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7/31/2019 IMPAHLA CLOTHING, PUMA world cat strategic supplier
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IMPAHLA CLOTHING
INTEGRATED ANNUAL REPORT 2012For the period 1 January 2011 to 29 February 2012
PUMA Worl Cat Stratgic Supplir
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Scope and boundaryWe produced our rst sustainabilityreport ve years ago, and this isour rst integrated annual report.In the process, we have shited ourreporting period rom the calendarear ending December, to the nancialear ending Februar. This reportthereore covers the 14-monthperiod rom 1 January 2011 to 29February 2012, with the sustainabilitreporting covering 14 months but
our nancial statements are orthe 12-month period rom 1 March2011 to 29 Februar 2012. Most othe gures will consequentl needto be defated by 14% in order tomake a comparison with gures in theprevious reporting period. All gureswith a superscript14 count the ull14 months. We have indicated in thereport when gures have been restatedto assist with comparisons, e.g. on amonthl comparison basis productionincreased b 28%. Throughout this
report2012
reers to the 2011/2012nancial year, and 2011 reers to the2010/2011 nancial ear.
Spring Romanc proprtis 34 (Pty) LtT/A Impahla Clothing
Head oce
Unit 10, Maitland Business Park, 1 Mowbra Road, Maitland,
Cape Town, South Arica 7405
Postal address
PO Box 921, Maitland 7404, Cape Town, South AricaTelephone: + 27 21 510 4201 Fax: +27 21 510 4257
Contact
William Hughes
email: [email protected]
www.impahla.co.za
Rqust or ac
Should ou have an questions about our compan, or
comments about anthing contained within this report, please
contact William via email at [email protected].
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TAbLe Of CONTeNTS
5 IMPAHLA AT A GLANCe
7 TAkING STOCk, LOOkING AHeAd
Managing dirctors rport
CHAPTER ONE
GOveRNANCe ANd STRUCTURe
CHAPTER TWO
OveRvIeW O MATeRIAL ISSUeS
CHAPTER THREE
MATeRIAL ISSUeS dISCUSSed
20 1. Sericig our eclusie cusomer PUMA 25 2. Maagig gro
29 3. Creaig a sarig ecoomic alue
33 4. Our people
40 5. Eiromeal proecio
44 APPeNdICeS
45 Fiacial saemes
49 GRI G3 Applicaio Leel Requireme: A
50 Compreesie GRI G3 Coe assessme
61 Ackolegemes
If you want
to overcome
obstacles in
your work, it has
to start within
yourself. Respect
people in the
work place,
and work with
pride.
Employee
10
14
18
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Turnover was 31%up rom 2011. NPBTincreased 132% romR1.6 million in 2011, toR3.7 million in 2012.Ater-tax return oninvestment increased
rom 25% in 2011 to 41%in 2012.
Produced exclusivel orour one customer, PUMA,or the rst ear in ourhistor.
Retained our A-grade
PUMA S.A.F.E. rating,increasing our overallscore rom 96.54% to98.02%.
Purchased productionplanning programmeFast React and workowbarcode tracking sstemStleman Qualitand on-time deliver
increased to 100% sinceNovember 2010.
B controlling our supplychain we can providebetter service goingorward.
Increased productionoor space b 20%300 m2 and spentR4.7 million onnew machiner andequipment.
Carbon ootprint: CO2e
intensit improved52% rom 0.79 kg CO
2e
per garment to 0.52kg CO
2e per garment
manuactured.
Installed an IDC-unded30 kWp solarphotovoltaic PV plant,
suppling approximatel25% o our electricitrequirement.
Saet: TRIFR maintainedat 115, but not as goodas our best ear in 2009TRIFR: 100
Water ecienc wasworse at 3.81 litreso water per garmentproduced 2011: 3.51litres, 15% higherthan the 3.31 litres pergarment produced in our
benchmark ear o 2008.
Strengthened themanagement teamb hiring our andpromoting one to takeresponsibilit or keunctions, and promotedsix machinists tosupervisor level. Zeroturnover o managementstaf.
Local procurement oabrics ell to 9% rom36% in 2011.
Emploees increased rom192 to 234. Non-directoremploee salar andwages increased 12%
rom R8.54 million in 2011to R9.57 million in 2012.
Absenteeism improvedrom 2.67% last ear to1.4% in the ear underreview, with averageabsenteeism bonusesnow at R774 peremployee comparedwith R442 per emploee
earned in 2011.
IMPAHLA AT A GLANCe
INTEGRATED ANNUAL REPORT 2012 5
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I love working here. We get enough time
for a real lunch and we work as a team.
We have enough space in our lines and
were safe. Theres no choking or messing
in the line.
Employee
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Rsponsil usinss pays
Spring Romance Properties 34 Pt Limited, trading
as Impahla Clothing Impahla, is a compan based inMaitland, Cape Town, South Arica and manuactures
clothing under a sole source agreement or PUMA,
a world-class sport and liestle compan. We are a
privatel owned business that has grown organicall
over the last eight ears rom 60 emploees in 2004 to
234 in Februar 2012. In 2012, we supplied in the order o
445 00014 garments or a total turnover o R38 million, 31%
up rom 2011. NPBT increased 132% rom R1.6 million in
2011, to R3.7 million in 2012. Adding this prot to the total
accumulated in the business brings the accumulated prot
as at 29 Februar 2012, to R6.2 million. Our ater-tax return
on investment has increased rom 25% in 2011 to 41% in
2012. For urther detail on our nancial perormance, seeour nancial statements beginning on page 45.
The most signicant recent development in our business
has been our decision to manuacture exclusivel or
PUMA. Our relationship with PUMA is crucial and benets
rom complete transparenc with regards to our business
practices and our production programming. Our business
philosoph is aligned with theirs, and underscored b
the length process we went through in ormalising our
understanding o corporate responsibilit as one o PUMAs
World Cat Strategic Suppliers. We believe our alignment to
PUMAs business philosoph is an important actor that
will ensure the sustainabilit o our supplier status with
the compan, even as important decision-makers are
succeeded within either organisation.
Over the same period that we have been in business,
man companies in the industr are either going out o
business, or claiming the cannot aford to compl with
the National Bargaining Council NBC. As this report goes
to press, there is an ongoing conict between the NBC and
clothing manuacturers that are insisting on undercutting
NBC agreed rates. The Cape Clothing Association CCA,
representing emploers in the Cape, is also concerned that
the bargaining orum is being compromised b the non-
compliance o a signicant proportion o the industr.
It is clear that there is an increasing number o non-
compliant manuacturers abusing human rights b
paing less than a living wage, and exploiting their labour
to compete unairl in the marketplace. This practice
is unsustainable and onl serves to widen the alread
dangerous gap between rich and poor in our countr.
Much has been made o the threat rom the Far East, where
materials and labour are cheaper than can be procured in
South Arica. I wholeheartedl support calls or local retail
buers to consider responsible procurement practices
beore sourcing rom the cheapest supplier. On the other
hand, the clothing manuacturing industr needs to look
to itsel too. Seldom do we remind societ that we alread
enjo protection rom the government in the orm o a
45% dut on imported apparel. The stor o the clothing
industrs decline bears man o the hallmarks o the
classic waning empire costl management overheads
and a distrusting relationship between management and
workers.
Wh has Impahla shown such robust growth? How
have we achieved this growth while also showing good
sustainabilit perormance? We have achieved these
results against high standards: PUMAs price structures are
highl competitive and our materials and nished products
By William Hughes, Managing Director
TAkING STOCk, LOOkING AHeAd
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have to conorm to strict qualit requirements. On the cost
side we pa air wages, and with bonuses included, we
remunerate well beond compliance with the NBC wage
structures.
We believe the answer lies in building relationships with
our stakeholders and building our resources to serve the
market and tackle uture growth demands. In particular,
our philosoph at Impahla has been to create a single
team where all members are respectul o the various roles
we pla. The compans three directors are also hands-on
managers working side b side with the manuacturingstaf. It has not been an eas journe, especiall given the
entrenched business culture that has existed or so long
within South Arica. However, I think our sustainabilit
perormance indicators, especiall those or absenteeism
and staf turnover, will show that our compan is growing,
not onl in size, but in the kind o strength and resilience
that comes rom a trusting and respectul relationship.
Our growth this ear has been accompanied b a 20%
increase in production oor space, and a R4.7 million
investment in new machines and production management
sotware. In addition, we invested, with the help o the
Industrial Development Corporation IDC, in a roo-top
photovoltaic sstem that generates 25% o our electricitrequirements rom the sun, bringing the total value o
propert, plant and equipment to R5.4 million, rom R2.0
million in 2011. We have promoted seven staf members as
well as emploing our rom the market to supervisor or
technical positions and managed to maintain eciencies
despite the inevitable disruptions that accompan growth
and change. Our emploee turnover minus the absconds
has increased to 7.6% rom 7.3% in 2011, but we are steadil
growing a loal and skilled core team, as indicated b a
38% increase in average bonuses paid. Most pleasing, we
achieved 100% qualit and deliver o product to PUMA.
