The acquisition and expansion of the 82-year-old company, based in Kimberley, Northern Cape, was approved by the NEF's Board Investment Committee on 22 April 2013, to enable the staff and management of the Delswa Group to purchase the entire group from the Jaff family, who are the former major shareholders and owners of the niche corporate clothing manufacturing company.
NEF's CEO, Philisiwe Mthethwa, said that Delswa's private and public clients include the Standard Bank of South Africa, Swaziland and Namibia, DHL, South African Airways, Airports Company South Africa (ACSA) and Clinix Holdings.
Delswa Group's new CEO, Preggy Govender, said: "It has been a long journey with many challenges along the way but we have finally reached our destination. The NEF's funding for our management and staff buyout gives a new lease of life to at least one business in the struggling local clothing industry, which for the most part has been resistant to transformation. All that is left for us as the new management is to push forward and aim for the sky."
Mthethwa said that the company has a reputation of high service delivery standards including cutting-edge design, quality garment construction, appropriate fabric choices, country-wide fittings, dedicated manufacturing, managed programmes and logistics.
"With almost 500 staff members the Delswa Group is one of the biggest employers in Kimberley and previously had over 95% ownership by white shareholders. With NEF funding, the Delswa Group is now 81% black owned and controlled.
"The transaction means the workers can now benefit from the hard work that has seen the group earn its reputation over the eight decades of being one of the longest-standing and biggest clothing manufacturers operating in South Africa's clothing and textiles industry. It is fitting that the workers who have contributed to Delswa's weathering the storm, even with the influx of imports from China, get the first chance to own and ensure the group's continued existence and success," she said.
The new Delswa Group shareholding structure will comprise management at 42.3% ownership of the company, staff at 9.1%, and trade union NEHAWU's Investment Holdings Enterprises owning 25.1% of the group.
The NEF has 23.5% shareholding in the business to facilitate its required rate of return from the transaction. "When the term of the loan is over, the NEF will give staff and management first preference to purchase the shares to ensure that the business remains fully empowered. Some of the foundations to maintain the empowerment credentials of the business were an undertaking that in addition to the new CEO of the business being black, a black female CFO is appointed. The Delswa Group Staff Trust comprises 82% women, and 78% of the women are black. The importance of women benefiting from NEF investments is always a critical criterion," said Mthethwa.
She added that the Delswa Group transaction, as with previous NEF-funded transactions, such as Linen Tech (linen manufacturer) and Ndalo Luxury Ventures (clothing retailer), demonstrates the NEF's determination to make key interventions in different sections of the clothing and textile value chain, "with the purpose of driving transformation and growth".
Almost R20 million of the NEF's R35 million investment will go towards the business' working capital. This means that the company has the potential to expand and create more job opportunities for the economically depressed Northern Cape province, and make an impact on the current low levels of employment.
"There is a need to grow black participation and to sustain manufacturing capacity in the troubled clothing and textiles industry. This is critical to achieve across the value chain, from manufacturing, value addition to retail, and for true and significant transformation to happen the investments must be meaningful. These transactions are all expansionary in their nature. They are meant to introduce, grow and foster B-BBEE in their own different developmental ways at different stages of investment and development of the businesses," said Mthethwa.
Established by the National Empowerment Fund Act No 105 of 1998, the NEF is a driver and a thought leader in promoting and facilitating black economic participation through the provision of financial and non-financial support to black-empowered businesses, as well as by promoting a culture of savings and investment among black people.
Since 2004 to date, the NEF has approved funding to a total of 519 black businesses amounting to more than R5 billion, and has created over 40 000 jobs. At least 21% of the businesses funded are owned and managed by black women.
