impahla clothing, puma world cat strategic supplier

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].


3/64 INTEGRATED ANNUAL REPORT 2012 3

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


4/644 IMPAHLA CLOTHING



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



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



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



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.



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.



GOveRNANCe ANd STRUCTURe

Chapter One



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.




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



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



OveRvIeW Of MATeRIAL ISSUeS

Chapter Two



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


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



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



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



MATeRIAL ISSUeS dISCUSSed

Chapter Three



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


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



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



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.



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%



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


24/6424 IMPAHLA CLOTHING24 IMPAHLA CLOTHING



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



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



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.



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



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



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.



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



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



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.



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



MIRIAM MIntOOR And hER tEAM SEwInG wOvEnS

zOLISwA dyAntyI And hER tEAM SEwInG FOOtbALL

AnnE hOCKER And hER tEAM SEwInG wOvEnS




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



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



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

impahla clothing, puma world cat strategic supplier

Documents