B&M Garments

B&M GARMENTS

B&M GARMENTS

B&M Garments Remains Stitched

in Fabric of Botswana PRODUCTION: David Napier

With times tougher than ever for Shashe-based B&M Garments, the company is looking to add value to its products and improve its range, offering first-class products and service to customers in a time where every order counts.

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Rewind three years and the commercial landscape in Southern Africa was very different. The hangover from the 2008 global recession was abating and spending and confidence had returned to the market. South African companies were expanding across different geographies, the mining and minerals industry that drives the region was performing relatively well, and some of the world’s fastest growing economies were located in the SADC region.

Fast-forward to today and the scene reads very differently; South Africa’s economy is weak, downgraded by the big international credit agencies; the aftershocks of the financial crisis of 2008 hit China and demand for minerals dipped causing a commodity price crisis; and global politics has become more uncertain than ever making futureproofing a difficult task. For successful business, now is a time for stability, for

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secure partnerships, and for confidence.

Look at the fashion retail sector for example. While consumer’s pockets remain tight, retailers must maintain control of their costs and quality. This means partnering with suppliers that consistently deliver, and have a reputation for value. B&M Garments, situated in Shashe near Francistown, Botswana, supplies clothing manufacturing services to South Africa’s big-name retailers. High-street brands such as Mr Price, Edcon, Retailability, The Hub and Foschini all look to the Botswana company for t-shirts, shirts, knitwear and other products. Its location makes it attractive and can keep lead times down compared to Chinese or Indian competition. But despite good relationships with customers, B&M Garments is feeling the pinch from a stale economy. Up until 2014, B&M Garments had invested around P20 million into its operation and up until 2007, it had

worked for major international brands including H&M and Bonprix but today, times are tough and there has been talk of the business relocating to Mauritius.

However, Managing Director Krishna Chinniah tells Enterprise Africa that, thanks to an improved partnership with local government, instead of leaving Botswana, the company will be investing in its facilities, alongside a local partner, to build a stronger, sustainable business.

“The main strategy of the company is to grow with added value; that is why we’re investing in embroidery machines, to add value to shirts. We are also looking at more advanced printing machines to add value to our t-shirt business and new dyeing machines so that we can expand our range of products.

“We will look to South Africa to source the machinery, specifically Berzacks which supplies high-quality machines. We should have these machines installed and up and running

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INDUSTRY FOCUS: TEXTILES

in the next three to six months and we believe it will help increase our turnover.”

STITCHED IN HISTORY B&M opened its doors in Shashe in 2000. Chinniah, a trained chemical engineer, worked in Mauritius following a seven-year stint working in the UK. Upon returning to his home country, he found little opportunity for a chemical engineer and instead chose to enter the textile industry which was booming and becoming increasingly prominent part of the country’s economy. After joining B&M Garments, which at the time worked heavily for H&M, Chinniah found there was a shortage of skilled labour and identified Botswana and Madagascar as potential areas for relocation.

Thanks to the incentives being offered by the Botswana government, Chinniah expanded the business into Shashe and began producing textile products to high international standards. In 2008 with the onset of the financial crisis, the company lost its big European contracts and refocused its strategy to target customers in South Africa. Although this took time, the idea paid off and the company now employs around 350 people.

“Our customers in South Africa such as Mr Price, MRP Sport, Edcon, the Hub and others are excited about our investments as it means we can complete more orders for them, where printing and embroidery are required,” explains Chinniah.

“In the local market, most of the t-shirts we produce need embroidery and printing for branding purposes.

We have some printing facilities but we do not have an embroidery machine right now so this will bolster our service portfolio in a big way.

“In the knitwear market, we have the machines and we are looking for more orders, mainly from the export market, to fill our capacity.

“With our increase in capacity and purchase of new machinery, we’re also

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going to need more technical people.

We will be recruiting and we will be training existing staff. In Botswana that is the way it is; where we are, there isn’t a lot of skill available and we always need time to train people.

Our technical staff come mainly from India and Sri Lanka. It’s similar to Mauritius where most technical staff come from India, Sri Lanka and other developing countries,” he adds.

ECONOMY UNZIPPED While the purchase of new machinery is exciting, and talk of potential recruitment drive may paint the picture of a blossoming business, Chinniah is quick to remind that all expansion and growth strategies are extremely carefully considered as the economic situation in which the region finds itself, and the state of the industry in Botswana, means that B&M Garments continues to find itself in a challenging position. Interestingly, the economic environments in Botswana’s neighbouring nations are key drivers behind slow business.

