Clothing and Textile Industries - Durban/PMB and Coastal

Fast Track Performance Improvement Feasibility Study

November 2005

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Contents

Page No

1 Brief 2

2 Feasibility Study 3

3 Overview of the Clothing and Textile Sector 4- 5

4 Key Challenges Facing the Sector 6- 7

5 Stakeholder Participation 8-10

6 Performance Improvement Strategy 11-14

7 Framework for Performance Improvement Strategy 15- 21

8 Funding for Performance Improvement Strategy 22-23

9 Conclusion and Recommendations 24-25

10 Addendum - Update 26-27

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1. Brief

The brief for this feasibility study entitled – “Crisis Intervention Project and Development and

Implementation of Performance Improvement Strategy for local Clothing and Textiles Industry” (hereafter

referred to as the “Fast Track Project”) - was defined by the KZN Department of Economic Development

(DED) as follows:

Phase 1

• Undertake feasibility study

• Establish stakeholder participation

• Develop performance improvement strategy (30 October 2005)

Phase 2

• Secure framework for performance improvement strategy

• Source funding for performance improvement strategy (30 November 2005)

In discussion with the DED it was agreed to amplify the brief in the following way;

The delivery of a feasibility study and implementation strategy which will cover the following:

• Establishing interest amongst clothing and textile companies especially those that are members of

the KZN Clothing and Textile Cluster to participate in a fast track performance improvement project

• The development of a fast track implementation strategy which is founded on experience in the

sector with such initiatives and the perceived needs of potential participants

• Alignment of the fast track implementation strategy with the business plans of the KZN Clothing

and Textile Cluster

It was further agreed with the DED that both phases of the Report would be undertaken as a matter of

urgency because of developments within the industry and the window of training opportunity between Feb

and Sept 2006

Accordingly it was agreed by PSA that it would endeavor to complete the feasibility study before the end of

October 2005.

The feasibility study report was finalised on 20 October 2005 and it was sent to the DED and presented

to the C+T Cluster Executive on 24 October 2005 where it was unanimously adopted by those present.

Since that date a number of developments have occurred and these are recorded in the Addendum

Update, Section10.

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2. Feasibility Study

This feasibility study has been conducted under the auspices of the KZN Clothing and Textiles (C+T)

Cluster – specifically the Manufacturing Excellence section of the Cluster.

All firms that are members of the KZN C+T Cluster were approached regarding their participation in a Fast

Track Project. In addition all firms with over 300 employees which were recorded on the CTFL SETA’s data

base were also contacted. Visits were made to all firms which were open to discuss the proposed Fast

Track Project.

Firms in the Ladysmith and Newcastle areas were not contacted as a fast track initiative supported by the

International Labour Organisation had recently been undertaken in the area (2003/4). Further follow-up

initiatives have been considered in this area and these will be finalised by the Northern KZN Sector

Business Support Centre (NKZN SBSC) which has been set up in Newcastle with support from the DED.

Small firms with less than 300 employees were also not contacted unless they were already members of

the KZN C+T Cluster or were referred by another firm. There were a number of reasons why this approach

was adopted vis:

• It was apparent from the small firms that were contacted that they had very different perspectives

and constraints to larger firms

• Without a core of large firms fully committed to the Fast Track Project it was unlikely to be feasible

or meaningful

• The time/cost ratio of visiting small firms was not accommodated by the budget which was

available for the Feasibility Study

Despite the above, a fast track initiative is suggested in the Report for small firms (CMT’s in particular).

The nature of this initiative would mean that the selection of firms would only be possible once certain

other processes had been put into place.

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3. Overview of the Clothing and Textile Sector

3.1 Global

Key Trends in the global clothing and textile industry can be summarised as follows:

• Significant growth in the buying power of retailers and the emergence of large discount and

speciality clothing chains – it is estimated that the top 10 retailers will double their current control of

the 11,5% of the Global industry by 2010

• China now accounts for 23% and 16% of the worlds total clothing and textile exports respectively

• The ending of the Multi Fibre Agreement (MFA) in 2004 will mean new sourcing criteria from

buyers which will include lead times, quality, reliability, flexibility and non-production functions such

as social compliance and environmental standards.

3.2 South Africa

Statistics on the Clothing and Textile sector are often inaccurate however based on data in the Department

of Industry’s (DTI’s) Customised Sector Programme (Oct 05), the following Table provides a snap shot of

the C+T industry in South Africa.

