South African Finance Minister Trevor Manuel told textile workers on Thursday that foreign-exchange matters were critical to understanding the future of the textile industry.
He said one of the realities was that the fundamentals of the United States (US) economy were out of kilter. The US was “importing more than it’s exporting” and the inevitable consequence of this was the devaluation of the dollar.
The textile industry had to take into consideration the inevitable appreciation of the rand.
“We can pull guns on each other, we can misbehave and perhaps then the rand will fall. For all other rational reasons we are not going to see the depreciation of the rand against the dollar.”
He said further: “It is not the rand, the problem is the dollar. Unless we factor that into our thinking, we are going to be looking at solutions in the wrong places.”
The textile industry had to determine where the rand would be against the dollar in May or June next year, he added, and had to take into consideration these factors when determining the future of the industry and the best way to protect jobs.
Manuel noted that the rand had been at 6,60 rand to the dollar a year ago when he spoke to textile workers and it was now under 6,00. It had been 13,80 to the dollar in December 2001.
He argued that the industry had to seek out sectors of the market where it could be competitive, noting that thousands of jobs had been lost in the textile sector in recent years.
Manuel said a good example of a clever marketing strategy was what the Indian textile market had done — it had identified that it could not compete against Chinese imports at the lower end of the market in the US and had opted to supply above that line.
Without directly saying that the government was avoiding taking any interventionist action in the textile industry, he nevertheless underscored the point by referring to the automobile industry. He said 10 or 11 years ago the industry had been in the doldrums with heavy tariffs imposed on imported vehicles. Now this industry — where trade barriers had come down — was booming with Mercedes introducing a left-hand drive C Class car at its East London plant.
He warned textile workers that the reality of Chinese competition was enormous and would grow in the future.
The Chinese deputy governor of its central bank, Lee Ruogo, had noted that the cost of Chinese labour was 3% of its American counterpart. He had warned that Americans should move out of textiles and possibly even agriculture and focus on higher technology goods.
Noting that he was being provocative, Manuel said he had to warn the industry about the “five-letter word” which was China. This country was “growing stronger and stronger” as a centre of manufacturing. It was a reality that workers — and employers — in the textile industry had to face, he said. – I-Net Bridge