Walking into a brave future
By Chris Barron
Sunday Times: Business Times
September 30 2012
RADICAL APPROACH: John Comley of Eddels Footwear in
PICTURE: Thembinkosi Dwayisa
While many local
manufacturers cut production and shed jobs in the face of
unfair competition from China, Pietermaritzburg shoe maker
John Comley has shown that there is another way.
He is the CEO of Eddels Footwear, which makes 2700 pairs of
leather shoes a day. He employs 385 people (from 240 five
years ago). He is looking to expand production to between
4000 and 5000 pairs a day in the next two-and-a-half years,
and create 550 more jobs.
Comley, 53, joined the business in 1987 as factory manager.
In 2000, he led a management buyout. Times were already
tough: the industry was retrenching to cut costs. Eddels,
which once employed 1700 people, was down to 330. Comley
decided to stop the job losses by improving efficiencies and
becoming more competitive. He empowered workers by making
them co-owners of the business.
On the day he took over, he gave the factory workers 5% of
the shares. Today they and management, 80% of whom are
ex-workers, own 39% of the shares. In addition to the
dividend from their shares at the end of every financial
year, there is a weekly incentive scheme through which they
share whatever operational savings they make every week.
There is division of labour and staff rotation which ensures
multiskilling and prevents boredom. There is on-site adult
education for staff in basic literacy and numeracy, which
happens inside working hours. Not surprisingly, all this has
had a marvellous effect on absenteeism (which has dropped to
about 2% - the sector average is three times that) and
productivity. The time from when an order was taken to when
it was delivered used to be 39 days. Now it is seven.
Instead of pursuing a lost cause, Eddels responded to cheap
imports by changing its business model. We said we're not
going to compete on price", says Comley. "We will offer a
totally different value equation."
The model can be summed up in two words: quick response.
"Small run, test it in the market, whatever works repeat it
as quickly as possible for the retailers," he explains. It
is also about forming strategic alliances with big retail
partners. Eddels supplies most of the big retail chains
including Edgars, Foschini, Markhams and Woolworths.
Comley, who is also the president of the Footwear
Manufacturers Association of SA, believes it is a model that
"should be replicated by every manufacturer in SA, not just
shoes or clothing. If you're not a low-cost producer you'd
better be differentiated. That is the most important thing.”
"We say to the retailer, you're going to lose on your
initial input margin but at the end of the process my margin
and your input margin will look the same. Because with me
there'll be no markdowns, less returns, you'll always be in
stock so there'll be bigger opportunities for gaining sales.
We replenish by colour, by size, by store."
The downside is that it is complicated and takes a lot of
"Management has to be on the ball," says Comley. "It's a
stressful manufacturing system. Your labour has to be
flexible so there has to be solid communication between you
and your customers. You've got to be in the top quartile of
all the best business practices. But it can work, it does
He thinks local manufacturers were spoiled under apartheid
when retailers had no choice but to buy from them and have
been slow to respond to the challenge from the East.
"We were pretty arrogant. But the wheel turned, we opened
our borders and retailers are now spoiled for choice with
ridiculous prices and huge margins. We as manufacturers only
saw one thing - how do we compete on price?
We didn't take a step back and see that price is only one
part of the equation. "We didn't try to flex ourselves to
offer a new, different value. Only lately has this started
to happen." He thinks there's an urgent need for a change of
mindset by both retailers and manufacturers that recognises
the South African reality.
"The truth is that our business people have to realise they
live in South Africa, and we can't necessarily copy
everything we see in Europe or the Far East. We have our own
structural, cultural and people issues.
"The only way we're going to get SA out of the quagmire it's
in is to employ people who have not been that well educated
by giving them jobs and reskilling them." It is in retail's
interests to start investing in that, he says.
Instead of being viewed as a lost cause, the local clothing,
textiles and footwear industry should be invested in as an
engine of growth and prosperity. "Look what happened in the
Far East. They used footwear, clothing and textiles to take
their masses of poorly educated, unemployed people and bring
them into the economy, earning and consuming."
The current MD of Eddels, Deena Moodley, is a chartered
accountant whose father used to cut leather in the factory.
He earned a pittance but used it to educate his son. Local
manufacturers are often themselves a big part of their
problem, says Comley. "We don't fight enough for what we
want and what we need, we don't lobby the government in the
right way and we come up with daft plans."
But retailers have "a huge social responsibility" to support
local manufacturers by at the very least asking how they can
add value. "When retailers start realising they have this
huge power to make a difference to the nation and to our
economy by spreading the work a little, we could end up with
a winning nation."
Comley describes himself as "a passionate South African. I
love this country. I don't want to be part of the problem. I
want to be part of the solution." In spite of being a "glass
half-full kind of guy", his determined optimism does not
blind him to the structural obstacles thrown in the way of
local businesses at every turn by the government. "The
government is making it extremely difficult to operate in
South Africa," he says.
Comley argues that a lack of service delivery, rising rates
and taxes, escalating electricity and water charges, an
over-regulated labour environment, central bargaining and an
avalanche of illegal imports due to lax entry-point controls
"create extremely tough conditions for business".
Innovative business models and progressive employment
practices can only take local manufacturers so far. For the
rest, he says, the government needs to come to the party.
"If we start creating employment, if we give South Africans
hope, you'll see a huge change in the way people interact
and behave," says Comley. He's seen it. It works.