Sales 2003 R billion % Export % Total Manufacturing

Textiles Clothing

12,4 13,0

19,8 18,4

1,7 1,8

Exports & Imports Trends – 2003 /4 % Change - Export % Change - Imports

Textiles Clothing

-35,6 -45,9

- 13,3 + 51

Employment – 2005 Formal Formal % Total Manufacturing

Textiles and Clothing 160 000 220 000 12,8

The following points can be added in relation to the above:

• Over 80% of clothing and textile sales are in the domestic market

• The top five retailers account for over 70% of formal SA clothing sales

• To keep clothing costs low, larger firms are outsourcing to CMT’s and/or moving to non-metro

areas • Textile firms have closed non core functions have moved to focusing on core products, and niche

markets – this has meant a move away from apparel textiles

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• Output per employee has declined in both sectors, there are serious skills shortages and ageing

capital goods in clothing.

In terms of profile, the C+T industry in SA sits between high value added, fashion orientated first world

players and low cost, mass based third world players.

There are however important regional differences in the industry which is predominantly based in the

W.Cape and KZN areas. These differences are summarised in the table below.

Regional Differences Firm Size Market Design Use Wage

Levels

KZN 80% CMT Domestic - Lower/Mass √ √ M

W Cape Medium /Large Domestic – Mid/Upper √√√ √√√ H

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4. Key Challenges facing the Sector 4.1 S W O T Analysis

A high level overview of the South African clothing and textiles sector reveals the following:

STRENGTHS WEAKNESSES

• Well established firms • Relatively low performance

• Relative flexible • Limited capital investment esp. clothing

• Consumer quality eg: formal wear and tailoring • Capability of management

• Design capability • Labour costs

• Stable environment and sound infrastructure • Inefficient ports

• Growing internal markets, esp. industrial textiles • Retailers with propensity to import

• Well established linkages with international

buyers

• Poor policing of (illegal) imports

• Distance from markets (exports)

THREATS OPPORTUNITIES

• Under investment in people • Increasing willingness of C+T to co-operate

• Increased imports • Improving relationships with retailers

• Even less flexible labour market • Actively pursue export markets

• Future of the DCCs • To improve manufacturing processes and to

upgrade capacity

4.2 CSP Strategic Themes

The DTI’s Customised Sector Programme (CSP) spells out certain key activities (themes) which are

essential to the survival of the industry in South Africa. These activities / themes are as follows:

• Recapturing domestic market share

• Measuring export/feasibility exporting growth

• Fostering capital upgrading

• Upgrading firm level competitiveness

• Creating a sustainable skills base

• Fostering industry transformation

• Co-ordinating value chain opportunities

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The upgrading of firm level competitiveness’ referred to in the Report is split into three proposed

activities/tasks as follows:

• Provision of national government funding for textile and clothing clusters in the Western Cape and

KZN

• Funding for technology upgrading

• Support for firms seeking to acquire international environmental and quality management

accreditation e.g. ISO 14000.

The envisaged Fast Track Project falls very clearly within the ambit of the above. In this sense, it needs to

be seen as only one of a number of initiatives that are required to support the C+T sector.

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5. Stakeholder Participation

5.1 Overview

At the point of concluding this Report, fifteen firms had expressed their interest in participating in the Fast

Track Project. The breakdown of firms by size and area is as follows:

AREA/SIZE < 300 300-1000 >1000

Isithebe √ √√ √

Tongaat √ √

Durban √√√ √√

South Coast √

Hammarsdale √

PMB √

Total 7 7 1

The participation status of these fifteen firms varies between those that:

• Have confirmed their participation (5 firms)

• Will participate subject to an assessment indicating areas of opportunity (5 firms)

• Are interested but have not finalised their participation (4 firms)

It is possible that certain firms might still indicate a wish to participate. Equally it is to be expected that some

of the “interested” firms will not come through. Based on previous experience an optimal number of

participants will be in the region of 8-12.

As indicated in the Methodology section of this Report, small clothing firms were not contacted at this stage

for the reasons outlined. It is however envisaged that there will be a small firm component of the Fast Track

Project which will run separately to the large firm initiative. In the case of the small firms, the participants

will, in large measure, be defined the lead manufacturer / agent. This approach is covered in more detail in

Section 7.3.

