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South Africa: Pep owner sets its sights on local manufacturing as supply chain woes continue

Discount Retail Chain Pepkor (owned by Steinhoff International) has begun working on sourcing its products locally following supply chain issues that are set to hurt consumers’ pockets in 2022.

The company, which owns brands like Pep, Ackermans, Russells and Incredible Connection, has been impacted by global supply chain challenges that have resulted in higher shipping and freight costs, port congestion and some product shortages.

Although Pepkor’s customers have not yet seen the impact of the supply chain issues on their wallets, Pepkor’s CEO Leon Lourens warned that they can expect price hikes from winter next year - if the problem persists.

Lourens explained that in the past year, customers had been cushioned by the strong rand, which meant that the company was able to buy products overseas at a lower price and invest what it saved in the supply chain.

But the rand has since strengthened against the dollar.

"It looks like going forward … winter next year and beyond … the additional shipping cost will obviously be carried by us, we will put that into the cost price of our product and unfortunately there will be inflation then," Lourens said.

This means that the cost will, unfortunately, have to be carried by consumers.

However, Pepkor is joining a growing list of retailers who are now turning to local manufacturing, not just as a solution to the current problem, but as a long-term plan - which bodes well for South Africa’s manufacturing industry.

Lourens said the company imports between 65% and 75% of the clothing it sells and the balance is produced locally. But the company has begun working with local manufacturers to develop more local products.

"Because we believe in the longer term, that will be to the benefit of not only our business, but also, to the country as a whole. Our objective is to work with local manufacturers locally that will make them competitive, that’s the secret," he said.

With regards to whether he anticipates shortages over the festive season, the CEO said consumers have nothing to worry about.

"There has been supply chain impact on stock supply, it goes up and down and we’ve had some delays, but I can assure you, we have more than enough stock for the festive season," he said.

On Friday, Lourens presented the group’s results for the year ended 30 September 2021. In that period, Pepkor’s earnings grew by 115% to R5 billion (US$0.3Bn), its revenue increased by 9.2% to R77 billion (US$4.9Bn) and its operation profit rose by 40% to R9 billion (US$0.6Bn).

The group managed to open 247 stores during the year, bringing its total stores across 10 countries to 5,470. And its goal is open 300 stores per year for the next five years.


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