when you look at the fact that we’re trying to chart the way forward out of this pandemic in a way that leaves no one behind. This is why I’m so passionate about the story, because you’re looking at the whole value chain here. But talk to us more specifically about the kind of training that the learners and the workers will undergo at this factory.
ANTHONY THUNSTRÖM: Fifi, the good news is that the training that our deaf workers undergo is virtually identical – other than how it is delivered – to the training that we put all of our employees who work in our manufacturing process through.
If you look at clothing manufacturing in South Africa, it’s been in a kind of structural decline for the best part of 15 years. People haven’t really invested in it, either from a technology point of view or a training perspective. We train virtually every single person who comes into our manufacturing division absolutely from scratch. They’ll spend the best part of the year with both academic – in other words, classroom – training, together with practical training in the factory until they are considered to be qualified from a TFG manufacturing perspective, and they then become full-time employees in our factory.
FIFI PETERS: Do you think there is room for some of your colleagues in corporate South Africa to rethink how they look at employment and who they bring into the fold, particularly when it comes to those with disabilities? Do you think that there’s room for them to do more?
ANTHONY THUNSTRÖM: A lot of companies are trying to do their best but, to be honest, I think there’s always a little bit of apprehension around employing more people. Dealing with more people is difficult in itself. I think there’s a natural almost risk-aversion around how I further complicate things by having to make more changes, more accommodation.
I think what we’ve learnt – and again, it’s very early days with this new factory – is that fundamentally there’s absolutely no difference in terms of whether we are employing in this case deaf people or people with perfect hearing. We’ve managed to partner with St Vincent School for the Deaf. They have done all the teaching and they’ve made sure that we understand exactly how best to communicate, and what needs to be communicated with all of our new staff. I guess you could almost say we’ve partnered with them in getting where we’ve got to.
So I guess the encouragement would be to corporate South Africa, absolutely, to try and explore, to [do] more of what we are doing. I guess the upside in all honesty is not as difficult as maybe it might seem from outside.
FIFI PETERS: I love it. Anthony, this is also the first factory for the TFG group in Gauteng. Is this a signal of confidence of doing business in the province?
ANTHONY THUNSTRÖM: Absolutely. I think there are two things. In manufacturing it is all about scale. We’ve definitely got scale in the Western Cape. We recently scaled up in KwaZulu-Natal to get to sufficient scale there. This is our first foray into Gauteng. There is absolutely no reason why we won’t grow that further. But then I also think, if you just look at how vulnerable global supply chains have become and have been exposed to over the last couple of months, and certainly since Covid started – even within South Africa – I think it makes sense that you don’t have all your manufacturing capacity located in one place. That’s just sensible from a risk-mitigation perspective.
FIFI PETERS: And the initial capital outlay for this?
ANTHONY THUNSTRÖM: Relatively modest. We’ve done this with support from a number of other corporates – Bidvest and Berzacks, to name two. And we’ve all I guess, chipped in to effectively build a very modern, very up-to-date working environment in frankly what is a rundown Hillbrow area.
FIFI PETERS: You were talking about reducing dependence on Asia or the West, as it were, to supply some of your clothing. Just talk to us about the contribution that this particular factory will make, and over what time period.
ANTHONY THUNSTRÖM: I’ll start with the big picture, Fifi. We used to be, like most South African retailers, quite reliant on the Far East as a whole – obviously China being the biggest component of that. If I look back a couple of years, they would have [represented] probably 45% of our clothing input into South Africa. That’s been significantly the Far East.
As a matter of fact, all imports in terms of clothing amount to about 30% now, which means roughly 70% of our clothing that we sell in our stores across all of our brands is locally manufactured.
Our Johannesburg factory, as I said, is starting off fairly modestly. It’s really being launched only now, but already our forecast for this year ahead is probably somewhere between 800 000 and a million units being produced in that factory.
FIFI PETERS: Just lastly, we had TymeBank on the show yesterday talking about the deal with you to roll out a couple of kiosks in some of your stores. Then it will get access to your customer base, which is around 26 million or so. What’s in it for the TFG group?
ANTHONY THUNSTRÖM: Fifi, it’s more than a couple [of kiosks]. Our plan for next year is that approximately 600 of our stores will have TymeBank available within them.
There are a couple of elements that are quite important. We already run a retail credit book within TFG. It’s been part of our history. Over time we’ve lessened our dependency. It certainly feeds up our balance sheet from having to fund that book. And we’ve gone from being about 70%-odd credit down to roughly 30% at the moment. I think TymeBank fills quite an important niche that’s becoming apparently more and more important around the world, and that’s really an after-pay service.
By that I mean people can come in and if you’re a TymeBank after-pay customer, you can pay a deposit on whatever it is that you buying. You can leave the shop with it, and you’ll typically settle the outstanding balance in either two or three months, interest-free. That’s really taken off in other territories that we trade in, particularly in the UK and Australia. I’ve got very little doubt it will become quite an important component of the overall credit market in South Africa.
At the same time, even though we’ve come from a traditional store-based business, we are becoming more and more digitally integrated. We’ve got a very strong omni-channel offering and what TymeBank offers is a very easy-to-integrate digital financial services platform. So everything from insurance to personal loans, as an example. If we had decided to build that ourselves it would have taken us, I guess, several years and a lot of investment.
I think we’ve managed to partner with TymeBank at just the right time – excuse the pun – where essentially you’ve done the hard work in terms of the development and obviously, as you’ve mentioned, the benefits. They get access to us, but we get access to a full suite of digitally enabled financial-services products which we can offer our customer base.
FIFI PETERS: Yes, the pun gets everyone. Anthony, we are out of time for this conversation, sir. But thanks so much for your time. That was TFG CEO Anthony Thunström.