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TEXTILE

FIRM EMPL LOCATION MEETING DATE PERSON(S) INTEREST REASONS/ COMMENT

Associated Spinners

360 Isithebe 28/9 H.Pieroni (MD) √ Subject to assessment

Belgotex 650 PMB - - - Unable to set up meeting decision

BSN Medical 530 Pinetown Tele contact A.Clemmow (GM) R.Wilson(Training Mng)

√ Interested in specialised workshop only

Coats 120 ND 29/9 M.Naicker (Ops Dir) W.Naidoo (HRO)

X Now importers and distributors cf manufacturers

Crossley Holdings

430 ND - J.Brown (SHEQ Mng) X Already have FT initiative underway

de Nim 570 Hamdale 29/9 11/10

N.Rademan (HR Mng) √ Have confirmed their participation

Dano Textile 500 ND 11/10 P.Redondi (MD) √ Subject to assessment outcome

Dyefin 156 ND 10/10 B.Pooley (MD) X Unable to set up meeting

Frame Textiles 3370 ND Tele contact D.Bowen (Training Dir) √ Committed to participate in at least one spinning plant

Gelvenor 600 ND 29/9 D.Coetzee (MD) C.Cook (HRM)

X Main issues are govt orders and protecting niche

Imran Textiles 40 Ifafa 13/9 I.Bux (MD) √ Committed to participation

Lounge-weave 120 Isithebe Tele contact T.Jenkins (MD) X Unable to set up meeting

Mediterranean Textile Mills

360 Hamdale Tele contact M.Varoli (MD) X Focus is on broad structural issues

Numyn Textiles 90 Umzinto 10/10 Z.Ally (MD) X Focus is on broad structural issues

Ninian & Lester 350 Pinetown Tele contact R.Fisher (MD) X Focus is on broader structural issues

Prilla Mills 320 PMB 4/10 R.Joubert (CEO) √ Subject to assessment outcomes

Standard Textiles

325 Isithebe Tele contact A.Jarvis (Fin Dir) ? Attempting to establish contact

Tufbag 400 Isithebe Indirect contact R.van Zyl (MD) ? In process of establishing contact

CLOTHING

FIRM EMPL LOCATION MEETING DATE

PERSON(S) INTEREST REASONS/ COMMENT

Celrose 900 Tongaat 29/9 J.Pillay (Prod Mng) S.Smith (HRM)

√ Subject to assessment outcomes

Belta Garments 350 Isithebe 6/10 K.Cheung (MD) C.Naidoo (HR)

X Order book too depressed

Estee Clothing 800 Isithebe 6/10 S.Pandarum (Admin) ? Participation will depend on Standard Group

Fashion World ? ND 12/10 H.Randaree (CEO) √ Mainly – outsource potential supplier development project

John Peter 260 ND 10/10 G.Gething (GM) √ Subject to assessment outcomes

Johnssons Workwear

300 ND - N.Johnsson (MD) ? Still making contact

Kingsgate Clothing

? ND 12/10 Mr.Vahed (CEO) ? Have sent through information

N/Coast Garments

? Tongaat - V McDonnel (MD) √ In process of making contact

Playtex ? ND - D. Owen-Brown CEO) X Unable to make contact

Siyaphambili 160 Isithebe 9/9 R.Govender (Plant Mng)

√ Provided training in Isithebe

Stirling ? ND ? A.Hoosen (CEO) ? Still to make contact

SA Clothing 1500 ND 9/9

13/9

10/10

B.Meyer (Plant Mng) P.Olivier (Prod Exec) K.Robson (HRD) Ed Besson (Training Mng) J.Londall (MD)

√√ Awaiting confirmation of possibly 2 plants (Isithebe and ND)

Tern Sportswear

3000 Isithebe 6/10 S.Tinkouree (Mng) √ Have confirmed verbally

Twin Clothing 400 ND 17/10 J.Paruk (MD) X See no future for industry

Yen-Fu Clothing ? Isithebe 16/10 A.Sha (MD) X No reasons given

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6. Performance Improvement Strategy

6.1 Overview - Parameters

The rationale behind the proposed strategy is the development of sustainable skills in order to increase

competitiveness which could result in job retention.

Four key parameters were taken into account in designing a draft programme for this Fast Track Project.