Stratgy control our supply chain
Our strateg to secure a sustainable uture or the business
is to become as verticall integrated as possible. We have
ound that our suppliers dont necessaril share the same
business philosoph and this presents Impahla with our
gravest risks, including or example, unreliable suppl,
the inclusion o potentiall hazardous raw materials,
and questionable human rights practices. B controlling
our suppl chain, we can provide a better service going
orward. While we can improve control over our suppl
chain through our inuence, this has a limited efect and
oten alls short o expectation. Our strateg will thereore
be to grow organicall in ke areas o the suppl chain, or
example b buing new machines, or to acquire existing
businesses, in particular in the areas o abric suppl,
sublimation and embroider. In this regard, as at ear end,
we have made an ofer to purchase a signicant supplier o
embroider services, a ast-growing area o the business.
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The aim o this report is to show all our stakeholders how
we do business, what issues we ace and how we intend
to tackle them going orward. Partl, we write this to
share our business model with those in the industr whogenuinel want to make a success o their manuacturing
businesses through responsible business practices. And
partl we write this or ourselves, as a realit check. For the
material issues we describe in the ollowing pages are ke
to the ongoing success o our business, and we need to
ensure that we constantl revisit our strateg and assess
the wisdom o our actions.
In developing this report, we have once again ollowed
the GRIs G3 Guidelines or sustainabilit reporting, and
have taken into consideration comments and advice
rom a variet o stakeholders, notabl rom consultation
with Trialogue, specialists in integrated and sustainabilitreporting.
Manuacturing The complete manuacture ogarments to order b PUMA 100%.
Blanks branded A quick response businesswhere blank garments held speculativel in
stock can be quickl converted to product withscreen-printing, heat transer or embroider tomeet orders with short lead times. Impahla hastaken over PUMAs entire South Arican blankprogramme.
Printing & embroidery services The nishingo a predestined garment line or PUMA throughscreen-printing, heat transer and embroider.
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GOveRNANCe ANd STRUCTURe
Chapter One
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What we stand or
Our commitment to airness, adherence to all laws, as well as our sound business practices and the constant maintenance
sae, hgienic and comortable working environment ensures our compliance to PUMAs code o conduct. We work hard
at redressing the them and us situation that industr has inherited rom the past. We believe strongl that we are a single
unit, a single team, and that we are all in this compan together.
The management team works alongside production staf, especiall when the compan is under pressure to deliver. All
supervisors and managers are approachable and available to resolve queries at an time, usuall without an appointment.
Our polic is to promote rom within and we have b and large achieved this over the ears. As we continue to grow, more
opportunities will become available or oor staf to develop their careers.
Above all, we stand or qualit qualit in relationships and qualit in the work we deliver. These values are embodied in
the ollowing emploment standards:
Employees must ask themselves, Why am
I employed? To do the best of my ability! Why
do I want to make my job easy? To be moreproductive! The right attitude, focus, a positive
mind and perseverance. These are the things
that lead to success.
Employee
Respect all orms o
human rights, includinga commitment to ensurethat all emploees are atleast 16 years o age.
Ensure we hire the rightperson or the right job,irrespective o race orgender.
Ensure that the companadheres to standardworking hours, witha polic o attemptingto avoid/limit voluntarovertime hours. Wherenecessar, we ensurethat proper noticationand pament o overtimeis ofered, in line withCollective Bargaining
rates.
Encourage responsible
people to takeresponsibilit or theirperormance acrossall levels within thecompan.
Respect the right toreedom o association orall emploees, and workwith the relevant unionsto ensure that emploees
have mechanisms orunderstanding andexpressing their rights.
Protect worker health
and saet throughadherence to local lawsand global best practice,as required b PUMA.The provision o rst aidtraining and supplies,the conducting oemergency evacuationre drills, and switlattending to mattersraised b our health andsaet ocers, are allenorced to ensure thatour workers are healthy
and sae.
INTEGRATED ANNUAL REPORT 2012 11
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Ownership structure and directorprofles
Impahla means clothing in Xhosa and our logo is the ame lil, a ower that is
most prominent in Zimbabwe, and which represents the spirit and intentions
o our compan. Having grown up in Zimbabwe, William Hughes Managing
Director remembers the ame lil as a beautiul Arican ower that embodies
the essence o the compan.
The compan is owned b our partners, o which one Paul Visser, 10% is a
non-executive, non-operational, silent investor living in the United States. The
other three partners William Hughes 50%, Carl Visser 30% and Lena Jansen
10% are the hands-on management team that activel ensures that Impahlas
production team is happ, health and ull deploed.
William HughsManaging Director
William Hughes was born in Nakuru, Kena in 1962. Having worked or our ears
or Nampak in Johannesburg in the 1980s, William returned to the amil arm
in Zimbabwe. Following land invasions in 2003, William and his amil moved
to South Arica, and in 2004 bought an ailing clothing manuacturer, The Cape
Town T-Shirt Compan, which had 60 staf. This operation became Impahla
Clothing. As Managing Director, William is responsible or the compans vision
and strateg or sustainable growth, its relationship with its sole customer
PUMA, or the sourcing o inputs and technologies, as well as health, saet and
environmental issues.
Carl vissr
Director o branding
Carl Visser BSc, Universit o Natal was born in Kadoma, Zimbabwe in 1955,
and qualied as a land surve proessional through the Harare Local Authorit in
Zimbabwe, beore operating his own surve practice in Harare until Jul 1984.
Following immigration to South Arica, Carl joined a surve practice, beore
joining Rand Water in 1995 and rising to chie surveor in 1997. Carl bought
shares in the compan in March 2005 and moved to Cape Town with his amil.
Carl set up Impahlas branding department to handle the compans screen-
printing, heat transer and embroider operations. Carl also developed the
processes that have allowed Impahla to become the rst Arican compan to
use water-based CHT inks or heat transers, thereb eradicating the compans
reliance on PVC-based inks.
Lna Jansn
Production Director
Lena Lnnece Jansen was born in 1960 in Southeville, Transkei, nishing her
ormal schooling at Elsies River High School in Cape Town. In 1979, Lena started
as a cleaner in the nishing department at Elite Clothing in Maitland, and moved
through the ranks at Qualit Workwear cutter/marker, then production planning
and analsis and the Cape Town T-Shirt Compan production manager. When
Impahla bought out the assets o the Cape Town T-Shirt Compan in 2004, Lena
was ofered a 10% share in the ownership o the compan in exchange or her
commitment to becoming Impahlas Production Director. Lena is uent in our
languages English, Arikaans, Xhosa and Zulu an immense asset in a multi-
cultural work environment. Lenas primar responsibilit is the management othe shop-oor team, including all aspects o production, such as scheduling,
workplace ecienc and qualit control.
wILLIAM hUGhES
CARL vISSER
LEnA jAnSEn
12 IMPAHLA CLOTHING
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team on a dail basis, while ormal production and
planning meetings are scheduled weekl an increase
over previousl held monthl meetings, and ownership
meetings are conducted quarterl, with input rom Paul
being considered as and when necessar.
Ultimate responsibilit or stakeholder engagement,
contractor compliance-related issues, legal and regulatorcompliance and compliance with union South Arican
Clothing and Textile Workers Union SACTWU and NBC
requirements rests with the directorship team, with William
spearheading all aspects o control and assurance.
Single supplier risk vsreward
Impahla is a privatel owned and operated clothing
manuacturing compan based in Maitland, Cape Town,
South Arica. The compan has developed rom an ailing
business with 60 staf producing standard qualit T-shirtsor a variet o customers to a steadast operation o 234
emploees ocusing exclusivel on the needs o PUMA, a
specialised sportswear compan.
Impahla has geared its operations to the highest
international standards and is PUMAs rst locall engaged
World Cat Strategic Supplier. This arrangement has seen
the compan benet rom a stead stream o orders rom
PUMA, efectivel providing sustainabilit or the compan
and its stakeholders.
Should our relationship with PUMA change signicantl,
or PUMAs abilit to maintain orders at current levels be
impaired, we are condent that our ocus on sustainablebusiness practices will put us in good standing with
companies seeking suppliers that meet standards o
international best practice in our industr.
Governance and decision-making
All decisions are made b the directorship including Paul
Visser, Impahlas non-operational silent partner, where
capital expenditures are required, with the delegation
o decision-making tasks ltering down through each
directors specic roles and responsibilities.
