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Africa needs to stop unfair trade

         Date: 2012-09-24

           Tag: Africa trade, Africa unfair trade

Summary: George Geringer, a senior manager at PwC's tax division, said during a discussion on whether Africa should protect itself against cheap imports at a PwC conference in Maputo this week that Africa mu…

Ii will be very difficult for most African economies to re-industrialise in the way India and China did if these economies do not have mechanisms to combat unfair trade.

George Geringer, a senior manager at PwC's tax division, said during a discussion on whether Africa should protect itself against cheap imports at a PwC conference in Maputo this week that Africa must grow by re-industrialising in the way the two eastern economic powerhouses did 20 and 30 years ago.

"Industrialisation normally takes place behind significant protection of a country's domestic industry," Geringer said.

"The current scenario of lowering tariffs in terms of a World Trade Organisation (WTO) agreement makes it extremely difficult for countries to just increase their tariffs and basically set high tariff boundaries for specific industries they want to develop."

Geringer said the re-industrialisation of Africa should be targeted at specific industries where countries have a competitive advantage or a significant market share.

Herman Fourie, associate director at PwC, said it is not a straightforward thing to say Africa should protect itself from cheap imports.

An example of the difficulties is the $682-million loan Mozambique recently received from China to build a suspension bridge in Maputo. The loan deal was announced in July as China's president Hu Jintao unveiled a total of $20-billion in new loans to Africa.

"Normally with these agreements the provision is that a country has to make use of Chinese contractors, has to import at least 50% of what you will need to erect the facility from China and you have to import some other products from China," Fourie said.

Geringer said African economies, and even SA's economy, are relative small when compared with the big Chinese and other eastern conglomerates. This makes the economies extremely vulnerable to competition from imports.

However, so-called "cheap imports" are not necessarily frowned upon by the WTO, he said.

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