Meeting between Zwelinzima Vavi and Tito Mboweni 10 - 10 - 06

COSATU General Secretary’s statement on his meeting with the Reserve Bank Governor on 9 October 2006

The COSATU General Secretary, Zwelinzima Vavi, and the Reserve Bank Governor, Tito Mboweni, met between 18:00 and 22:00 last night, 9 October 2006, to discuss matters of mutual concern. The discussions were fruitful and characterised by frankness and the mutual respect we have for one another.

Our discussions covered the broad economic challenges facing South Africa in the context of our history and globalisation. These challenges include the need to address with necessary speed the legacy of apartheid, such as the extraordinarily high levels of unemployment and poverty and slow economic growth. We noted the recent report of Statistics South Africa on unemployment and agreed that, whilst they indicate some real growth of employment opportunities, the level of unemployment still remains a huge challenge for South Africa.

We analysed import/export trade between China and Africa, China and South Africa and broadly China and the world. It is clear that imports from China have increased dramatically over the past four years. According to the statistics provided by the Reserve Bank, clothing, textiles and footwear make up 20% of total imports from China but clothing, textile and footwear imports from China increased by 450% between 2000 and 2005.

We discussed the implications of this phenomenon for jobs and the economy, including the implications for the rate of inflation. We also noted that the five biggest retail companies listed in the JSE increased their profit margins from R1, 7 to R6, 6 billion between 2002 and 2006.

Machinery and electrical equipment are the single largest category of import from China. Broadly South Africa, just like most of Africa, exports raw materials to China which it then beneficiates, and builds its industrial base, before sending them back to South Africa in all manner of finished products. This means that South Africa, whose economy continues to be dominated by minerals, heavy chemicals and auto that are capital intensive, continue to export jobs to China.

We agreed that only an industrial strategy would turn this situation around. It has become extremely urgent to address this matter.

It was in this context that we discussed the trade agreement between South Africa and China. The COSATU General Secretary briefed the Governor about the processes that led to the signing of the agreement between the two countries. This included the decisions of the Alliance Summit early last year, the task team established by the President of the ANC to look at short- and long-terms measures to be taken to address job losses in the clothing and textile industry, the application that SACTWU launched with the International Trade Administration Commission for safeguard measures to be used in line with the WTO procedures and the negotiations between the South African and China Governments.

The General Secretary briefed the Governor about the negotiations between the DTI, SACTWU, the clothing and textile manufacturers and the retail industry that has led to the agreement on restructuring of the industry. This plan, called the Customised Sector Programme, which will soon be announced, seeks to modernise the industry and ensure that it takes full advantage of the window period provided by the SA/China trade agreement on clothing and textiles. All parties agree that competitiveness of the industry must be improved if was to withstand the threat of Chinese imports.

The Reserve Bank Governor, having noted the multi-pronged strategy to address the problem, expressed his hope that the industry and all parties would fully implement the industry plans. He expressed appreciation that there was a full strategy that does not just depend on time-bound limit of imports from China.

We agreed to continue to interact more closely to continue the discussions that have begun.