These can be summarised as follows:

• The needs and requirements of potential participants

• Key learnings from the ILO’s Enterprise Competitiveness Development (ECD) project with

Ladysmith and Newcastle C+T firms

• Synergies with the KZN C+T Cluster programme

• Funding opportunities and constraints.

Each one of these parameters is dealt with in more detail in the sections which follow.

6.2 Needs and Requirements of Potential Participants

In most cases, only a single visit has been made to potential participants so at this stage, there has not

been in depth discussion regarding their specific needs and requirements. In addition, assessments have

yet to be conducted at a number of firms so that data is not yet available to inform potential opportunities

within such firms.

Some comments both about content and process have however already been forthcoming and these are

recorded below:

• There is a strong emphasis on developing internal capability to drive world class manufacturing

initiatives

• There is a strong preference for an Isithebe sub-cluster from firms in this area so that they do not

have to travel to Durban for training

• Production planning and procurement best practices would be of benefit to certain firms

• Some firms wish to explore issues around flexible pay

• Training should as far as possible be conducted in the period Feb - Sept

• Small firms have a great deal of difficulty attending activities during working hours.

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It is expected that as firms get more involved in the preparation stages of the Fast Track Project they will

develop further views about the shape of the programme.

In section 8 of this Report one of the recommended steps going forward is a workshop with interested

participants to discuss the programme with them in some detail.

6.3 Learnings from the ILO’s Enterprise Competitiveness Development Project

Key learnings from work with C+T firms in Ladysmith and Newcastle were summarised at the end of the

Project as follows:

• Employee and union buy-in was critical to overall project success

• Enterprise success was dependent on active, senior management support

• Improvement opportunities were sub-optimised by poor HR practices

• Significant improvements were achieved just by measuring accurately and visually

• Absenteeism can be managed down to exceed world class levels

• Major opportunities lie outside of manufacturing.

A number of the points above, relate to the set up and management of the project – e.g. employer and

union buy in, senior management support etc. In terms of actual content, the point regarding major

opportunities lying outside of manufacturing is crucial. In short, it became evident that there was significant

scope to improve performance both on the inbound and outbound sides of the supply chain i.e. not simply

in manufacturing.

Given that almost two years have elapsed since the beginning of the ILO’s ECD project and conditions

have continued to deteriorate in the industry, there will also be very strong pressure to produce cost

savings early in the process. Accordingly, it will be important that meaningful profit improvement projects

are identified early on, and are rigorously pursued at each point in supply chain.

6.4 Maximise Synergies with the KZN C+T Cluster

The KZN C+T Cluster has produced three business plans outlining its proposed activities in terms of

Manufacturing Excellence, Human Resource Development and Labour Markets. The Labour Market

business plan has however now been integrated with that for Human Resources Development.

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The activities of the Manufacturing Excellence Business plan can be summarised as follows:

• Firm-level benchmarking

• Quarterly best practice workshops

• Training of benchmarking champions

• Manufacturing Excellence seminars

• Quarterly best practice newsletters

• Best practices sharing

• Expert workshops

• Upgrading interventions within firms

The business plan for HRD focuses on the following activities:

• Management skills development

• Supervisory and labour skills development

• Technical skills development

• Information sharing

• HIV/AIDS and community support

There are a number of potential overlaps between the activities envisaged in these business plans and a

Fast Track Project modeled on the lines of the ILO’s ECD project in Ladysmith and Newcastle. These are

dealt with in more detail in section 7.4.

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At a broader conceptual level, however the two initiatives can be quite clearly distinguished from one

another as follows:

KZN CLOTHING AND TEXTILES CLUSTER FAST TRACK PROJECT

• Pace of programme determined by members and by data • Very tight, structured programme

• Medium term objectives (up to 3 yrs +) • Short term high impact objective (15 months)

• Striving for sector level performance improvement • Driven by individual plant level

performance improvements

• Rely on firms to implement best practices • Provides tools and support at firm level to

implement best practices

• Have very large sets of benchmark data • Works primarily with data of participating firms

• Aim to achieve high level supply chain alignment including

retailers

• Focused on supply chain alignment within firms and

in respect of small firms

• Capacity building – for rollout.

