National lockdown cited as the reason
More than 30 000 jobs are at risk at retail group Edcon after its CEO, Grant Pattison, admitted that the nationwide shutdown due to the Covid-19 might force the company to go into business rescue .
Pattison, in an emotional call to suppliers, said the shutdown would see sales go about
R400-million below predicted sales and cash for April.
“The presidential lockdown order further means that we will lose a further R800-million in turnover during the 21 days. We also expect a significant shortage of cash by the end of April,” Pattison said.
“Management will continue to look at all options, and there may be some really tough recommendations to be made to the board after the lockdown period, including having to consider business rescue.”
Matthew Parks from Cosatu said the federation was “extremely” worried about the impact of Covid-19 on Edcon.
“40 000 workers are employed by Edcon [and] 100 000 workers are employed by factories supplying Edcon,” Parks said.
“Sactwu and Saccawu are and will work closely with Edcon and its management team to ensure the company survives and its workers’ jobs are saved.”
Pattison said the company, which is the second-biggest retailer in the country, only had money to pay salaries and not enough to pay its suppliers.
Edcon brands include Edgars and Jet.
Chief investment officer at Aeon Investment Management Asief Mohamed said it was highly unlikely that Edcon would be able to survive “unless the government or the Public Investment Corporation (PIC) bail them out again”.
Edcon received R2.7-billion in cash commitments and rent reductions last year, with the PIC, on behalf of the Unemployment Insurance Fund (UIF), investing R1.2-billion in a deal
meant to save the company.
The deal meant the UIF is now one of the shareholders in Edcon. The move was hailed by
Cosatu, which said it saved more than 140 000 jobs across the value chain. According to research by Cosatu’s aliate – the Southern African Clothing and Textile Workers Union – Edcon procures around 45% of its clothing products locally – the most of all the country’s major retailers.
Edcon was a successful retailer until US-based private equity firm Bain Capital got its hands
on it in 2007, delisting Edcon from the JSE in a debt-financed R25-billion buyout. Bain gave
ownership of Edcon to creditors in 2016 in a debt-for-equity swap that reduced Edcon’s debt burden to R6-billion from R26.7-billion.
