PICK a sector, any sector. If you fancy clothing, which companies would you buy? Set aside all the usual caveats such as national retail sales trends or the number of cash as opposed to credit-based customers.

Which of South Africa’s fashion chains is best positioned for profitable investment right now? You might be surprised.

Deep in the engine room of the industry, a small brand named Holmes Brothers has seen the rules of the games change. Ten years ago, when China’s government ripped the heart out of the world’s indigenous manufacturers by subsidising their own sweatshops, South African retailers had no choice but to follow suit. Their margins would not allow otherwise.

Today it is a different story. China has cut its manufacturing subsidies, making it more expensive for South Africans to outsource their production. It has forced fashionistas to find low-cost domestic suppliers. Many left it too late to buy the required talent and skills on home soil.

So who is winning so far?

Mr Price, you have to say. The Durban brand was first to embrace the notion of instant fashion: buy cheap, wear for two months, discard. Yet, because the mass retailer had to meet volume demand for its quick-turnaround products, it was most exposed to the Chinese change of heart.

“China Mall is the biggest chain store in South Africa,” says Gary Holmes. “Bigger than Edcon, Truworths, Foschini or Mr Price. It has 6,000 stores. People think all the little Chinese shops are independent. They’re run by one person. Your tiny store in Fouriesburg or wherever is owned and controlled by one group under one roof.”

Now Mr Price is scrambling to secure Durban-based CMT (cut, make and trim) suppliers because it is simply too expensive to farm stuff out to China any more. Besides, it takes too long to get trendy goods back to South Africa.

Trouble is, customers don’t want to wait. They will go to China Mall instead.

The Holmes Brothers, whose iconic Mandela and Springbok T-shirts have been ripped off and resold more times than they want to mention, say the main threat to jobs in the fashion industry is knock-offs. Not offshore outsourcing, during which they reckon 400,000 jobs were lost. The real danger lies in fake tat, sold for a song.

“China Mall is the biggest chain store in South Africa,” says Gary Holmes. “Bigger than Edcon, Truworths, Foschini or Mr Price. It has 6,000 stores. People think all the little Chinese shops are independent. They’re run by one person. Your tiny store in Fouriesburg or wherever is owned and controlled by one group under one roof.”

Given that, you have to say the loser in the JSE-listed game is Shoprite. Subsidiaries Pep and Ackermans are up against opposition the South African government has shown no sign of blocking.

Which leaves the blue chips. Foschini and Truworths have a near-immaculate way of jiggling just-in-time local supply with longer-term demand. Not even the Holmes Brothers can find fault with their models. Slow and easy wins, for now.

Early movers now need to watch which jumped-up local brands will be bought by fast-moving international companies.

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