Given the nature and size o the business, inormal
meetings are conducted amongst the management
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OveRvIeW Of MATeRIAL ISSUeS
Chapter Two
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Material issue categories
On the ollowing pages the table sets out in summar orm, the most important
issues acing Impahla as it seeks a sustainable uture or all its stakeholders.
Considering this is an integrated report, the list o issues has developed to now
include issues o both a nancial and non-nancial nature. While there isnt
necessaril a rating o relative importance, the issues have been categorised in
two levels, and the order in which the appear gives an indication o relative
importance.
Servicing ourexclusive customer
PUMApage 20
1
Managinggrowth
page 25
2
Creating,sharing economic
valuepage 29
3
Ourpeople
page 33
4
Environmentalprotection
page 40
5
INTEGRATED ANNUAL REPORT 2012 15
I am a fast learner and would like to
become a good quality controller. My
dream is to go to school and learn moreabout how I can do more to help our
company survive.
Employee
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ISSUe PeRORMANCe TARGeT
1. Servcg our excusve cusomer PUMA
Meeting, goingbeyond standards
page 20
100% deliver perormance since November 2010 100% qualit record or orders delivered since November 2010 Internal repairs not measured
Our new Stleman sotware will track internalrepairs per line, allowing us to measure ourperormance and set targets or improvement
Strengthening thesupply chain
page 20
Embroider Own 20%
Bond/rebate store Paing dut on abrics not available Sublimation Not owned, at risk Cotton abric manuacturing Not owned, cost concern Screen-printing & heat transers 100% owned Technical abric importation 100% in control since 2008
Negotiating to take over production assets tomeet 100% capacit requirement
Constructing a rebate store Looking at purchasing equipment to bringsublimation unction in-house
Looking at amalgamation to bring cotton abricmanuacturing in-house
Staying withtechnology
page 21
Technolog investments o R4.7 million, increasing value o propert,plant and equipment on the balance sheet to R5.4 million, romR2 million in 2011.
New purchases:
Gerber Accumark sstem New branding equipment 2011 Automatic cutting machine Second pocket welt machine Three new embroider machines
Stleman and Fast React sotware 1.5 tonne diesel LDV Heat transer machine Fabric inspection machine
Reer to above
Responsibility andPUMAs Code oConduct
page 22
Improved PUMA S.A.F.E. score rom 96.54% to 98.02% Maintained A level PUMA S.A.F.E. classication since 2007 Do Restricted Substances testing
See below
Extending ourresponsibilitythrough the supplychain
page 22
All suppliers have cop o PUMA S.A.F.E. Pocket Guide We occasionall request reports rom suppliers on PUMA S.A.F.E. Proportion o abrics procured locall ell rom 36% to 9%
Will conduct email surves o all suppliersagainst PUMA S.A.F.E. and report in 2012/13
Encourage government to remove dut onabrics
2. Maagg gro
Measuring grossmargin, managingeciency
page 25
Gross margin up rom 28% to 34% Production ecienc at 66%, comparable with 65% budget, but
well below 80% target Production ecienc bonuses per emploee down 13% since
2009 due to new staf and more intricate designs
Acquired production tracking module oStleman post ear-end
Aim to improve supervision Will revise production bonus scheme to rewardentire manuacturing line and thus encourageteamwork
Minimising costs,maximisingworking capital
page 26
Reduced operating cost margin rom 27% to 24% Cash and equivalents reduced to our times monthl expenditure,
rom 4.7 months in 2011 reecting increased capex
Monitoring expansion to ensure that wegenerate cash aster than the increase inworking capital requirements
Developingmanagementcapacity
page 26
Emploed our personnel to take responsibilit or ke unctions Promoted one emploee to qualit manager Promoted six machinists to supervisor level Turnover o management staf remains at zero
Continue to promote rom within and groompotential leaders or the uture
Developing HRcapacity and otherresources
page 27
As measured against a 28% increase in garments manuactured permonth:
Net increase in emploees o 22% Resignations at 7.6%, slightl up rom 7.3% in 2011 and 4% in 2011 Increased workspace b 20% 300m2
Working on reducing resignations althoughmost o the resignations were due to personalreasons and amil commitments
Financing growth
page 27
O R4.74 million assets purchased: R1.76 million nanced romexisting cash ow and R2.98 million nanced through IDC loans.
Cash reduced rom R3.08 million to R2.68 million R2 million overdrat acilit with Absa Bank, collateral through
unlimited suret b William Hughes.
Reduced directors loans b two-thirds
Need to deal with stress o reling on collateralrom a single director o the business
Will look at sourcing additional loan inance Continue acting on polic o paing directorsloans beore dividends
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ISSUe PeRORMANCe TARGeT
3. Creag, sarg ecoomc vaue
Return onshareholderinvestment
page 29
NPBT increased 132% rom R1.6 million in 2011, to R3.7 million in2012
Ater-tax return on investment has increased rom 25% in 2011 to41% in 2012
Recentl taken out insurance in the event odeath to recompense shareholders estates tothe value o the late owners portion
Clothing industryand the NBC
page 29
Impahla stas committed to paing NBC rates Continue to run emploee incentive schemes
Encourage buers to consider human rightsissues as well as price
Urge industr to treat and pa emploees airl Uphold PUMA S.A.F.E. Code o Conduct
Remuneration andemployment equity
page 30
See above Prole: 92.7% emale, up rom 90.6% Prole: 97.4% previousl disadvantaged No disabled emploees
Continue to meet or exceed NBC rates Improve perormance bonus scheme Continue to engage both emploees and PUMA
Equity in ownershipand control oImpahla
page 31
Impahla 10% black owned and controlled Will investigate emploee share ownershipscheme or possible implementation in 2013/14
Externalstakeholder equity
page 31
Not measured Will measure B-BBEE status to report in 2012/13
4. Our peope
Employeeengagement
page 33
Non-management emploees are members o SACTWU No industrial action, no CCMA cases Emploee satisaction not measured, but as prox measure,
emploee turnover minus absconds has increased to 7.6% rom7.3% in 2011
Will consider measuring emploee satisaction
Skills and careerdevelopment
page 34
More than doubled total training spend to R56 00014
Training spend per emploee increased to R205, rom R115 in 2011. One-on-one coaching or supervisors Ran a drug awareness workshop
Will run a mone matters programme or allemploees
Absenteeism andlate arrivals
page 35
Total absenteeism improved to 1.4 %. rom 2.67% in 2011 Late arrivals at 0.7% rom 0.6% in 2011 Absenteeism bonus: average pa-out improved to R774 per
emploee rom R442 in 2011 Total lost time TLT ell to 2.1% rom 2.4% in 2011
Attempt to decrease TLT ratio to less than 2% in2012/13
Workplace saetyand well-being
page 39
It is made known that we keep no cash on the premises All wages paid into emploee accounts Two lost time injuries over the last our ears, none this ear TRIFR maintained at 115, but not as good as in 2009 TRIFR: 100
Aim to improve TRIFR to below 100
5. Evromea proeco
Carbon ootprint
page 40
0.52 kg CO2e per garment produced, down 34% rom 2011
One tonne CO2e per emploee, down 20% rom 2011
Funded the planting o 651 trees b Food and Trees or Arica
2010: 663
Will continue to oset our carbon ootprint aswe expand our business
Electricity and solarpower
page 40
Installed 30 kWp solar photovoltaic PV plant in Februar 2012,replacing estimated 25% o electricit requirement
Carbon emissions rom electricit consumption reduced to 0.49 kgCO
2e per garment rom 0.74 kg CO
2e per garment in 2011
Expect urther savings rom solar PV plant
Fuel
page 41
Changed rom petrol to diesel in buing new LDV in Jul 2011 Achieved 42% saving in CO
2e per garment delivered
Expect urther savings rom improved capacitutilisation
Travel
page 41
Total CO2e increased to 5.26 rom 3.89 tonnes, equivalent to a 9%
increase in CO2e per garment manuactured
Will begin benchmarking against peers whensuch industr data becomes available
Water
page 41
Water usage rose to 3.81 litres per garment produced rom 3.51 in2011, and 15% worse than the 3.31 o our benchmark ear in 2008
Research industr benchmark Seek was to improve eicienc
Waste
page 41
Reccle paper and plastics with Oasis No partners ound or scrap material Hazardous materials minimal and not measured
Intend inding a partner organisation to handleour scrap material
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MATeRIAL ISSUeS dISCUSSed
Chapter Three
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Summarising our strategy
Over the ollowing pages we discuss each o the sub-issues that contribute to
our ve main issue categories. For each we review the context o the issue and
what it means to our uture sustainabilit, our perormance and our response in
dealing with the issue. On this page we have summarised what we intend to do
to deal with each issue going orward.
Before I started working here, I didnt
understand a lot of what William described.
