Press Release on EDCON GROUP and Business Rescue Practitioners by SACCAWU
Why the Business Rescue Practitioners would keep their hands in the cookie jar, if, they expressed in public a view that, EDCON Group can be saved? If the report by: Reuters / 20 May 2020 16:04; is anything to go by.
The Media reports which are not clinically canvassed with essential stakeholders to the effect that, the Edcon Holdings Ltd, which is viewed as South Africa’s second-biggest clothing retailer, said it may not be able to re-open at the end of National Lockdown to combat the coronavirus outbreak, are rather unfortunate news to say the least, in the context of generally experienced trading slump across economic sectors.
According to the Chief Executive Officer Grant Pattison; articulation comparing stats of the whole industry he allegedly said “like-for-like sales have dropped 45% since that statement less than two weeks ago, and March revenue will be R400 million ($23 million) below the retailer’s forecasts” This therefore, justifies the pain the company endures and cried for public sympathy, whilst expects South Africans to embrace whatever form of reaction by the company to save what might be the little left after such real or perceived loss economically. The CEO allegedly argued that, drop in collections of the debtor’s book, will mean that the business only has sufficient liquidity to pay salaries; and beyond that possibility is fast becoming real that, Edcon would be unable to honour any other accounts payable during this period or into the foreseeable future.
The CEO then went on to unleash a silver bullet in saying to the public that, Edcon may need to consider a local form of bankruptcy and will hold talks with government about any possible state assistance. To this effect, no clear data of options available to the company were cited; hence, we believe such was a silver bullet as the Union.
Memory-lane: When job-security is under threats we simply cannot fail to tap in the reservoir of bitter experiences of SACCAWU battles with EDCON Group. The announcement on a magnitude of second coming of Jan van Riebeeck in the year 1998 announcing arrival in our economic shores of one Stephen Ross who left the United States, after being recruited by South African Breweries to supposedly turn around the ailing Edcon. With economic medallions that, Stephen Ross allegedly achieved with market capitalization increasing thirty-one fold from R800 million in 1998 to a R25 billion transaction being concluded with Bain Capital in 2007. In his qualification of being the specialist of note, they awarded an expectation that, additional to an extensive retail pedigree, Stephen Ross also has comprehensive equity and debt market experiences in South Africa, the United Kingdom and the United States. For this Bain Capital was positioned as a Messiah to the problems endured by EDCON Group then.
Before-sun-set: The company outlook became so complex to even trace easily gene and evolution of the EDCON Group to comprehend to the effect that: Edcon is a company incorporated in South Africa. Edcon is controlled by Edgars consolidated Stores limited (“ECSL”), which is controlled by Edcon Acquisition (Pty) Ltd (“Bidco”). Bidco is controlled by Edcon holdings Limited (“Edcon Holdings”), which is controlled by Edcon (BC) S.a.r.I. (“Edcon BC”). Edcon BC is ultimately controlled by Bain Capital Investors LLC (“Bain Capital”). The Edcon Group is active in the retail apparel market. Through its various subsidiaries such as Edgars, CNA, Samsung stores, Jet and Legit; the Edcon Group sells men’s, women’s and children’s wear, fragrances, cosmetic products and cellular products. In addition to this, The Edcon Group also provides insurance products to its customers through Hollard Limited (“Hollard”).
This was hailed as the, business achievement in the Tribunal adjudication process to the effect that, this transaction is a financial restructuring of the Edcon Group due to the then purported dire financial situation of the Edcon Group. To avoid a business rescue situation, Edcon’s creditors have entered into an arrangement to partially equitize their debt claims and take the majority equity in the Edcon Group. Some of the creditors will also provide liquidity. Parentco will acquire 100% of the shares in Bidco, which holds 100% shares in ECSL, and ultimately the entire issued share capital of Edcon.
Financial Octopus: This web of financial modeling by design was, as we now know, a vehicle of conduit for haulage of what was remaining financially resource which was still there in EDCON Group. The magnitude of financial intelligence deployed by Bain Capital effectively eroded sense of judgment of Competition Commission Tribunal that was responsible to adjudicate over this business transaction and even mastered the art of confusion the very Union; for, during the Commission’s investigation, the South African Commercial and Allied Workers Union (“SACCAWU”) raised concerns and objected in relation to the proposed transaction, particularly in relation to employment. These concerns were however said to be addressed by the merging parties when it had been said to have re-assured SACCAWU that the financial restructuring emanating from the proposed transaction is in fact necessary to ensure that no retrenchments will take place in the Edcon Group. The further lie was that, the transaction complied with B-BBEE score card or requirements while referring to an internal but unilateral ESSOP Scheme not agreed to with the Union; fraught with workers ignorance of dynamics and real ownership thereof, given that when asked were not even knowing the value of that alleged shares/shareholding.
