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Thursday, 24 February 2011 14:41

Press Release : Immediate

Manufacturing focus welcomed but could be undone by strong Rand

The Southern African Clothing & Textile Workers’ Union (SACTWU) notes the budget speech by the Minister of Finance, Pravin Gordhan.

SACTWU supports the more comprehensive response issued by COSATU, but wish to draw specific attention to issues affecting the manufacturing sector and the clothing, textile, footwear and leather (CTFL) industry in the budget.

We welcome the increased focus on the manufacturing sector, including the support for the Industrial Policy Action Plan (IPAP2).

SACTWU believes that the allocation towards the production incentive for the CTFL industry, as well as other allocations such as the Jobs Fund and tax incentives will further help to stabilise this industry by securing employment and industrial capacity. We would urge the government to ensure that these incentives are linked to commitments by businesses to grow employment and comply with tax and labour laws.

We are especially encouraged by the announcement of a major programme to tackle customs fraud in the clothing and textile industry. While we have seen some good work recently from SARS to deal with this problem, a better resourced and coordinated programme is required. Customs fraud does not only destroy South African jobs, it also deprives the fiscus of income.

The need for this initiative is reflected by the fact that an estimated one third of all clothing and footwear sold in South Africa is imported illegally. For instance, in a possible case of under-invoicing to evade customs duties, a consignment of cotton socks were imported from China at R4.85 per kilogram in November 2010. However, the world price of the cotton used in the manufacture of these socks alone were in excess of R20 per kilogram.

For some time, SACTWU and COSATU have been calling for a revision of the mandate of our Development Finance Institutions (DFIs) to allow these to focus much more on the creation of decent work. We appreciate that our call has been heeded with the establishment of a Development Finance Institutions Council. Such a council will allow for a realignment of DFIs’ mandates with developmental goals.

We do fear that the focus on the manufacturing sector, especially the allocations towards it, will be undone by our overvalued currency.

We welcome the fact that the budget commits government to investigate further tools, including tax and regulatory measures, to deal with the strong Rand. We would urge government to adopt such tools because while the Rand has weakened recently, we fear that this is not because of the current tools utilised, such as the purchase of foreign reserves, but rather because of investment decisions taken by third parties. We need to be equipped to deal with future inflows of speculative investments.

Issued by Andre Kriel
General Secretary