7. Framework for Performance Improvement Strategy 7.1 Overview – College Approach

A College approach is recommended for this Project. This approach worked very successfully in the ILO’s

ECD project in Ladysmith/Newcastle. Colleges involve the bringing together of firms for training purposes

and then getting each to implement these learnings at plant level with support from experienced

consultants. The broad methodology is thus as follows:

COLLEGE APPROACH

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Support and mentor on site

Improvement projects Implement Best Practices

College review and train

The advantages of a College approach can be summarised as follows:

• Sharing of learning across sites

• Regular assessment of progress

• Pull system – set momentum

• Fosters “firm as a team” participation

• “Best in class” tracked and visited

• Economies of scale – reduced costs

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7.2 Separate Colleges

Being virtual, Colleges can be flexibly determined to suit requirements on the ground. In compiling this

Report, discussion was held on various College options as follows:

• Separate Clothing and Textile Colleges

This might be the route to follow if there are simply too many potential participants i.e. more than

12. There are however important cross sector learnings to be gained from a mixed/joint approach

and this is the recommended route.

• Separate Isithebe College

Firms from this area have indicated very strongly that they would like to avoid travel time costs by

having training offered locally. This would be viable for much of the training if there is sufficient

interest in the area. SACI and Tern Sportswear would be decisive.

• Separate College for Large and Small Firms

This is strongly recommended particularly in the clothing industry. In general, large firms have

different horizons, priorities and constraints to smaller firms and it is very difficult to develop a

single approach to cater for these different needs. Accordingly it is recommended that separate

Colleges be run for large clothing and textile firms on the one hand and smaller clothing CMT’s on

the other. On the textile side, because of higher levels of capital investment and the nature of their

operations, it is recommended that any small textile firm should be accommodated in the College

with larger firms.

7.3 Large Firms College

The ILO’s ECD project assessment indicated a need to focus not only on manufacturing but also on other

aspects of the supply chain. This was -*because there were both blockages and opportunities in these

areas.

Accordingly it is recommended that, in addition to manufacturing, supply chain areas such as Procurement,

Inventory Management, Production Planning, and Maintenance (mainly for Textile firms) be considered.

It is not envisaged that each firm will attempt to implement all the best practice areas identified.

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These sets of best practices would probably involve different teams from each firm - each team would

attend the relevant training modules at College level and would then implement these at firm level with

consultant support. In some cases training of team leaders and teams will be appropriate.

It is envisaged that this recommended set of best practices would form the basis of discussion with

potential participants and these could be changed or amended in accordance with their requirements.

7.4 Small Firms College (CMT’s)

Experience indicates that small CMT firms are driven by very short term agenda’s which are determined by

retailers, their agents and large firms who give them work. These customers determine their survival and

hence a College programme is proposed for CMT’s which:

• Is driven by retailers, agents and large firm outsourcers (customers)

• Aims to help CMT’s to clearly understand the needs of their customer • Develops clear agreements between CMT’s and their customer • Helps CMT’s to improve their performance to meet customer needs.

It is envisaged that there will be two or three clusters of small firms with each cluster being determined by a

main customer e.g. Fashion World. The main customer will help with the selection of small firms in each of

these clusters.

Workshops will be held to determine the requirements of the main customer and the extent to which these

requirements are being met by their suppliers i.e. small firms. The final programme for the College for small

firms will thus be determined by the gap between customer requirements and the current performance

levels of such small firms.

It is envisaged that the College programme could involve the following best practices.

• Problem solving • Quality Assurance • Production Planning (Basic) • Human Resource Management

Some precedent for this type of supplier development programme has already been set by project funded

by the CTFL SETA which involved Fashion World and sixteen CMT’s to whom they outsource.

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Fashion World has not yet been interviewed but the report on this project indicates that training was carried

out in the following areas:

• Management Skills • Operator Skills • Supervisory Skills • Quality Assurance • Health and Safety • Labour Relations • Productivity Improvement Techniques

Most firms appear to have recorded productivity, quality and profitability improvements.

The main differences between this training programme and the College approach being suggested would

appear to be that the College programme will:

• Place more emphasis on developing customer service level agreements • Link measured performance improvements directly to customer requirements • Provide some hands-on plant level support to business owners and their teams to reach customer

standards.

7.5 Synergising with the KZN C+T Cluster

There is some level of overlap between the KZN C+T Cluster business plans and the large firms College

outlined in 7.3 above. This is mainly in the following areas:

• Baseline Assessments • Best Practice Workshops • Expert Workshops • HRD initiatives

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Following discussions with Dr Justin Barnes and Jeanne Esselaar at BM Analysts it is recommended that in

order to maximise synergies between the two programmes the following approach should be adopted:

• Separate Programmes

The two initiatives require different support infrastructure and each will have a different core funder

– the DED in the case of the KZN C+T Cluster and the ILO in the case of the Fast Track Project.

