Coronavirus News Africa

Edcon forced to start retrenchment consultations after failing to find buyers

An Edgars store in Johannesburg in March, 2020.

  • Edcon says it issued retrenchment notices to all its staff because it has not received binding offers for its business
  • The retail giant has been looking for buyers and its business rescue plan envisaged that the best outcome would be to transfer workers to new owners
  • Edcon’s retrenchments would be the biggest yet, if the company is forced to go ahead with this plan

Troubled clothing retailer Edcon says the reason it sent retrenchment notices to all its staff is because it has not received any binding offers from people interested in buying the company or any of its divisions.

One of the retail group’s BRPs, Lance Schapiro said the company sent Section 189 retrenchment notices to 22 000 workers, meaning that jobs of everyone employed by the retailer are on the line – as the owner of Edgars and Jet has approximately 17 000 people employed on full-time basis and about 5 000 seasonal workers.  

“The Business Rescue Plan is still in its preliminary phase, and as such, as at today no binding offers have been received and therefore we cannot predict which parts, of Edcon will be successfully sold. Therefore it is prudent to start consultations with all employees, in terms of Section 189,” said Schapiro in a written response.

He added that should a binding offer be received and implemented, this could change the number of people who are at risk of being retrenched as some employees would be transferred to the new owners.  

Biggest retrenchment plan yet

Edcon’s move makes it be the biggest retrenchment plan yet that any local company has announced during the lockdown, blaming it on the coronavirus-induced restrictions. For instance, the national carrier, SAA which is also in business rescue said 4 708 jobs were affected when it started retrenchment consultations in March.

Edcon said before going into voluntary buiness rescue in April that the lockdown caused it to lose about R2 billion in sales and did not see any other way out of its woes. But in the business rescue plan that Edcon published on the 9th of June, its business rescue practitioner (BRPs) envisaged that employees would be transferred to potential buyers of Edcon businesses. At the time, the plan said only unavoidable retrenchments would take place if there are remaining employees who were not absorbed by the buyers after the accelerated sales.

The plan said there was no conclusion to be drawn that people working in “non-viable” stores would “definitely” be retrenched. The BRPs were supposed to get final offers from businesses and parties interested in buying Edcon’s divisions by the end of June and finalise successful bids by early July 2020.

Therefore, it was expected that the extent to which the company would be able to retain jobs would become clearer then. But the business rescue plan did budget R597 million for proposed retrenchments of employees whose jobs the BRPs might not be able to save.

The union that represents most of Edcon employees, the South African Commercial Catering and Allied Workers Union (Saccawu), said it is not surprised that retrenchment notices were issued before there’s any clarity on whether the sale of Edcon will be successful, because in its view business rescue processes hardly ever benefit workers.

“We are not surprised. We don’t have any success story of the business rescue practitioners. I might be wrong because I don’t know all business rescue stories but most of the time what you get is the disposal of the asset or the business in its entirety. Those success stories have never been in the interest of workers,” said Saccawu secretariat admin, Lucas Ramatlhodi.

In a written response, the BRPs said their intention and key priority is to sell the business s a going concern so that employees can be automatically transferred to the purchaser. “Note that no final decisions have yet been taken, until the BRPs and the company have exhausted consultation and hopefully reached agreement with all the relevant stakeholders,” read the response.

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