The more involved you get, the harder it isto leave.
Employee
INTEGRATED ANNUAL REPORT 2012 19
We will manage growththrough improvedsupervision andincentives, while ndingadditional unds tonance expansion.
2
Our people: We willassist emploees developtheir careers and improveeedbackthroughindependent means.
4
We will urther improvehow we measureour impact on theenvironment, and ensure
our waste is gainullprocessed.
5
To serve our customer,PUMA, we aim to controlour suppl chain, throughgrowth, acquisition and
inuence.
1
We will investigate how toimprove black ownershipboth within Impahla aswell as in our suppl chainand report our plans nextyear.
3
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Over the past eight ears, PUMAs share o the total number
o garments shipped to customers has grown steadil rom
62% in 2006 to efectivel 100% in the current nancial
ear. Part o this growth has resulted rom our improved
sustainabilit perormance, justiing PUMAs decisions
to channel orders to Impahla instead o the Far East. For
PUMA, we have become both more competitive and more
sustainable.
Clearl we are a tier-one manuacturer or PUMA, ull
committed to servicing our sole source agreement. The
sustainabilit o our relationship is underlined b both
parties commitment to PUMAs World Cat Strategic
Supplier agreement.
As a small manuacturing compan, we do not have a
marketing department, but rel completel on PUMA our
sole client as o 2012 and its highl sophisticated market
research and analsis team to meet new consumer trends.
We are condent in PUMAs marketing expertise. That is
what it does best. Our expertise lies in taking their designs
and converting these to excellent qualit garments. For
this reason we have acquired the latest design and pre-
production sotware to ensure seamless transer o a
design to our cutting tables.
Mting, going yon stanars
Our goal is alwas to produce top-qualit products on time
and on budget. From cutting, printing and embroider,
through to assembl and nishing, Impahla strives to
achieve the highest standards as a supplier o qualit
garment manuacturing and branding services.
As a condition o our ongoing relationship with PUMA, we
must consistentl adhere to its strict controls over qualit,
timeliness o deliveries, as well as environmental, health
and saet concerns. In enorcing these standards, PUMA
undertakes requent contractor compliance audits at our
operations, and ofers comprehensive eedback on how
well we meet the compans expectations.
In previous ears we reported ongoing issues with late
deliver. In response, we purchased a production planning
programme called Fast React and a programme called
Stleman which tracks production through barcode
tracking technolog. Using this technolog, and with
extensive collaboration with PUMA to ensure realistic
achievement o the order pipeline, we have so dramaticall
improved the scheduling o manuacture and deliver
that we have achieved a 100% deliver perormance since
November 2010. Likewise, we continue to maintain a 100%
record or the qualit o orders leaving the actor. For
internal rework, see Managing ecienc on page 25.
We will continue to proactivel engage with PUMA to
ensure that production expectations do not exceed
Impahlas abilit to deliver, or impede on our commitment
to worker health and saet, including work-lie balance.
Strngthning th supply chain
The qualit, reliabilit and responsibilit o our suppl chain
is so important or our business that we have taken the
decision to verticall integrate, i.e. control the suppl chain
through vertical, organic growth and/or buing businesses
in our suppl chain. This has become our ke strateg to
secure the uture sustainabilit o Impahla.
Specic aspects o this issue are discussed in the Managing
Directors overview on page 7, as well as in the two sections
that ollow: Staing with technolog and Extending our
responsibilit in the suppl chain.
In the accompaning table, we describe the core unctions
in our suppl chain and endeavour to rate the extent to
which we are in control o this unction and/or the steps
we are taking to improve control.
Fullling customer demand or the highest qualitproduct requires that both sides work hard at therelationship. In plaing our part, we have identied veimportant issues:
Meeting, going beyond standards
Strengthening the supply chain
Staying with technology
Responsibility and PUMAs Code o Conduct
Extending our responsibility through the supply
chain
1. Servicing our exclusive customer PUMA
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21/64 INTEGRATED ANNUAL REPORT 2012 21
Staying with tchnology
New technologies are constantl being developed to addvalue to products and processes in the clothing industr, as
well as to improve eciencies. We recognise that pursuing
ecienc can come at a cost to job creation and seek
an appropriate balance that both empowers emploees
to work at a higher level o skill, as well as produce more
valuable product within the ever-tightening cost budgets
dictated b the marketplace.
Our polic has been to acquire a range o operator-
managed machines or all o our core assembl activities,
and we have ensured that our cutters, machine operators
and nishers are supplied with reliable, sae and appropriate
machines that allow them to deliver against increasinglchallenging targets. Equall important, we have alwas
sought to retain in-house competence in ke unctions.
See Developing HR capacit and other resources on page
27 or urther detail.
Signifcant technology developments to 2012
In 2012 we purchased and deploed a Gerber Accumark
sstem or pattern making, grading, ratings and marker
making this is sotware that wirelessl transers the pattern
in virtual orm rom the designers screen to the cutting
machine. This equipment aligns our order-taking and
planning procedures with PUMAs design specications,
and has improved the accurac o costing and sourcing o
abric, ultimatel improving our abric usage ecienc and
reducing solid waste.
In 2012, additional branding equipment i.e. a second
multi-place screen-printing machine was purchased toexpand our printing capacit, and this also more than
doubled emploment opportunities within the branding
department.
Gaining control of our supply chain
UNCTION STATUS STePS We ARe TAkING
Embroidery Embellishment o logoson garments
Own 20% o unction.Balance rom approved subcontractor, butpriorit o scheduling is not under our control.
Negotiating with an embroider businesswithin the oice park to take over theirassets.
Bond/rebate store a regulated andcontrolled store or imported and dutree abric that is not available in SouthArica
Foreiting competitiveness b having to padut on abrics not available in South Arica.
Constructing a rebate store along withapplication to SARS or permission tooperate and claim rebate on importedabrics.
Sublimation the all-over printing ogarments o ranchise sport teams a ast-growing market
100% outsourced rom one approvedsubcontractor.
Priorit o scheduling is not under our control,leading to concern around capacit, reliabilitand single-supplier risk.
Looking at easibilit o purchasingequipment to bring the unction in-house.
Cotton abric manuacturing knitting o cotton abrics preerabl rom
the Cotton Made in Arica programme, aair trade initiative in order to control thesuppl o this crucial raw material
100% outsourced rom one approvedsubcontractor. Concern is that the cost o theproduct is not competitive.
Looking at easibilit o amalgamatingwith an existing abric supplier to bringthe unction in-house.
Screen-printing & heat transers addition o branding aspects ongarments
Own 100% o unction.
Technical abric importation theimportation o high-spec abrics notavailable in South Arica
100% control o this unction since 2008 i norder to ensure compliance with PUMAs abricqualit requirements.
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Capital expenditure or 2012
This ear we increased production oor space b 20%
about 300m
2
, b renting a unit within the same complex,and equipped the acilit with the latest machiner
specialised sewing machines, industrial irons, stand-b
cutting machines and tables, etc. in order to meet growing
demand or woven products sportswear rom PUMA. Apart
rom the increase in oor space, we have also made a
number o signicant investments, totalling R4.7 million*
see table below.
Rsponsiility an PUMAs Co oConuct
PUMAs Code o Conduct expresses commitment
to human rights and air labour. The PUMA S.A.F.E.
programme executes training and compliance in line with
the principles o its Code o Conduct within the compans
workplace as well as among its suppliers.
Results rom PUMAs S.A.F.E audits, conducted ever second
ear, have been a helpul benchmark o our perormance
in social, environmental and saet areas. We are proud
o our status as one o PUMAs A-level suppliers, and we
are committed to ensuring that we continue to meet this
grade in the uture. The next audit will take place in the
next reporting period.
extning our rsponsiility throughth supply chain
Encouraging responsibility
We have discussed above our concern with suppliers who
cannot deliver reliabl or responsibl, and our consequent
strateg to control our suppl chain. We recognise that
buing or supplanting our suppliers is not the onl route.
With encouragement, an o our suppliers ought to be ableto improve their business practices and join the suppl
chain in a mutuall benecial relationship.
Expenditure for 2012
Automatic cutting machine Comes with an air-driven laing up table and an automatic spreader las out the laers oabric to be cut, nanced with a loan rom the IDC at prime minus 5%. The automatic cutting machine increases ecienc,
reduces cost wasted abric and increases throughput and accurac o cutting.
R 2 075 000
Three new embroidery machines Financed b the IDC Production Incentive Programme, in line with our strateg tocontrol suppl unctions.
R 450 000
Styleman and Fast React Planning and production tracking sotware. R 280 000
A second pocket welt machine For manuacturing pockets in woven abri cs. This reduces a ke bottle neck inproduction whilst also serving as a back-up acilit.
