South African President Thabo Mbeki said on Sunday his government may cut tariffs on some imported equipment and goods in a bid to boost the manufacturing sector and make it more competitive internationally.
In a briefing to discuss the outcome of a mid-year meeting of his Cabinet and other senior officials, Mbeki said a healthier manufacturing sector was critical to the government’s efforts to narrow the country’s trade deficit.
“We have to increase exports of manufactured goods,” Mbeki told reporters in Pretoria. “We will look at the tariffs that impact on things that need to be imported.”
He highlighted manufacturers of chemicals, pulp and paper and pharmaceuticals as among those that could receive tariff relief.
The proposal is the latest attempt by Mbeki’s government to address what it sees as a worrying trade imbalance, the result largely of a recent explosion in consumer spending and credit growth in South Africa’s booming commodity-rich economy.
Heady demand for imports has become one of most vexing issues for South Africa’s central bank, which is battling rising inflation. It has raised interest rates in the past year in a bid to tame consumers’ appetites.
South Africa’s trade deficit was R2,7-billion in May, down from R5,67-billion in April. Although welcoming the drop, economists say improving the nation’s competitive position is key to eliminating the deficit.
Africa’s economic powerhouse has struggled to keep up with export-driven competitors, particularly China. The Asian giant is largely importing raw resources from African nations, while exporting finished goods to the continent.
The result has been the virtual destruction of certain industries in Africa.
“Textiles are getting killed by Chinese imports,” Mbeki said. But he rejected the idea of his government adopting protectionist trade policies to save jobs despite it having the support of South Africa’s powerful trade union movement.
Mbeki, who has been accused by his labour and communist allies of adopting policies that favour the business community and the rich at the expense of millions of poor black South Africans, said that there would be no radical changes in economic policy.
A three-day meeting of Mbeki’s Cabinet and other key officials last week opted, instead, to tinker with policies in a bid to cut chronic poverty, improve delivery of basic services and strengthen its industrial sector, Mbeki said.
Although South Africa’s economy has been booming under Mbeki’s watch — he was first elected in 1999 — there are concerns that growth could be jeopardised by a skills shortage and deterioration of basic infrastructure.
Mbeki outlined plans to accelerate delivery of water, electricity and other basic services to those without and upgrade telecommunications infrastructure, an area often cited as a drag on the economy. – Reuteres