Da Gama to raise its weaving capacity
TEXTILE manufacturer Da Gama Textiles, which almost went out of business in 2014, is planning to significantly increase its weaving capacity at a cost of about R150 million, resulting in the company employing a further 200 people.
Greg James, the chief executive of Da Gama Textiles, revealed this yesterday during a Competition Tribunal hearing to confirm a consent order entered into by the company with the Competition Commission for collusive tendering.
Da Gama admitted to collusive tendering through bilateral agreements it reached with Monoge Mining and Motseng Trading & Supply Services for a National Treasury tender for the supply of fabric used in the manufacture of uniforms for the Department of Correctional Services, the SA Air Force and the SA Military Health Services.
James told Business Report after the hearing that the plans to increase the company’s capacity were quite advanced and prompted by its need to buy in woven cloth from local spinners, which was relatively expensive.
He said Da Gama’s plant had a capacity of 1.8 million metres a month but weaving capacity on only 600 000 metres a month.
The plan was to add 60 additional looms to the factory over about a year, resulting in the creation of an additional 200 jobs. James added that an application through the Industrial Development Corporation’s (IDC) black industrialist’s programme was “90 percent there” and it already had an in-principle agreement.
He said part of the R150m investment would come from the IDC black industrialist programme and the balance from normal IDC or bank funding.
James said Da Gama’s factory was based at a small town outside King William’s Town in the Eastern Cape and the entire community was dependent on the factory.
James told the tribunal the collusive conduct had already taken place when he joined Da Gama in August 2014, but was tasked with entering into discussions with the commission to resolve this issue. He said Da Gama had been going through a slow and steady decline and been through massive retrenchments from 2010, with the staff reduced from about 2 500 to about 500 by the time he joined the company.
James added that Cowie Trading, which purchased the shweshwe African cloth from Da Gama and accounted for 60 percent of the company’s sales, acquired major shareholder Claas Daun’s shareholding in the company because it would have also closed down if Da Gama stopped operating, which saved 500 jobs.
A restructuring plan was implemented in conjunction with the IDC, which injected about R100 million into the company.
James said the new management and sales force that came into Da Gama in 2014 had moved on from there and managed to increase production from 1 million metres a month to about 1.8 million metres, resulting in the creation of an additional 150 jobs in the past two and a half years.
“With the change in management and having a shareholder that is directly involved in the actual end product of Da Gama has actually changed the whole dynamics of the company,” he said. James revealed this in response to questions from the tribunal panel hearing the case about the reasons for the proposed fine imposed on Da Gama in terms of the consent agreement with the commission being so low.
The penalty Da Gama agreed to pay in terms of the consent agreement was about R2.1 million, which represented 0.4 percent of the company’s annual turnover for the financial year to December 2013.
The commission has the power to impose an administrative penalty of as much as 10 percent of annual turnover on companies that are found guilty of contravening the Competition Act.
Matodzi Sivhaga, appearing for the commission, told the tribunal that the commission had accepted Da Gama’s offer after initially proposing a higher percentage that resulted in a penalty of about R9 million. He said in agreeing to the lower penalty the commission had taken into account the general decline in the textile industry.
The tribunal confirmed the consent agreement.