This quantum or magnitude of violations of the financial regulations eroded regime of established Foreign Direct Investment objectives, International Financial Regulation and undermined the national sovereignty of South Africa and her striving developmental imperatives agenda; with little or no measure of impunity imposed either by the State or the ruling party which both by law, ought to have effected oversight in matters of real or perceived financial irregularities.
Lined-up pockets: Why does it not dawn into the mind of the State, in particular the Ministries of Finance and DTIC ; the fact that, the very concept of Business Rescue and the practitioners involved are not ready to lend a hand to save businesses, in particular jobs or job security? This is very uncomplicated to be done, for, the State or her Agencies can simply pullout their (Business Rescue Practitioners) stats and rate them in accordance with their failures and successes on their primary mandate and contrast that to the country’s national developmental imperatives primary agenda which views the job security and jobs creation as but the fundamental pillar that talks to meaningful democratization of the society; including in dealing in earnest with ultimate elimination of inherent and prevalent, if not unabatedly escalating gross inequalities , poverty and joblessness infested democratic society.
Characters of the incumbents consistently awarded status of being Business Rescue Practitioners are rather somewhat questionable to say the least. Hilariously; every time the need arises for these services the same people get to be appointed; as if the skills set they posses is nowhere to be found, but, in them and solitarily them. Secondly; determination of labour value is a top secrecy, even more than what we may know of State Security determination in defense of the nation and the national key points. What is now known in the case of SAA for an example; these usual suspects/incumbents have allegedly pocketed, allegedly without any comprehensive business turnaround plan at hand, more than ±R30 million, which nobody can illustrate value for or value to add to their primary mandate that is to save SAA. This was the case when they were appointed to save Ellerines Group in the case of SACCAWU direct interest; and if you were to ask where Ellerines Group is today and what happened to the workers? Their modus operandi is somewhat the same, for they seem to come into the business; undermine the existing industrial relations and snatch the total cost of employment budget; and drive the business to halt with impunity and there are no consequences that follow their action from the State. In the current case of Edcon the Rescue Practitioners have, with impunity and contempt disregard ,if not derecognised SACCAWU ; as they directly communicated with workers , including their unilateral suspension , if not cancellation of the second and final part of a multi-year wage agreement , entered into between Edcon and SACCAWU and binding to both parties, legally.
Inherent characteristics and/or selection of the Management Executive material incumbent(s) within Edcon that seem to be awarded status of being the CEO(s), their approach and relations with Foreign Direct Investment objectives, compliance with International Financial Regulation including their obligations when they observe acts that seek to undermine the national sovereignty of South African State; remains our serious challenge as and when business transactions are concluded. We assume, but, get disappointed in numerous assertions that, when we are visited upon by threats of job losses, the primary task of the captains of economic sustainability of any business becomes efforts to save jobs; but, in contrast we observed in more than one instance where CEO(s) are chiefly interested in their obsession with quantum of their golden handshake(s). It is concerning that, some may be holding a position that places him/her in secured and prosperous life style irrespective of whatever economic prevailing conditions and/or detrimental ramifications. This raises more suspicions when you find some persons in that regard thriving through golden handshakes, as a norm, at the expense of drifting millions of employees embedded into deeper poverty and unemployment.
Threats of job losses and downward-variation Basic Employment Standards: We are served with papers which in summation are a clear demonstration that, the Business Rescue Practitioner’s primary task is to deal with the existing established labour regime within EDCON Group. Already they undermine the presence of the Union as a representative body yet a sole collective bargaining for that matter; and issued out communiqué to individual employees as a starting point of consultation in a unionised workplace. Following that, they, without decency to consult with the Union, resolved to disown commitments that were outcomes of negotiations in the processes of substantive and working conditions agreement for the period under review. This clearly shows suspension of labour regime regulations which governed relations between the employer and employees and also erodes the powers of LRA 66 of 1995 as amended.
We call upon the cited Ministries to reverse this business and jobs destructive plan disguised as the Business Rescue when experience and realities prove otherwise
However, if given no other option, we are more than prepared to engage in such unfortunate action!
Issued by SACCAWU Media Unit