R 255 000
1.5 tonne diesel LDV To transport all garments to PUMA, replacing a petrol-driven Toota Condor. Increases delivercapacit and improves uel ecienc.
R 175 000
Heat transer machine A specialised printing machine to produce complex heat transers, ensuring viabilit o rst andsecond-part branding services nanced b IDC PI.
R 120 000
Fabric inspection machine To inspect and control qualit o the incoming abric cost. R 58 000
* Excluding our investment in solar-powered electricity generation, see page 40 or details
PUMA S.A.F.E. SCORES (%)
Addiioal
Eiromeal
heal ad Safey
Social
5%
10%
35%
50%
0%
20%
40%
60%
80%
100%
2010200920072004wEIGht
PUMA IMPAhLA SCORE
90.49% 95.31% 96.54% 98.02%100%
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23/64 INTEGRATED ANNUAL REPORT 2012 23
While this is an unortunate trend, it does illustrate the basic
principle o relative economic advantage between trading
nations. Extraction, raw material processing, assembl,
sotware, etc. all require diferent actors o production
to be competitive. It is clear that in South Arica we can
compete in garment assembl/manuacturing, but not in
abric manuacturing. And there is a strong ratchet efect
in this trend: customers, once having experienced better
qualit and value rom an imported abric, or example,
will not easil be persuaded to return to a local ofering.
Given this realit, we would encourage the government
to remove the dut on abrics that are not available in
South Arica. No amount o dut will reverse the realit
that imported abrics are better and in higher demand, but
punitive duties will, and do, have a negative impact on the
abilit o garment manuacturers to compete airl in the
marketplace.
Total Materials Purchased in 2012
AbRICS (M) TOTAL
Cotton 709
Polester 302 005
Nlon 254 901
TOTAL 557 615
OTHeR MATeRIALS TOTAL
Draw Cord 212 379
Zippers 316 025
Threadcones 15 597
Elastic m 126 191
Cord Stoppers 220 000
Shock Cord m 137 297
Eelets 434 800
CHT Inks kg 2 173
Replica Holograms 10 000
Rugb Pol Tape m 59 893
Pol Bags 453 000
Corrugated Cartons 5 390
PUMA expects us to take responsibilit or the qualit
and responsibilit o our suppl chain. One area involves
compling with PUMA standards on Restricted Substance
Testing RSL. Impahla takes on this responsibilit or allnew components that go into the manuacturing process.
For example, we send samples o new materials at our
expense to Nelson Mandela Ba Universit PE, the onl
accredited laborator in South Arica, where the are
screened or restricted substances beore being taken up
in the suppl chain.
Recognising our responsibilit, we have brieed all our
suppliers on PUMA S.A.F.E. Code o Conduct and each
supplier has a cop o the PUMA S.A.F.E. Pocket Guide. We
ollow up with sporadic requests to our suppliers to report
on their perormance against the PUMA S.A.F.E. Code
o Conduct. It should be noted that while PUMA exertspressure on Impahla to take on this responsibilit, we dont
have the clout that PUMA has, which can impact on our
eforts to persuade our suppliers to improve their business
practices.
The next step in gaining control, or at least gaining
assurance over the sustainabilit practices in the suppl
chain, will be to send out an email-based sel-assessment
questionnaire to ever supplier requesting them to assess
their operations against PUMA S.A.F.E. standards. Although
this would not have the rigour o an independent audit, it
would serve as an indicator o our suppliers commitment
to sustainabilit. Over time, and as we grow, we can rene
this tool to be more accurate and inuential.
Local vs. oreign
While we are committed to purchasing raw materials as
well as outsourced services rom local suppliers, there has
been a signicant shit in our reliance on oreign versus
local abric see graph below. In some cases, PUMA
might require a specic trim item e.g. specialised zippers
that cannot be sourced in South Arica according to
their standards. For example, PUMA strictl adheres to its
restrictive substances polic, which efectivel eliminates
the possibilit o procuring locall due to inadequate
materials management at local manuacturers.
PROPORTION OF FABRICS PROCURED LOCALLy
0%
10%
20%
30%
40%
50%
201220112010
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As a consequence o our status as a World Cat Strategic
Supplier to PUMA now manuacturing exclusivel or
PUMA we have continued to show strong growth. This
ear, an average months production was up 28% on last
ear and 82% up on 2010, reecting a doubling in turnover
ever 18 months. The ollowing graph illustrates the rapid
growth in Impahlas business.
Masuring th gross margin, managingfcincy
Starting at the top o the income statement, the rst
measure o the protabilit o our business is the gross
margin the main contributors being abrics, trims,
embellishments and emploee costs. This ear, our gross
margin improved rom 28% in 2011 to 34% in 2012. This
reects better abric utilisation as a result o the Gerber
sotware and ongoing cost control.
As discussed earlier, we are producing 100% qualit, 100%
on time. However, making a trading prot on each garment
order requires that we achieve maximum production
ecienc. Production ecienc is dependent on the skill
o the machinist, how industriousl she utilises her time
and how man repairs need to be made to the nished
garments.
Each garment has a time-based costing against which ever
operator is measured: 65% is the standard to make budget,
but we aim to improve ecienc towards an 80% target,
and pa bonuses or production eciencies over 65%.
These are measured and awarded on an individual basis.
Last ear we reported ecienc at 70%, down rom 76% in
2009. This ear, we have calculated our ecienc at 66%,
but suspect that the basis o calculation ma be slightl
diferent rom the previous ear. Production ecienc
bonuses, calculated per emploee, have declined b 84%
since 2009, reecting two issues: supervision has sufered
as we have grown, and garments have become more
complex, making it harder to reach the bonus thresholdsand targets we set. Further, to ull ever order ecientl
depends on the whole team. Slow machinists holding up
the line dampen the efect o the incentive.
We are condent o making strides to improve ecienc
and are taking steps to tackle the challenges noted above.
Post ear-end, we have acquired the production tracking
Major events and sports ranchiseswe supply
Impahla has been able to suppl garments toArican teams representing our region at majorsporting events around the world, including:
Arican Conederations Cup and 2010 FIFAWorld Cup replica kit or Algeria, Angola,Cameroon,Egpt, Ghana, Ivor Coast, Mozambique, Namibia,Senegal and Tunisia
2010 CAF Arican Cup o Nations replica kitor national soccer teams representing Algeria,Angola, Cameroon, Egpt, Ghana, Ivor Coast andMozambique
South Arican National soccer team, Baana
Baana, ull sporting kit or plaers and replicasupporters jerses
PSL team ull sporting plaers kit and replicasupporters kit or Moroka Swallows and JomoCosmos
Super 15 and Currie Cup ull sporting rugb kitor plaers and replica supporters jerses or theVodacom Blue Bulls including the new VerBerr line, the Free State Cheetahs and EasternCape Southern Kings
Full sporting kit or Puma-sponsored schools Paul Roos Gmnasium, Paarl Gmnasium,
Glenwood High School and Monument HighSchool
University o Cape Town rugb kit
GROWTH IN THE BUSINESS FROM FINANCIALyEAR END 2009 TO PRESENT
150
200
250
300
350
400
450
500
no of garmes
201220112010200910
15
20
25
30
35
40
45
value of sales
Thousands
R(Millions)
The most important issues we need to ocus onin order to deal successull with anticipated growth indemand rom PUMA are:
Measuring the gross margin, managing eiciency
Minimising costs, maximising working capital
Developing management capacity
Developing HR capacity and other resources
Financing growth
2. Managing growth
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module o Stleman, and using scanning technolog,
we will begin tracking the workow o ever garment.
The transparenc that this technolog brings will enableus to improve supervision levels and allow the accurate
calculation o ecienc benchmarks and perormance.
We will also take this opportunit to revise the production
bonus scheme such that bonuses accrue to an entire
manuacturing line, rather than to individuals. We hope
that individuals will encourage and help each other to
perorm better, thus benetting the whole team, and
indeed the protabilit o the business.
Minimising costs, maximising woringcapital
Cost management is a philosoph at Impahla Clothing, and
is set b example at leadership level. Each unction in the
business continuousl looks out or small areas o savings,
rom stationer to deliver routes. This builds a habit o
rugalit and eventuall leads to reduced overheads. All
purchases have to be well motivated and signed of b the
Managing Director. This ear, we reduced our operating
cost margin b 9% to 24% o gross revenue 2011: 27%,
reecting improved abric utilisation brought about with
the assistance o our new Gerber marker making sstem,
less waste and on-going cost control.
The management o creditors is vital to cash ow as well
as to smooth operations. We have recentl emploed a
creditors accounts clerk to oversee this unction, ensuringthat the inputs we have ordered have been received in ull
beore pament. We pa our creditors timeousl on agreed
terms.
