(in the pic - Chienes President Zuma addressing FOCAC summit). President Jacob Zuma co-chairs the FOCAC Summit with Chinese President Xi Jinping - Sandton, Johannesburg. 04/12/2015, Elmond Jiyane, GCIS
(in the pic - Chienes President Zuma addressing FOCAC summit). President Jacob Zuma co-chairs the FOCAC Summit with Chinese President Xi Jinping - Sandton, Johannesburg. 04/12/2015, Elmond Jiyane, GCIS

China’s $60bn is an early ‘Christmas’

By Peter Fabricius Time of article published Dec 5, 2015

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#Focac: Johannesburg - “What a Christmas,” said international relations and co-operation department director general Jerry Matjila. “It's raining. And now we see it pours billions of dollars.”

Matjila was enthusing about the $60 billion aid package for Africa over the next three years which Chinese President Xi Jinping had just announced at the opening of the Forum for China-Africa Co-operation (Focac) summit in Johannesburg on Friday. Xi announced a broad range of measures which China had decided to adopt across the spectrum of trade, investment, health, human capital development, and peace and security.

He said the $60 billion would comprise $5 billion of grants and zero-interest loans; $35 billion of loans of concessional nature on more favorable terms and export credit lines; an increase of $5 billion each to the China-Africa Development Fund and the Special Loan for the Development of African SMEs; and the establishment of a China-Africa Fund for Production Capacity Co-operation with an initial contribution of $10 billion.

Matjila said on Thursday, when the Chinese and African ministers met, China had told them the package announced by Xi on Friday would total $50 billion. “So they added $10 billion overnight. This is unprecedented,” he said, noting that it was three times the US20 billion offered by China at the last Focac conference in 2012.

Matjila said what South Africa appreciated most was that the $60 billion would go to such a wide range of development sectors, but also that it would be focused on human capital development “because that's the insurance of the future” and to the productive sector of the economy, including manufacturing, beneficiation, and industrialisation. Another official said South Africa particularly welcomed China agreeing for the first time to beneficiate African minerals at source.

“That's the big change from 2012,” he said, referring to the last Focac conference, in Beijing. Matjila said these new measures were in line with China's commitments at the recent G20 summit in Turkey to move the developing world up China's global supply chains.

Structural change

These measures would change the structure of the economic relationship between China and Africa, away from the unbalanced trade relationship where Africa mainly exported raw materials to China and mainly imported manufactured goods. Matjila also welcomed the fact that China had dropped the interest rates on its soft loans to almost the price Africans could get them at home.

It had realised its loans had been too expensive before. If one added the $60 billion for Africa plus the $8-9 billion package for South Africa which Xi announced on Wednesday during his state visit to South Africa, that amounted to a total package of nearly $70 billion.

Other officials said South Africa also welcomed Xi's promise that China's investments in Africa would not be at the expense of the ecosystem. Matjila also welcomed the fact that China had agreed to invest more in Africa's peace and stability, realising this was critical for development.

Trade and Industry Minister Rob Davies said Xi's aid package was “pressing all the buttons which Africa wants pressed. He was talking about investment, industrialisation, modernising agriculture...” And he added that, on past experience, “the Chinese deliver what they promise. And in some areas they over-deliver”.

The measures to boost industrialisation and manufacturing were important to South Africa, Davies said, because last year South Africa's exports to China had dropped 19 percent as China's demand for commodities declined and the prices of commodities dropped. Meanwhile, overall trade between South Africa and China dropped three percent, which meant China's exports to South Africa had risen and so had South Africa's trade deficit. Unless South Africa added more value to its exports to China, the trade gap would continue to widen as 80 percent of South Africa's exports to China were mineral commodities.

“So if the balance keeps widening and we can't export, the overall trade will go down and our ability to import will be at risk.” The problem was even worse for other African countries where their exports to China comprised almost entirely of raw minerals.

As the most industrialised country in Africa, South Africa stood most to gain from China's moves towards greater investment in Africa and especially in adding value to raw materials.

Davies stressed China was doing South Africa no favours, though. “We've been able to show to China that their investments here have had a good outcome,” he said, adding that the Chinese company, HiSense, which mostly makes TVs, had told him that its plant in South Africa was its second best performer in the world, outside China itself.

The signs were encouraging he said, pointing out that included in the package of projects which South Africa and China had signed on Wednesday on Xi's state visit was a deal between the Industrial Development Corporation (IDC) and the BAIC (Beijing Automotive Industry Holding Corporation) for a R12 billion investment, the largest single investment in the South African automotive sector.


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