The KZN C+T Cluster has already established its own decision making bodies. The Fast Track

Project for its part will have to establish a suitable tripartite Steering Committee to comply with ILO

requirements.

• Baseline Assessments

Both initiatives require assessments to be carried out at participating firms. BM Analysts has

already begun the process of conducting assessments at various firms and it is agreed there is

merit in staying with a single assessment methodology for firms in both initiatives.

Accordingly BM Analysts will conduct all baseline assessments. In the case of participants in the

Fast Track Project, some assessments (at lest in respect of the large firms College) will have to be

completed by February 2006 at the latest. Where a particular firm has not joined the KZN

Benchmarking Cluster, the assessment will be conducted on behalf of the Fast Track Project and

paid for by that Project.

• Best Practice Workshops

The KZN C+T Cluster has planned to have quarterly Best Practice Workshops. These workshops

involve meeting at a specific firm where performance improvement or the implementation of a best

practice, has been particularly impressive. The firm makes a presentation, questions are asked

and learnings are shared. The focus of any Best Practice Workshops is determined by firm

breakthroughs and ongoing analysis of benchmarking data.

The Fast Track Project will, for its part, have a Quarterly Steering Committee Workshops where

participating firms will make presentations on their progress in terms of performance and best

practice implementation. The focus of these workshops is determined by the College programme.

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It will make sense to combine these quarterly meetings. It is therefore proposed that the two

initiatives jointly design the five quarterly workshops which will be held during the life of Fast Track

Project.

It is envisaged that the day would be split with Cluster members attending a morning session and

the Fast Track members the afternoon presentation on progress. Participants in both would stay

the full day (every three months).

• Expert Workshops

The KZN C+T Cluster plans to run workshops involving local and international experts as and

when they become available.

The Fast Track Project will focus on providing expert advice and training on particular best

practices and topics that have been identified and agreed up front with participants. Potential

issues are listed in 7.3 These issues are tackled in a very structured manner to ensure that there is

proper implementation at plant level.

As with the quarterly Best Practice/Steering Committee meetings it will make sense to combine

these activities. It is therefore recommended that part of the first days training on any of the best

practices to be introduced in the Fast Track Project, will involve both Cluster and Fast Track

members. BM Analysts will make a presentation on the particular best practice based on data at

their disposal, a local or international expert will be introduced if available and thereafter training

for Fast Track Project participants will take place. On this basis, stand alone Expert Workshops

will, unless a major opportunity presents itself, be held over until the end of the Fast Track Project.

• HRD Initiatives

There are a number of activities outlined in the Cluster’s HRD Business Plan. These are derailed

under section 6.4 of this report.

The possibility exists for these activities to be integrated with the HRD best practices training which

is envisaged in terms of the Fast Track Project. This is outlined in more detail in section 8.1.5.

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The elements of the Skills Development best practices training would be as follows: Performance Pay Job Profile Development Skills Development Facilitator Development Coaching for Middle Management

In the ILO ECD project a special initiative was undertaken with Frame Textile to develop a generic

supervisor job profile and an instrument to assess potential against this profile. These tools are available to

all SETA members through the offices of the SETA. The Fast Track Project will offer the third element

which is training for identified supervisors/team leaders against the generic profile that has been developed.

In view of the above and in order to avoid unnecessary duplication across initiatives, it is recommended

that a small team from the Clusters HRD group and the Fast Track Project get together to look closely at

how respective activities can be aligned.

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8. Funding for Performance Improvement Strategy

The potential funders for this programme are:

• The International Labour Organisation (ILO)

• The Department of Economic Development (DED)

• The European Union

• The CTFL SETA

• The Durban Metro

The ILO South African Office has agreed in principle to support the initiative and has put forward a budget

to its Swiss donors for an amount of approximately R2 million. Conditions attached to ILO funding will be as

follows:

• There must be tripartite (employer, worker and government) governance of the initiative

• Participating firms must be compliant with existing Labour laws or must at least be committed to

achieving compliance

• The fostering of sound industrial relations must be promoted wherever necessary

• Firms must contribute in part to the direct cost of the programme.