Our trading debtor is PUMA, with whom we have agreed
pament terms in accordance with our PUMA World Cat
Strategic Supplier agreement. We also have a benecial
relationship with the Industrial Development CorporationIDC, rom whom we were awarded loans to the value o
R4 million during the ear under review. B ear end, we
had drawn down R2.6 million; a urther R400 000 is due
or the solar project and R1 million has been set aside or
working capital. During the course o the 14-month ear,
cash and cash equivalents reduced to our times monthl
expenditure, rom 4.7 months in 2011, reecting, our
growing capital expenditure programme.
dloping managmnt capacity
At the end o 2011 we identied that a growing threat
to the sustainabilit o the business was the increasingworkload on top management. In order to alleviate this
pressure and develop management capacit or taking
the business orward, we hired and promoted people to a
number o ke positions that we identied. These are:
Anton Redelinghuys Emploed to implement Stleman
programme, progressed to operations manager.
Anthea Diamond Emploed as packer, temped as
receptionist, then qualit assurance, now taken on the
added responsibilit or barcoding and labelling o all
nished product to PUMA specications.
Pamela Ngodwane Emploed as creditors accounts
clerk.
Lydia Makalima Promoted to qualit manager. Previousl
emploed rst as a machinist and then as a supervisor.
Judith Heneke Emploed as a garment developer and
to control pattern making and marker transer processes.
The ollowing people were promoted to supervisor rom
the garment manuacturing lines during the course o
the 14-month reporting period: Miriam Mentoor, Anne
Hocker, Hestel Appies, Catherine Williams, Alethea
Barnett, and Zoliswa Dyantji.
These join the existing supervisor/management team, all
o whom were promoted rom within our own emploeeranks over the preceding ears: Patricia Collins, Francis
Enicker, Christine Kalie, Joyce Thebus, Merle Beckles,
Mogamat Jordaan, Enricel van Schalkwyk, Charmaine
Barnett and Sharon Weitz.
As evidenced b the high proportion o internal promotions
listed above, our polic is to develop our management
capacit rom our own staf. We have been delighted
b the rapid development in skills and responsibilit
levels shown b ke individuals, and believe that career
development within Impahla also grows loalt to the
compan. Turnover o management staf supervisor and
above compared with line staf reects this.
We have identied supervisor training as a ke area where
we need outside assistance. With the help o Human
Alliance and the Clothing and Textile Service Centre
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CLOTEX, each o our 12 supervisors received one-on-one
coaching during the ear, learning how to manage their
erstwhile co-workers, man o whom were close riends
or even amil. Issues the have had to deal with include
discipline, qualit, saet and ecienc. A ke actor in
determining the success o a supervisor is their abilit to
be a role model or their teams. Our polic thereore is to
select the ver best operators, those with the best and
broadest range o skills and outstanding sel-discipline.
dloping HR capacity an othrrsourcs
The 48%14 increase in the number o garmentsmanuactured this ear has required that we hire and train
15514 2011:116 new emploees whilst unortunatel
experiencing 11314 2011:100 departures over the same
period or a net increase o 22% in the total number o
emploees working or Impahla Clothing. While emploee
turnover was stil l high at 22%, this gure includes absconds,
i.e. those new recruits who let the business shortl ater
joining. Considering how vital this relationship testing/
building period is or establishing the team that will remain
or the long haul, we will no longer report this turnover
gure, but instead keep a close ee on resignations, i.e.
longer term emploees that leave the compan. Our staf
turnover minus the absconds has increased to 7.6% rom7.3% in 2011, which is disturbingl up rom 4.0% in 2011
and onl 1.1% in 2010.
We realise we need to look into the reasons or this
trend and work at improving our retention o emploees
who have alread passed the initial probationar phase
with the compan. Certainl, the technical abilit o thepeople we emplo is good. We look or multi-disciplined
people, capable o working on diferent lines, as the work
demands. This aspect is a ke strateg that we believe
greatl improves our abilit to deal with peaks and troughs
in demand. I there is excess capacit on one line, operators
can be redeploed. We are ortunate not to have had to
put an emploees on short time since the business turn-
around eight ears ago.
Apart rom the issues dealt with above, we have also had to
increase our workspace, our machiner and management
sstems. These are dealt with on page 21 under Staing
with technolog.
Total employees in 2012
TOTAL 234
White 6 2.6%
Black 73 31.2%
Coloured 155 66.2%
MALe 17 7.3%
White 4 1.7%
Black 0 0%
Coloured 13 5.6%
eMALe 217 92.7%White 2 0.9%
Black 73 31.2%
Coloured 142 60.7%
inancing growth
In the 14 months under review, we purchased assets to
the value o R4.74 million. O this total, R1.76 million was
nanced rom our existing cash ow, and R2.98 million was
nanced through loans rom the IDC. As noted earlier, cash
and cash equivalents has consequentl been reduced rom
R3.08 million to R2.68 million. Impahla Clothing also has
use o a R2-million overdrat acilit at Absa Bank in order tonance normal trading operations.
Our strateg to acquire more control o our suppl chain
will urther test our abilit to nance the ongoing growth
o the business. B the end o the rst quarter o 2012/13
we expect to acquire a urther R1.7 million in machiner,
including nine scanners, seven embroider machines and
a sublimation acilit.
Should urther nancing requirements not be available
rom the IDC, the compan ma raise unds through
directors loans, underwritten b privatel held propert.
We recognise the stress at owner/director level o reling
on collateral rom a single director o the business and willbe looking or other sources o loan nance.
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In a urther development, an agreement was reached in
the Western Cape in 2011 whereb clothing and textile
manuacturers would be permitted to pa below NBC rates
when taking on new and inexperienced staf.
As discussed in the Managing Directors overview on page
7, Impahla Clothing is committed to paing NBC rates. We
urge retail buers to consider human rights issues whenmaking their buing decisions, and we urge the clothing
In this section, we examine the nancial viabilit o
Impahla Clothing as a business. We quanti and analse
the economic value it is adding, rst and oremost or
its shareholders, then or its internal stakeholders i.e. its
emploees, and then or its external stakeholders its
suppliers and the broader economic communit.
Impahla Clothing is an integrated business consisting o
Manuacturing, Blanks branded and Printing & embroider
services see page 9. Measured at the Gross Prot level
i.e. ater cost o sales subtracted rom Gross Revenue, the
compan grew its business b 60% in the ear under review.
Both the manuacturing and the printing & embroider
services showed excellent growth, with the latter
showing spectacular growth, rom a Gross Prot in 2011 o
just R130 000 to R2.6 million in 2012.
The accompaning graph shows the increase in the size
o the business and how this value, received rom our
single customer, PUMA, has been distributed to the most
important stakeholders in the business.
For urther detail on our nancial perormance, see our
nancial statements beginning on page 45.
Rturn on sharholr instmnt
Over this past ear Impahla Clothing more than doubled
the value o its propert, plant and equipment, to R5.4
million. Shareholders investment in Impahla increased
42%, rom R4.6 million in 2011 to R6.5 million in 2012.
The Compan returned a Net Prot ater interest and tax
o R2.68 million, representing an increase in return on
investment rom 25% in 2011 to 41% in 2012.
Clothing inustry an th NbC
Increasingl, oreign-owned actories in the Newcastle area
o KwaZulu-Natal KZN are challenging the wage rates set
b the NBC. Where we are subject to minimum wages that
exceed R782 per week or our machinists, the Newcastle
operators are threatening to relocate jobs out o South
Arica i the cannot be permitted to pa less than R350 per
week. Their argument is that b placing actories in morerural areas, the should be allowed to pa substandard
wages, regardless o whether or not their wage rates can
be viewed as a living wage.
GROWTH IN THE BUSINESS FROM FINANCIALyEAR END 2009 TO PRESENT
We have identied ve key issues to ocus on as weseek to improve the equitable distribution o wealth toImpahlas internal and external stakeholders:
Return on shareholder investment
Clothing industry and the NBC
Remuneration and employment equity
Equity in ownership and control o Impahla
External stakeholder equity
R29.12 million R38.02 million
0
10
20
30
40
20122011
Millions
3. Creating and sharing economic value
Reaied earigs
Goerme (ax)
Execuie direcors
EmployeesLadlord
Exeral suppliers
7.0%
2.7%
0.1%
3.6%
25.2%
4.5%
56.9%
100%
4.0%
1.5%
0.0%
4.4%
29.4%
5.1%
55.6%
100%
2011 2012
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industr to look to their own business practices. Our
experience would indicate that behaving responsibl also
brings eciencies and opportunities to do business with
world-class and international organisations.
We will continue to uphold the PUMA S.A.F.E. Code
o Conduct in respect o human rights as related to
emploment practices, and lobb or industr to become
more responsible, both on the suppl and demand sides.