While Botswana’s most prominent export, diamonds, faced a tough time over the past few years with prices falling, the industry recovered slightly in 2016 but this had little impact on B&M; the real impact came from inability to commit to spending from customers in SA and Zimbabwe.

“It’s been very challenging,” admits Chinniah. “Our main markets are South Africa and Zimbabwe. The big chains in South Africa take 70% of our business and 20% goes to Zimbabwe with the balance supplied to the local market. The political instability in Zimbabwe has affected our sales very badly. Likewise, the political turmoil in South Africa and the unpredictable price of the Rand means that we are affected. Following President’s Zuma’s cabinet reshuffle, the Rand declined in the forex markets and our products lost value overnight with our imports becoming more expensive.

“We considered moving the operation to Mauritius but we are located in a rural area and are one of the biggest employers in the region so the local government in Botswana came to us and offered support as closing the factory would have had a seriously negative impact on this region.”

Fortunately, the government’s support goes beyond just financial backing at the B&M factory; it is also reaching out to the country’s retailers to encourage support of local industry.

“The government of Botswana has come to an agreement with retailers operating in the country and they must give at least 10% of the floor area to locally manufactured product. This has resulted in new orders for us as we have good prices – if you have low prices you get orders.

Obviously, we have to be sensible with our pricing as there is a certain margin we must make for orders to be worthwhile,” says Chinniah.

The IMF expects Botswana’s local economy to grow by around 4.1% in 2017, and increase from 3.5% in 2016 but down from the average of 5% over the past decade. However, according to the IMF, ‘economic growth in subSaharan Africa this year is set to drop to its lowest level in more than 20 years’, thanks to a plethora of issues including government policy and commodity pricing. Chinniah agrees saying: “In general, we are seeing spending decreasing slightly. It’s a general feeling all over Botswana that spending from customers is decreasing.”

TIGHT COMPETITION The second major hurdle that B&M Garments faces is competition. The well-documented basement pricing offered by companies from Eastern markets have long-dogged textile manufacturers of Southern Africa, but today local and international competition puts B&M Garments

B&M GARMENTS

under pressure from two angles. The whole situation is catalysed by the ever-increasing cost of road transport in Africa, and the challenges that are faced on those journeys.

“It’s not just the Eastern and Far-Eastern countries, we also face intense competition from companies in Madagascar and Mauritius as well,” says Chinniah. “We are part of the SADC community and that means we can export fairly easily into South Africa but our competitors in Madagascar and Mauritius are also starting to utilise the protocol to move their products.

“We also face the drawback that inland freight is in fact more expensive than sea freight, so our competitors can ship a 20ft container from Mauritius to Durban cheaper than we can send a small truck from Botswana to Durban. From Botswana, you must go to the border which is a time-consuming issue. We have had trucks hijacked and are in the process of buying new trucks and that will happen before the end of 2017.”

The transportation issue causes a problem further down the value chain, not just in delivering goods to clients, but also in sourcing raw materials from key market partners.

“I import raw material from India but competitors in Mauritius can import the same raw material from Mumbai to Port Louis which is a fairly easy journey,” says Chinniah. “I have to import from Mumbai to Durban, then rail or road the material from Durban to Botswana, then make the products, and then road or rail them back to South Africa. I have also experimented buying raw material from Lesotho but the inland transport cost remains high.”

Asked if the company could attempt to regain business with former big-name European clients, Chinniah admits that it’s unlikely in the current market while the likes of H&M look for cheap pricing from existing suppliers.

MANAGING DIRECTOR KRISHNA CHINNIAH

“It’s very tough,” he says.

“Those companies have now built relationships with suppliers in Bangladesh or China and enjoy favourable pricing. The market is difficult; manufacturing in Africa is very challenging. Without support from the local government, our operation would be very very tough.”

But, despite what seems like a lot of negativity, Chinniah and B&M Garments remains upbeat. Its relationships with South African customers and local government remains strong, its abilities and facilities are growing, its workforce will continue to be upskilled, and its impact on the local community remains invaluable.

A key theme of so many success stories over the past five years is that those who can survive through the

tough times and continue investing when all others consolidate are the ones who come out in the strongest position. This is the story for B&M Garments for the past 17 years.

“We are always looking to increase our product list and diversify into added value. With the government supporting us, we are also hopeful to take on more local orders, especially through added value products,” Chinniah concludes.

B&M GARMENTS +267 2485665 krishna@bnmgarm.co.bw www.bitc.co.bw/bm-gaments-pty-ltd

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