Arising out of its assessment of its ECD project in Ladysmith and Newcastle, the ILO will be concerned to

get maximum dispersion of its funding i.e. impact on as wide a range of firms and individuals as possible

without compromising the effectiveness of the initiative. It will therefore be looking for creative suggestions

on how to achieve this balance.

The DED has approximately R200, 000 (to financial year end) available for the start up of this initiative. This

amount includes the funding of this Feasibility Study. It will however shortly have to finalise its budget for

2006/7 which will be effective from March 2006 and a further R800, 000 might be possible. Such funding

would be conditional on legal compliance by participating firms and some contribution to direct costs to

indicate their commitment.

The European Union has expressed interest in funding a project of this nature. It could do so through its

Reconstruction and Development (EPRD) programme which has a specific local Economic Development

(LED) project in KZN under title of the Local Competitiveness Fund (LCF).

The LCF specifically indicates that funding could be applied to “support particular sectors that have a high

potential to boost socio-economic objectives including but not limited to clothing and textiles”. The extent of

support offered is R380, 000 up to R3, 800.00. This funding will however only be applied to projects which

are outside of the eThekwini Municipality. The deadline for applications is 9 December 2005 but successful

(and conditional) projects will only be announced in May 2006.

The CTFL SETA has committed itself to the development of small firms and will be inviting applications in

terms of discretionary grant funding which it has available. The total funding available could be in the region

of R4 million and applications from the Fast Track Project in respect of small firms would be considered.

The CTFL SETA would expect a small contribution to direct costs by such firms and would require that they

are compliant with current legislation.

The Economic Development Unit of Durban Metro has supported the KZN Provincial DED by making some

funding available for the KZN C+T Cluster. It is expected that it might similarly support a Fast Track

initiative in its 2006/7 budget. A conservative but realistic support parameter would be R200, 000 with the

same conditions applicable as required by the KZN DED.

Potential funding support and conditions can therefore be summarised as follows:

Firm Size /

Location

Any Size Small Conditions

Non Metro 380 000 – 3,800 000 ( EU/ LCF) • Tripartite governance • Legislative compliance • Promotion of sound

industrial relations

500 000 SETA

Metro 2,500 000 – 3,000 000 (ILO & DED) • Part contribution by firm • Small firms (CTFL SETA)

• Non Metro areas ( EU)

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9. Conclusion and Recommendations 9.1 Overview

It is too early to begin the process of matching participants, the programme and the available funding for

the following reasons:

• At this stage most firms have only indicated a willingness to participate or have made their

participation conditional

• The programme does need to be discussed, changed and approved by participating firms

• The ILO and the DED being core funders have indicated their in-principled support but have not

yet committed to actual numbers.

At this stage it can therefore be concluded that:

• There is sufficient interest from participants to make a Fast Track Project viable • There are sufficient funds if the main funders can deliver at expected levels • Draft programmes are ready for discussion by potential participants.

The process going forward will inevitably have to be iterative in that the number of participants, the nature

of the programme and the levels of funding support all impact directly on one another.

It is however recommended that a line should be drawn in the sand in regard to participant contribution

levels. It is widely agreed that these should be sufficiently meaningful so as to build a commitment to full

participation. Approximately 10-15% of direct cost has generally been considered reasonable and on this

basis contribution levels based on a sliding scale from R12, 500 for small companies with less than 50

employees through to R60, 000 for larger companies who employ in excess of 300 employees, were

proposed at the outset:

Actual contribution will be determined in accordance with the sliding scale proportionate to actual company

size

It is proposed that these contribution levels be approved in order that certainty is established for potential

participants. It is further recommended that up to 50% of the contribution be payable upfront and the

balance amortised over the duration of the project as negotiated with the Project Manager.

Secondly it is recommended that funding should be made immediately available from either of the two core

funders in order that the following preparation activities can be undertaken:

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• Continue the process of meeting and interacting with potential participants

• Conduct further baseline assessments as required

• Finalise participation by firms as soon as possible

• Support firms in the preparation activities required before start up

• Finalise the programme and develop a Project Implementation Schedule

• Set up the necessary project support and infrastructure e.g. contracts.

Correspondence regarding the costs of these preparation activities will be directed to both core funders.

It is critical not to loose the momentum which has been established in this initiative. Interested firms will

need further support and information through this period.

A meeting of all potential participants is recommended for early November 2005 which will finalise the

programme, outline the process ahead etc.