Rmunration an mploymnt quitySouth Arica has one o the highest Gini coecients in the
world, meaning that there is an unsustainabl wide gap
between the haves and the have nots. The rst arbiter
o economic equit is the marketplace and we have little
room to bargain or the price we receive, considering
heav competition rom low-wage paing manuacturing
regions.
Nonetheless, our remuneration packages, including salar,
bonuses and incentives, are above average or our industr,
and we are registered with industrial councils and all other
statutor bodies. Whilst wages are established b the NBC
or the Clothing Industr, Impahla has activel pursuedbonus sstems and other orms o non-nancial reward.
Non-director emploee salar and wages increased 12%
rom R8.54 million in 2011 to R9.57 million in 2012.
Ever emploee has an opportunit to earn the right
to improve their income potential through personal
development, commitment to the Impahla team, and a
demonstration o leadership potential. Although Impahla
has had to emplo talent rom outside the compan, one o
our cornerstone policies is that o promotion rom within,
as described on page 26 under the section Developing
management capacit.
Our team is made up o 92.7% emales 2011: 90.6% and97.4% PDIs: both ke perormance indicators within the
South Arican context. However, we still have not had an
opportunit to emplo persons with disabilities. Impahla
does not permit an orm o discrimination against
emploees. We do not tolerate racism, sexual harassment
or the discrimination o persons with an orm o disabilit.
The overriding barrier to emploment equit remains
in the area o selection criteria. It is essential that onl
suitabl qualied, skilled candidates are appointed. A
shortage o skills in some population and gender groups
limits the compans opportunities to align with national
demographics. Improvement is being seen in this area
with the downsizing o the industr and thereore theavailabilit o a greater pool o applicants, as well as
through internal eforts to train and develop candidates
with the potential to learn.
While we understand that Impahla alone cannot x South
Aricas income disparit problems, we are nonetheless
committed to setting an example o emploment equit
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and remuneration that will have a positive inuence on the
entire industr. Specicall, we will continue to:
Ensure that wages, as set b the NBC, and benets,as negotiated b the CCA and SACTWU, are met or
exceeded throughout our operations.
Enter into meaningul discussions with our emploees
to ensure that matters afecting their own economic
sustainabilit are considered whenever possible and
necessar.
Ensure that perormance bonuses and opportunities
or additional work i.e. overtime are ofered in a
manner that ensures that the entire Impahla team has
a reasonable opportunit to share in the compans
economic success.
Engage with PUMA to ensure that the true cost oproduction is actored into our pricing negotiations,
regardless o whether other manuacturers are less
committed to paing air wages or similar work.
equity in ownrship an control oImpahla
Impahla has 10% black ownership and control through
Lena Jansen, our Production Director. We recognise the
need to consider urther empowerment o the historicall
disadvantaged, but our polic will alwas be to ofer such
opportunities to individuals who have a deep involvement
and interest in the compan.
We are thereore considering the introduction o anemploee shareholding scheme or our staf, especiall or
those who are prepared to live the values and take on the
responsibilities o compan ownership.
There are a wide variet o such schemes in the industr,
man o which have not worked or all the parties
concerned. Beore entering into engagement with
emploees we need to undertake a thorough stud o
these schemes and ull understand the pros and cons
o each. While it is unlikel that we will introduce such
a scheme in the 2013 nancial ear, we will report our
progress on this matter in our next integrated report.
extrnal staholr quity
According to the dtis ramework or the Broad-based Black
Economic Empowerment o the South Arican econom,
companies are expected to assist in the empowerment
o their business partners and the local communit in
which the have inuence. This is dened b the dti as
preerential procurement, enterprise development and
socio-economic development.
Until the ear under review, we have not attempted to
measure our perormance in these areas. We recognise that
as we progress rom a struggling start-up business to a more
established position in the marketplace, we need to plaour part in promoting the development o entrepreneurs
amongst the previousl disadvantaged, and that the rst
place to begin would be in our own suppl chain.
In the normal course o business, we do support non-prot
organisations NPO and black-owned businesses. For
example, a BEE supplier handles our transer overow work
to an approximate value o R150k to R200k per annum. We
also deliver about a tonne o plastics and paper waste to
Oasis once a week, at our expense, or them to process
and on-sell to reccling companies. As part o our support
or communit development, we ensure that the trees we
nance or our carbon of-set programme are planted at
schools and centres within the communities rom which
we draw labour.
Our rst proactive step towards external transormation
will be to measure our current status with regard to the
three pillars o the dtis Codes o Good Practice mentioned
above. In our 2013 integrated annual report, we will
report on our perormance as well as set targets or uture
progress.
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It is hard to emphasise how important we regard our
entire emploee team. Our success is entirel dependent
on the eforts o each unction perorming in a tightl
choreographed set o processes as we move rom the
receipt o an order, through cutting, making up and
appling trim, to the nal packaging and deliver o
perectl nished garments. Small errors, delas rom
disafection in the team, or plain mismanagement, are
oten the cause o steadil declining businesses.
employ ngagmnt
Union representation
Non-management emploees are members o
the dominant relevant trade union in the garment
manuacturing industr, the South Arican Clothing and
Textile Workers Union SACTWU. Over the ear, no strikes
or industrial actions occurred, and no das were lost due
to union action. SACTWU has been a useul partner in our
campaigns against HIV and Aids, TB and substance abuse.
It does ongoing HIV and Aids testing and conducts poster
campaigns and inormation sessions at our operations.
Direct employee engagement
Our emploees know that the three executive directors o
the business are available or discussion on an subject atan time. All three are highl visible on the oor and oce
doors are kept open to encourage eas communication.
Impahla has a suggestion box and this does attract
suggestions and issues rom time to time. Management
responds through consultation and discussion, ollowed
b a written note on the notice board recording the
compans decision. A number o issues were raised b
emploees this ear:
Delays in clocking out Emploees raised a concern that
delas in the clocking out process could result in some not
catching their transport home in the evenings.
Response: Scrutiny o the clocking out process showedthat the total delay o ve minutes could be reduced through
introducing an orderly clocking out procedure. Employees now
take turns to clock out rst, by rotation o production lines.
Selling ood on the premises Emploees could not
understand wh people cant sell eatables at tea time and
lunch time.
Response: Thet is a threat to the company. Considering
losses rom thet this year, Impahla has controlled access to
its production areas. Unauthorised employees cannot be
allowed to enter production acilities where they do not work.
Employees can sell products to ellow employees, but must do
so only outside the premises.
Operators doing their own repairs Emploees
pointed out that i repairs are corrected b another person,
then the operator will not learn rom her mistakes.
Response: I a repair is picked up while the garment is still on
the line, then the person concerned must x it. I the garments
are already o the line, the supervisor arranges or one or two
people to make the repairs without penalty.
Giving a post to a newcomer Some emploees were
concerned that a post was given to a newcomer, instead o
appointing someone who has come a long wa with the
compan.
Response: Impahla has always invited employees to apply
or new posts. Unortunately, the new post required specic
skills and education not available in the company at the time.
We have alread dealt with a number o ke issuesrelating to how we treat our emploees and how wecreate the best environment or the most ecientproduction. Apart rom the aorementioned, this sectionwill report on our key issues:
Employee engagement
Skills and career development
Absenteeism and late arrivals
Workplace saety and well-being
wILLIAM hUGhES, LEnA jAnSEn And CARL vISSER ExECUtIvE dIRECtORS
4. Our people
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Sills an carr lopmnt
Investment in training and skills development is a priorit
or Impahla Clothing and we more than doubled our
spend or emploed learners in the period under review
to R56 00014
, or R205 per emploee on an annualisedbasis. Apart rom improved skills, emploee retention and
job satisaction, this investment is developing a pipeline
o successul candidates or internal promotion within
Impahla.
Technical skills covered this ear include Machine
Mechanics various levels, Supervisor Training, Pattern
Development, Cutting Room Management, First Aid
Training and Computer Aided Design. Our association
with the Clothing and Textile Service Centre CLOTEX is
now well underwa and has provided various training
opportunities or us, with urther training planned or
the uture.
We have also ocused on sot skills, developing supervisors
through one-on-one coaching.
We are aware that emploees ace signicant challenges
outside the workplace, which in turn can impact negativel
on attendance and productivit. In an efort to assist and
support emploees in dealing with these diculties, we
started an Emploee Wellbeing Awareness Programme
or educating emploees, as well as providing them
with channels through which the and their amilies can
access assistance and counselling. As part o this initiative,
the Cape Town Drug Counselling Centre recentl ran a
successul Drug Awareness Workshop with all emploees.
