More than 800 jobs are under threat after South Africa's largest clothing and textile maker, Seardel Investment Corporation Limited, said it was planning to shut down its Intimate Apparel division.

The closure of the loss-making Cape Town-based underwear and swimwear manufacturer is being blamed on the high costs of local production, with pressure on margins making it impossible to recover the costs of raw material inputs, labour and other overheads.

Retailers, including the firm's main customer, Woolworths Holdings Limited, are also implicated in the manufacturer's demise for refusing to raise their prices and switching to overseas suppliers.

"The strategy to source fashion brassieres and core brassiere lines from offshore companies by retailers in order to realise the targeted retail margins has overcome Intimate Apparel's ability to compete," said Seardel CEO Stuart Queen.

He said the problem was particularly acute in the production of bras, which not only require significant investments in design and pre-production to ensure fit and function, but are also time-consuming to make.

Consultations are under way with the Southern African Clothing & Textile Workers' Union (Sactwu), with the division likely to be closed at the end of November 2010.

However, for its part the union has called for an urgent meeting with Woolworths to discuss the pending closure of the plant.

"We believe that retailers in general and Woolworths in particular can play a major role in preventing the pending job losses," it said in a statement.

The issue is complicated by the fact that Hosken Consolidated Investments (HCI), which owns 70 percent of Seardel, is in turn 40%-owned by Sactwu.
"Should the closure of this factory proceed, it will have disastrous consequences," Sactwu said.

The union cited "the current depressed economic circumstances, the recent wave of job losses (both nationally and in the clothing manufacturing sector in particular) which has seen unemployment increase to its highest rate in five years, the detrimental downstream consequences, the fact that many Intimate Apparel's workers are single mothers and the socio-economic effects on the areas and communities where the workers live."

This is the latest in a series of closures at Seardel, which wound down the spinning, weaving, finishing and denim divisions of its Frame Textile unit last April and more recently shuttered its men's suit factory in Durban.

The cost of the closures pushed the group to a loss of ZAR204m (US$26.4m) for the year ended 31 March. However, income from continuing operations was breakeven in the year, and while turnover fell by 11%, gross margin rose by 7%, Seardel said in May.