S.Africa c.bank chief, trade union meet on China spat

Posted 10 October 2006 @ 05:28 pm EET     Print     Reprint     E-Mail     Comments

JOHANNESBURG (Reuters) - South Africa's central bank governor met a leader of the country's largest trade union federation this week to cool a public spat over clothing imports from China, the union said on Tuesday.

The powerful Congress of SA Trade Unions (COSATU) recently rebuked Reserve Bank Governor Tito Mboweni for criticising government plans to introduce quotas on clothing and textile imports from the Asian nation.

The union body says the cheap imports are crowding out local companies, costing thousands of jobs in South Africa's struggling clothing and textile industry.

"The discussions were fruitful and characterised by frankness and the mutual respect we have for one another," COSATU general secretary Zwelinzima Vavi said in a statement.

Mboweni angered the union body - an alliance partner with the ruling African National Congress - last month when he said the quotas did not make economic sense, and warned about the impact on inflation from cutting the supply of cheap goods.

Cheap Chinese textile and clothing goods have helped temper inflationary pressure in Africa's biggest economy, where higher fuel and food prices are threatening to drive inflation through the upper end of its 3-6 percent target range.

The central bank's targeted CPIX inflation index edged up to 5 percent year-on-year in August, backing the case for higher interest rates.

Mboweni added that the quotas, agreed to in principle earlier this year during a visit to South Africa by Chinese Premier Wen Jiabao, would not save the uncompetitive industry.

Vavi said the comments were unfortunate and accused Mboweni of being "irresponsible".

South Africa's government last month delayed the introduction of the planned quotas to January 1 from September 28 to allow retailers more time to prepare.

This followed vociferous criticism from shopping chains, that called on the Department of Trade and Industry to scrap the move, saying capping the imports would inflate prices and hit profits.

Vavi said he and Mboweni had analysed data of South Africa's trade with China including that clothing, textile and footwear from that country had increased 450 percent between 2000 and 2005, although he conceded that the imports made up only 20 percent of total imports from China.