The next phase will ocus on mone matters with a view
to increasing their abilit to manage their nances in a
responsible manner. Topics will include budgeting, the use
PAtRICIA COLLInS And hER tEAM CUttInG
AdMInIStR AtIvE And MAnAGEMEnt StAFF
RECEPtIOnISt
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MOGAMAt jORdAAn And hIS tEAM bRAndInG
EMbROIdERy tEAM
ShAROn wEItz And hER tEAM SEwInG ShORtS
o credit acilities, understanding interest rates and debt
consolidation.
Asntism an lat arrials
Last ear we reported how closer monitoring o our
emploees attendance as ar back as 2007 had revealed
the damaging impact on the business o absenteeism and
late arrivals. Emploees need, and have the right, to take
das of when illness or injur occurs. This is recorded as
sick leave, or which the law allows 10 das per annum.
However, we also understand that man workers take
excessive leave reerred to as absenteeism or reasons
other than illness, including such things as taking das of
to do personal banking and shopping.
Time lost due to late arrivals is another indicator we
identied. Back in 2007, more than 1.5% o our totalproduction potential was lost due to late arrivals, but this
has been reduced to 0.7% in the ear under review.
In order to reduce absenteeism and late arrivals, we
developed an incentive scheme to encourage emploees
to reduce unnecessar sick leave and to work ull shits. As
o earl 2008, each emploee is ofered an opportunit to
receive a maximum o a R500 bonus ever six months i
the do not take an sick leave. For ever da the take of,
the lose R100 o the bonus, resulting in a R0 bonus or
more than ve das o sick leave taken. A similar incentive
has been worked out or punctual arrival.
The table below illustrates the bonuses we haveawarded over the last three ears, shows, that, or both
these indicators, the Impahla team has shown excellent
improvement. Total absenteeism improved rom 2.67%
last ear to 1.4% in the ear under review, and the average
pa-out o R774 per emploee in 2012, is proportionall up
rom the average o R442 per emploee earned in 2011.
While the awards appear well below the maximum R1 000
or a perect attendance record, we have not rened our
measurement to exclude emploees who worked or onl
part o a six-month period, and would thereore not be
eligible or the incentive scheme.
Improvement in average bonuses
2012 2011 2010
Absenteeism* R774 R442 R356
Arrive on time bonus* R114 R138 R84
* These gures under-report actual averages as some o the employeeswould not have qualied, having only worked or a portion o the period.
Considerable engagement has taken place with emploees
to reduce late arrivals and in 2008 we instituted a bonus
scheme to encourage emploees to arrive on time and
during the past ear have also made improvements to the
clocking sstem. Despite these eforts the average time
lost due to late arrivals worsened slightl rom 0.6% in 2011to 0.7% in 2012. We attribute this mostl to the unreliable
public transport sstem.
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hEStEL APPIES And hER tEAM SEwInG wOvEnS
ChRIStInA KALIE And hER tEAM SEwInG RUGby
FRAnCIS EnICKER And hER tEAM SEwInG wOvEnS
36 IMPAHLA CLOTHING
ChARMAInE bARnEtt And CAthERInE wILLIAMS And thEIR tEAMS FInIShInG
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MIRIAM MIntOOR And hER tEAM SEwInG wOvEnS
zOLISwA dyAntyI And hER tEAM SEwInG FOOtbALL
AnnE hOCKER And hER tEAM SEwInG wOvEnS
INTEGRATED ANNUAL REPORT 2012 37
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Our absenteeism and late arrivals sum to a total lost time
TLT o 2.1% 2011: 2.4%, which remains well below
the industr average o 6%. We continue to enter into
discussions with our emploees, and through their unionrepresentatives, we are attempting to decrease our TLT
Ratio to less than 2.00% in 2012/13.
Worplac saty an wll-ing
We have made it clear that we dont keep an cash on the
premises, nor do we conduct an transactions in cash. All
emploees must open bank accounts on emploment,
and all wages are paid into their accounts. This polic is
designed to reduce the risk o potentiall harmul robber
and we can ortunatel report no serious incidents
involving assault in the ear under review.
While the management and staf at Impahla considerthe compan to be a sae place in which to work, we are
nevertheless mindul o health and saet risks and hazards.
We have developed and implemented an Occupational
Health and Saet Polic that sets out our commitment to
zero harm, including:
The ongoing management and stocking o a rst aid
room, where treatment can be obtained or injuries,
or where ill emploees can la down and rest when
required.
The conducting o monthl health and saet
committee meetings, chaired b Joan Hughes,
Impahlas health and saet manager and/or ourhealth and saet ocers Joce Thebus, Gail Arendse
and Merle Beckles, and attended b managers,
supervisors and shop stewards.
The urther training and deploment o Joce, Gail and
Merle as Impahlas shop oor saet ocers, under the
supervision and guidance o Joan Hughes, our health
and saet manager.
Posting o appropriate signs to direct ever emploees
attention to emergenc exits, hazards and policies and
procedures or managing health and saet.
The urther training, development and testing o re
marshals, including the provision o well-maintainedre management equipment and the conducting o
regular re drills.
Working in close co-operation with the NBC or the
Clothing Manuacturing Industr, as well as SACTWU,
to conduct HIV and Aids awareness campaigns at
Impahla on a regular basis.
We work hard to create and maintain a work environment
ree rom the potential or illness or injur or our emploees,
our clients and afected neighbours. Over the last our
ears, we have onl recorded two injuries that resulted in
lost time as per the denition. This ear we are pleased
to report that our saet perormance was maintained at
a Total Recordable Injur Frequenc Rate TRIFR o 114.73
2011: 114.67, not as low as our best ear in 2010 TRIFR:
100.25, but considerabl better than or 2009 TRIFR:
157.33. We attribute the minor injuries we have sufered
to the signicant turnover weve had on our shop oor,
and the related challenges o monitoring behaviour duringperiods o extensive on-the-job training 155 new recruits
in 2012.
Part o our ongoing commitment to working in a sae
and injur-ree environment includes regular Hazard
Identication and Risk Assessments HIRA. In our most
recent review, we recorded the ollowing risks and hazard
incidents:
Injuries recorded over the last three years
201214 2011 2010
Needle pricks 14 14 14
Cuts and bruises 33 22 2
Slips and alls 1 3 3
Minor injuries 1 6 7
Liting sprains 0 0 2
Burns 1 0 0
Total 50 45 28
GAIL AREndSE, jOAn hUGhES, MERLE bECKLES AndjOyCE thEbUS hEALth And SAFEty COMMIttEE
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In terms o South Arican monitoring and evaluationnorms, the clothing and textile manuacturing industrs
potential or negative environmental impact is considered
moderate. We thereore recognise our responsibilit to
monitor, manage and reduce our environmental impacts
wherever and whenever possible.
Caron ootprint
Although we are a relativel small compan, we believe it
is within our scope o responsibilit to monitor, manage
and report on our total carbon ootprint in the orm o
the amount o carbon we emit into the atmosphere as
a result o our dail operations. Using a relativel simple
methodolog we have determined that our total carbon
emissions, in terms o carbon dioxide equivalents or CO2e,
is 232.4 tonnes 2011: 236.6. We have ofset these carbon
emissions through the planting o 651 trees 2010: 663
trees b Food and Trees or Arica.
Factoring in our business expansion, our CO2e intensit has
actuall improved signicantl over the past our ears.
Improvement in carbon footprint intensity
2012 2011 2010 2009
CO2e per garment 0.52 0.79 0.83 1.00
CO2e per emploee 0.99 1.23 1.15 2.00We calculated our total carbon ootprint using the publicly availablecalculator at www.carbonootprint.com.
elctricity an solar powr
Until this ear, we have alwas drawn all our electrical
power rom the Cit o Cape Town, which in turn relies
largel on ossil uel sources. In keeping with our compan
strateg to reduce our carbon ootprint we have installed
a 30 kWp solar photovoltaic PV plant, designed and
installed b Power Solutions. The sstem consists o
131 solar modules capturing energ rom the sun and
generating approximatel 48 MWh/annum that is eddirectl into our electricit grid, replacing approximatel
25% o our demand. Over the lietime o the sstem, we
expect to ofset some 1 150 tons o carbon.
We identi ve issues relating to environmentalprotection:
Carbon ootprint
Electricity and solar power
Fuel
Travel Water
Waste
5. Environmental protection
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The electricit sstem is monitored and displaed in our
entrance oer and can be ollowed on the ollowing link:
http://www.sunnportal.com. The project was unded
through the IDCs Green Energ Ecienc Fund in linewith its goal to reduce reliance on coastal-based electrical
power and introduce environmentall riendl production
processes.
The sstem has alread had an impact on our monthl
electricit bills and reduced our electricit CO2e
component per garment to 0.49 kg CO2e 2011: 0.74 kg
CO2e per garment.
ul
Having reported c