South African Reserve Bank governor Tito Mboweni’s positive stance on cheap Chinese and Indian goods and services remained unchanged on Tuesday in the face of government and trade union criticism.
Mboweni was labelled ”irresponsible” by Congress of South African Trade Unions (Cosatu) general secretary Zwelinzima Vavi earlier in the day.
This was over his condemnation of the government’s decision to restrict clothing and textile imports from China.
A greater presence of Indian and Chinese tradeable goods was making it difficult for other producers to increase their prices, Mboweni told a dinner for investors in Johannesburg on Tuesday night.
”I won’t say anything on textiles, because Vavi will be angry,” Mboweni added.
It was possible the large number of goods from India and China were helping to keep inflation low, he continued.
Mboweni told Parliament last month that the quotas did not make economic sense and would not save an industry that was not competitive.
”If you have not become competitive, you have no dog’s chance in hell of becoming competitive in the three years or so that the quota will be imposed,” he told the portfolio committee on finance.
Speaking at a presidential trade union working group meeting in Pretoria on Tuesday, Vavi said President Thabo Mbeki had been jokingly asked if Mboweni was the new trade and industry minister, because it was not his duty to comment on the deal.
”The remarks were unfortunate … they were absolutely irresponsible,” Vavi said.
”I gather [Vavi] says I should not talk about the economy, only monetary policy,” Mboweni told the dinner guests.
”I’ll stick to monetary policy if he sticks to union organising.”
Trade and Industry Minister Mandisi Mpahlwa said the quotas come after months of planing and ”are not some crazy action”.
But he agreed with Mboweni that China was not solely to blame for the textile and clothing industry’s woes.
Mboweni said that for the most part there seemed to be fertile ground for further improvement in global economic growth, the oil price notwithstanding.
”It would help a lot if the governments of the world could find their way clear to sorting out the World Trade Organisation negotiations … ” he said.
Mboweni added: ”I hope Vavi agrees this is to the benefit of the global economy and the world’s workers.”
On the situation locally, he said although inflation was still within the target range of 3% to 6%, it was ”something we should watch very carefully” particularly with reference to the impact of the oil price.
He pointed out that non-residents’ R74-billion contribution to the economy was going a long way to finance the deficit on the current account balance of payments and he hoped ”their interest continues”.
South Africa’s trade account has been in deficit since the second quarter of 2004, and was increasing. The current account deficit was 6,4% of gross domestic product (GDP) in the first quarter of this year, and 6,1% in the second — double the recommended amount.
As far as South African consumers were concerned, Mboweni said they were ”still having a big party out there”.
Consumer expenditure was at eight percent of GDP, with loans to the private sector at 24% to 25%.
The imbalance needed to be ”tackled by somebody, somewhere”, he said.
The Monetary Policy Committee, which determines the repo rate — the rate at which the Reserve Bank lends money to commercial banks — meets next week.
It has increased rates twice this year by a total of 100 basis points, leading to corresponding interest rate adjustments by commercial banks. – Sapa