Fears for 150 jobs as EDCON embarks on mass retrenchments
Jobs of 150 employees working of Edcon in Botswana are hanging in a balance as South Africa’s biggest non-food retailer embarks on mass retrenchments amid fears of liquidation.
Media reports say the troubled retailer, which operates Edgars and Jet family outfitters, is reportedly seeking buyers as it struggles to stay afloat due to debt and poor sales. It emerged from South Africa this week that 22,000 of its employees were served with notices of retrenchments after lockdown imposed by the government in Botswana’s neighbour negated sales.
Edcon has been trying at all costs to avoid liquidation. According to Sowetan Live, the retrenchment notice is dated June 10 and was addressed to all employees and the SA Commercial, Catering and Allied Workers Union (Saccawu). It stated the company's 2019 restructuring plan - which included sourcing R2.7bn from the Public Investment Corporation, among others - was on track until the end of December 2019.
"The company's financial position has recently become distressed due to the following: poor sales... the recession in the South African economy, exacerbated by frequent load-shedding which disrupted purchasing patterns," Sowatan Live reported.
The report also indicates that its business plan suffered as "the advent of the COVID-19 pandemic which resulted in the government announcing and implementing measures, including the initial 45-day hard lockdown period which prohibited trading of nonessential products”.
Edcon was established 90 year ago and is the largest clothing, footwear and textiles retailing group in South Africa. It operates Edgars Divisions, Discount Divisions with Jet, and Jet Mart. According to its website, Edcon operates 30 stores in Botswana that are estimated to have between 150 and 200 employees. The Edgar’s Division, a high end clothing retailer, includes four Edgars stores and three Edgars Active stores. Discount Stores, also clothing retailers, make a combined 23 stores: Jet, with 18 stores and Jet Mart two.
According to media reports, Edcon said in February that it was selling its stationery business, CNA to a consortium majority owned by Astoria Investments. CNA was the group’s stationery, books, games, movies, music, hi-tech electronics and mobile retailer operating three stores in Botswana.
Edcon has already sold Legit, a fashion-forward retailer offering women’s clothes and accessories. It was part of a strategy of exiting non-profitable international brands and optimisation of merchandise categories and store rationalisation. Edcon operated three Legit stores in Botswana. The group sold its Legit business for R637 million to the Retailability Group, according to Business Report, in a move to create a simpler and more agile business. Retailability is a South African-based group of retail brands, including Beaver Canoe and Style. It competes directly with Edcon clothing stores.
In past years, Edcon embarked on long-term drive to evaluate asset efficiency and performance across all its markets, prompting closure of some of its stores and sale of some businesses. As part of its operational strategy, Edcon continuously reviewed its asset efficiency and performance of products, brands and stores across the group whether in South Africa or any other country, Group Corporate Affairs Executive, Vannie Pillay, previously responded to the Business Weekly & Review. Pillay said this was mainly achieved by making store portfolio more efficient, which meant requiring less floor space going forward. “It’s a long-term strategy and decisions will be made in line with trading conditions, lease renewals and efficiencies,” she said.
However, it appears this strategy has not worked in favour of the group. The retrenchments come after the group said it was officially under business rescue in March.