Textiles: a risky investment

Johannesburg - Although the textile industry is a dangerous place for investors, JSE-listed Brimstone Investment Corporation and Hosken Consolidated Investments (HCI) - which have invested in the local sector - believe that this investment will not only lead to job creation and employment, but that there is also opportunity for great returns.

But with so much uncertainty in the local textile industry, investors and shareholders may wish to take their money elsewhere. "It's a dangerous market, the margins are thin, things can go wrong, and management is pushed to do silly things," says Finweek journalist Marc Hasenfuss, speaking in this week's Off the Record podcast. "It is a bit of a risky position".

Hasenfuss explores why two empowerment investment companies, Brimstone and HCI have decided to make brave investments in the local textile industry.

This industrial sector is largely considered a "no-go area" for investors. Many textile and clothing companies have fallen off the JSE after they were unable to compete with highly competitive clothing imports. "The previously JSE-listed companies were smaller companies, they maybe had one or two product lines and they just couldn't cope. Once the rand strengthened, they lost the export markets and with local consumers buying better cost goods from the Far East, there was just no way they had a market. They just couldn't survive. It's as simple as that."

It must be clarified that these companies are relatively small in the greater textile industry, but they could leave a hole or two in the market, which no one wants in these current economic conditions, said Hasenfuss.

To find out more about Brimstone and HCI's investments and initiatives in the local rag trade, listen to Off the Record with David McKay.

To listen to the podcast, visit Fin24.com Podcasts.

- Fin24.com