By  on August 3, 2010

JOHANNESBURG — South Africa’s embattled clothing and textiles industry suffered another blow when Seardel, the country’s largest clothing company, said it was closing its Intimate Apparel division.

The Cape Town-based unit manufactures lingerie and swimwear for mid-to-upmarket local brands, including national retail giant Woolworths. More than 800 employees are set to lose their jobs as a result.

The last two years appear to have been particularly challenging for the company. In April, 800 people were let go from its suit manufacturing and intimates facilities. Late last year, another key division, Frame Textile Group, laid off 1,400 workers. By the time Intimate Apparel shuts down operations completely in November, Seardel would have shed some 5,000 jobs.

Stuart Queen, Seardel’s chief executive officer, made the announcement last Thursday and stressed the decision to shut the division had been taken “subject to any viable alternatives and consultation.” Queen said the manufacture of the products was labor intensive, but with low-selling prices, “making it extremely difficult to recover the costs of labor inputs.” Despite recent investment to upgrade equipment and training, and the implementation of various cost-saving measures, Queen said, “It has become clear that improved efficiencies alone will not be sufficient to compensate for the structural and depressed margin issues facing the division.”

The clothing workers’ unions, headed by the South African Clothing & Textile Workers Union blamed the turn of events, in part, on Woolworths’ refusal to up the prices they paid. Queen concurred, saying, “The principal problem is that you can’t get an increase in the selling price from retailers.”

Brett Kaplan, divisional director of clothing and general merchandise for Woolworths, said, “The reason given to us is that the high costs of labor associated with the manufacturing of lingerie and the wage differential with their international competitors have made it impossible for them to compete with overseas suppliers and so to sustain a commercially viable business,” adding that “the company would lose a key supplier of lingerie and, in order to ensure continuity and quality of supply to its customers, it would need to source an alternative supplier as a matter of urgency.”

Queen said the Intimate Apparel unit had losses in excess of 100 million rand, or about $13.7 million, over the last 18 months.

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