Standard Bank CEO warns Temu and Shein could gut SA manufacturing

Standard Bank Group CEO Sim Tshabalala has warned that South Africa risks losing entire industries to a flood of cheap Chinese imports, including from platforms like Temu and Shein, unless the country builds its own manufacturing capacity. Speaking on GIBS Business School's Fate, Luck, and Choice podcast, Tshabalala pointed to the collapse of South Africa's textile sector as a warning sign for broader manufacturing. Local clothing retailers had complained of paying far higher import duties than Chinese platforms before SARS closed a tax loophole. While cheap imports help curb inflation, Tshabalala said Africa must negotiate tougher deals and ensure foreign investment benefits local businesses and workers..By Jan Vermeulen.Chinese companies Temu and Shein will decimate local industries in South Africa unless the country responds by building manufacturing capacity, Standard Bank Group CEO Sim Tshabalala has warned.Tshabalala was speaking on the GIBS Business School’s Fate, Luck, and Choice podcast and responding to a question from Prof. Adrian Saville about China opening its market to African imports.“China says African exporters have open access to the Chinese market. Do you anticipate that will really translate into African manufacturers producing exports for Chinese buyers?” Saville asked.“What we know for a fact is that excess capacity in China is now being deployed across the African continent, including manufacturing capacity,” Tshabalala responded.“One of the outcomes of that is the development of manufacturing capacity on the continent — take motor vehicle assembly, for example — but also the influx of cheap imported goods into Africa.”Tshabalala explained that this was a double-edged sword, with benefits for consumers while being a threat to local producers and job creators.“The negative effect is that, unless Africans actively build their own manufacturing capacity, this surplus risks decimating entire domestic industries,” he said.“Look at what happened to South Africa’s textile sector, and what could potentially happen to our broader manufacturing sector if South Africa doesn’t play its cards right.”Tshabalala was referring to the outcry from the clothing sector over the impact of cheap, direct-from-China imports via platforms like Temu and Shein.However, in that instance, the sector complained that they had to pay 45% import duties plus 15% VAT, whereas the Chinese importers used a loophole to pay a flat 20% import tax.In the meantime, the South African Revenue Service (SARS) said it cracked down on the loophole as part of a promise to level the playing field.Temu also hit South Africa’s electronics sector.In addition to the impact on the textile industry, local electronics distributors have complained about an influx of foreign goods that do not comply with local regulations.This included not having the correct ICASA certificates, Letters of Authority from the National Regulator for Compulsory Specifications, and failing to comply with other safety standards.Another issue was unregulated products that were not subject to such compulsory specifications by any national regulator.“Unregulated” products often imported into South Africa from China include clothing and textiles, footwear, leather goods, handbags, toys, baby products, and kitchenware.However, attempts by the Department of Trade, Industry and Competition (DTIC) and the South African Bureau of Standards (SABS) to crack down on these imports were recently torpedoed.The DTIC published a proposal in March for Pre-shipment Verification of Conformity (PVoC), which would have required a wide range of products imported from China to obtain a special certification.The certificates must be issued before export, meaning regulatory checks would need to be conducted in China before the product leaves the country.The SABS said this programme’s implementation was halted following feedback from the World Trade Organisation (WTO) and consultations with the Embassy of the People’s Republic of China.It said that the new regulations had been placed on hold until South Africa’s obligations under the WTO Agreement on Technical Barriers to Trade (TBT) had been discharged.Cheap Chinese imports depress inflation.Tshabalala said that the positive effect of the influx of cheap imported goods was that they depressed inflation.He said this was evident when comparing the price of used cars against the affordable new Chinese vehicles on the market.“Given that reality, we have to think carefully about how to position not just South Africa, but the entire African continent and local businesses to capitalise on this global competition.”Tshabalala said he liked to quote Kwame Nkrumah, the first prime minister and president of an independent Ghana, who said, “We face neither east nor west; we face forward.”In other words, said Tshabalala, leaders must act strictly in Africa’s best interest and negotiate the strongest possible bargains.“People expect us to do that, yet we frequently settle for transactional arrangements that don’t serve Africans well,” he said.Tshabalala said that South Africa possesses massive resources that the rest of the world urgently needs for its own economic transition.“Whether dealing with the East or the West, we must extract the best possible deal,” he said..Read more:.MBB: Capitec sounds alarm — Temu and Shein SMS scams target SA shoppers.“If a foreign partner is going to build a bridge, port, airport, or dam, it must be constructed in a way that truly benefits the continent — minimising unproductive rent-seeking as much as possible.”To the extent that capital flows in, Tshabalala said it must reach local small and medium enterprises, resulting in fully functional infrastructure built on the continent by Africans themselves..This article was first published by MyBroadband and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. 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Standard Bank CEO warns Temu and Shein could gut SA manufacturing

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