Lynda Loxton reports from Cape Town on the reaction to the far-reaching proposals to shake up the motor, textile and clothing industries
When Trade and Industry Minister Trevor Manuel met the captains of the textile, clothing and automobile industries and unionists this week, many expected a fair amount of blood letting as these fractious industries reacted to new proposals for their future.
But a fairly relaxed Manuel told a media briefing immediately afterwards that there was “no blood on the floor and we have lived to tell the tale”.
He said it was “quite remarkable” that his latest proposals for tariff cuts and restructuring had been so well received, but put this down to the fact that everyone realised there was no point dissipating energy through endless battles with each other.
Tariff cuts are needed in terms of South Africa’s commitment to the General Agreement on Tariffs and Trade (Gatt), the international accord which binds member nations to freeing trade with others.
Restructuring is needed because the industries, long protected by high tariffs, are not competitive by world standards and will not be able to survive the lowering of tariff barriers without major changes in work organisation, productivity and throughput.
National Association of Automobile and Allied Component Manufacturers president John Brandtner earlier summed up the industry position by saying they all realised that a “Damocles sword” was hanging over the industry.
“All industry sectors know that we cannot postpone implementation much longer. We just have to make sure that it is as good a programme as possible. There will be difficulties, there will be adjustments, and there will be pain in all sectors,” he said.
Manuel said the clothing and textile industries had been given until July 12 to react to his suggestions, while a task team would be set up to finalise the position of the motor vehicle assemblers and components manufacturers by the end of July.
Brandtner said this was particularly important as none of the major structural issues of the motor industry had been addressed.
“We have dealt with duty-free allowances, some export incentives, but we have not really dealt with structural issues. We believe that unless those structural issues are actually addressed, the industry is not going to change,” he said.
“Foreign exchange usage will continue at the rate that it has in the past, which means that the affordability of vehicles as an objective is not going to be addressed and the economies of scale also have not been addressed.”
National Union of Metalworkers of South Africa (Numsa) motor sector co-ordinator Gavin Hartford said that Numsa had been arguing for the past two-and-a-half years for an integrated industrial policy that involved not only tariff reduction and export incentives, but also supply-side mechanisms such as human resource development, materials, technology, work practices and work organisation.
“Those are not in the programme and we would be concerned to ensure that those other mechanisms are integrated into this programme before its final adoption.”
Broadly, Manuel’s proposals for the automobile industry involve abandoning minimum local content requirements for vehicles and replacing excise duties and excise duty rebates that drive Phase VI of the motor industry development programme with customs duties and duty-free
The customs duties on built-up cars, commercial vehicles and minibuses will be phased out from 65 percent in 1995 to 40 percent by 2002, while the duties on components will be reduced from 49 percent this year to 30 percent in 2002. The present nominal duty rate for built-up vehicles is 75 percent, down from 115 percent last year.Various incentives are also suggested to help assemblers import components.
For textiles and clothing, Manuel announced plans for a 10- year programme to make the industries more competitive with minimum job losses.
For clothing, tariffs would be phased down from the present 90 percent to 40 percent, for household textiles from 55 percent to 30 percent, fabrics from 45 percent to 22 percent, yarn from 32 percent to 15 percent and polyester fibre from 25 percent to 7,5 percent.
Ad valorem rates would be phased down over eight years and specific duties over four years with a possible one year extension. All rebates would be phased out over 10 years.
A document released on the changes said that several recent studies had found that although the clothing industry was competitive, productivity was low. The textile industry had been found to be uncompetitive and in need of restructuring to move into higher value-added production.
Manuel said that he would be the first to “recognise the imperfections of these proposals; we are dealing with industries that have not had to compete on an equal basis. They had the benefit of a captive market secured behind high tariff walls”.
But, he said it was not the business of restructuring to drive companies out of business. “These proposals serve to make a break with the past in policy-making; they are negotiated, and place us beyond the exclusive reliance on tariffs as the policy instrument. Instead we have developed new instruments which focus on supply side measures such as human resources development, work organisation and technology enhancement.”