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Strengthening economic co-operation between South Africa and China

President Cyril Ramaphosa pictured with Chinese President Xi Jinping in Beijing in 2018. PHOTO: DNS/ Katlholo Maifadi/Dirco

President Cyril Ramaphosa pictured with Chinese President Xi Jinping in Beijing in 2018. PHOTO: DNS/ Katlholo Maifadi/Dirco

Published Jul 22, 2021


Gert Grobler

China's economy, which accounts for 18% of global GDP, is characterised by near-frantic planning, consolidation and expansion activities. The economic growth rate of 18.3% in the first quarter of this year will, according to the World Bank, result in an annual growth of between 8% and 9% for 2021.

The IMF stated recently that China’s remarkable recovery had provided a “strong stimulus” for the global economy which supply it with commodities and supply chain components. As the worlds’s largest market and with huge consumption potential, the Chinese current “dual” approach of enhancing domestic economic activity while reinforcing international economic interaction, will provide exciting new trade and investment opportunities inter alia for South Africa, Africa and the developing world .

This was one of the key messages that emerged from a productive and useful China-South Africa Trade and Investment Roundtable in Hangzhou, capital of China's prosperous Zhejiang province, last week with the theme “A New Development pattern with New Opportunities”.

The Roundtable , hosted jointly by the South African Embassy, Beijing and the China-Africa Development Fund provided an opportunity for senior representatives of government and the private sector of the two countries to take stock of the existing economic co-operation and to explore the active enhancement of bilateral economic ties.

The China-Africa Development Fund has committed to invest over $5.5 billion (R80bn) in 37 African countries and leveraged $26bn in investment and financing from Chinese enterprises in Africa. The fund has invested and financed a number of key projects in South Africa in sectors such as electricity, energy, home appliances, cement and culture thereby making a substantive contribution to South Africa's industrialisation, job creation and the improvement of people's lives.

Speakers at the Roundtable included Siyabonga Cwele, the South African Ambassador to China, Chen Xiaodong, China's ambassador to South Africa, Leslie Maasdorp, vice-president of the Shanghai-based New Development Bank as well as several high ranking government officials both from South Africa and China.

The event also attracted about 200 representatives from South African and Chinese enterprises, some of whom participated virtually. Feedback was also provided by a number of major Chinese companies with an existing economic involvement in South Africa and Africa. The Round Table focused on a number of priority sectors such as Special Economic Zones and industrial parks, manufacturing, mining, renewable energy and the role of Zhejiang province enterprises on the continent .

Ambassador Cwele provided a snapshot of “what South Africa is able to offer the investor” and gave an overview of the South African Government ‘s comprehensive Economic Reconstruction and Recovery Plan.This plan, devised jointly with the private sector, labour and civil society , has the aim to boost confidence, restart the economy and drive urgent reforms to promote faster, more inclusive growth and employment.

He also highlighted some of the plan’s key priorities such as infrastructure, rapid expansion of energy generation , a drive for export-oriented industrialisation and re-industrialisation, mining and minerals beneficiation, agriculture, gender equality and economic inclusion of women and youth. Sectors like automotive, textiles, chemicals and plastics, tourism, oceans economy and digital economy were also highlighted.

Echoing Ambassador Cwele, Ambassador Chen welcomed the Roundtable and added that China is committed to actively promote trade and investment with South Africa and that new exciting opportunities will abound in this “new era” of intensified co-operation.

China will join hands with South Africa to explore new ways and areas for collaboration, to mutual benefit. Ambassador Chen said that China would encourage the promotion of high-quality projects and development of the Belt and Road Initiative (BRI) which he believed would lead to greater synergy between industries and enterprises of the two countries rendering fruitful results.

China has been South Africa's largest trading partner for 12 years in a row. From January to May this year, bilateral trade between China and South Africa reached $20.52 bn, growing 65.6% year-on-year and showing strong momentum for recovery and potential for growth. There was also an encouraging 28% increase in South African exports to China in this period mainly driven by fast growing commodity exports as well as agricultural products from South Africa to China.

Based on the comprehensive deliberations, the following salient points and practical results, emerged from the Roundtable:

* There was a strong expression of confidence on the part of the Chinese government and private enterprise in the future political and economic prospects of South Africa and Africa. Chinese companies with an existing presence in South Africa and Africa were enthused about the performance of its operations as well as longer term economic potential.

* That South Africa’s Economic Reconstruction and Recovery Plan offers numerous new opportunities for Chinese and South Africa economic co-operation in infrastructure, energy, in particular renewable, manufacturing, services, e-commerce, agriculture, mining and tourism.

* China's cumulative investment in South Africa currently exceeded $25bn, creating more than 400 000 direct and indirect jobs in South Africa. China undertook to encourage an increasing number of Chinese companies to participate in President Ramaphosa’s Fourth Investment conference scheduled to take place in South Africa later this year .

* As China welcomes the export by Africa of more competitive and value added products, China will hold the fourth China International Import Expo in Shanghai later this year . This reflects the country’s determination to open up its markets to products from countries abroad, including Africa.

* That South Africa and China are committed to co-operate on strategic and high quality BRI projects in South Africa and on the continent which will encourage more qualified Chinese companies to enter the South African and African market.

* As part of the Economic Recovery and Reconstruction Plan , South Africa ‘s Special Economic Zones (SEZ) are vital to reignite manufacturing-led industrialisation in an accelerated manner in the country. Chinese companies are increasingly seeking opportunities in these SEZ’s in South Africa and a number of companies such as Baic, FAW and others have established plants at Coega. In view of the significant progress that China has made with its economic and trade zones, the need for closer interaction and consultation between the two governments on the functioning of and capacity building at SEZ’s were agreed upon.

* With China, a recognised world leader in green energy supply, it was agreed that there was significant potential for further cooperation on renewable energy between China and South Africa. Chinese companies like Golden Valley and Longyuan are actively involved in wind power projects in South Africa. Attractive opportunities, however, are also available in related sectors such as energy and battery storage as well as hydrogen technologies.

* That China had a good understanding of the significance of the African Continental Free Trade Area (AfCFTA) , which was a central theme at the Roundtable, for Africa and strong support was expressed by China and its enterprises to assist with the development of the AfCFTA.

All in all, the Roundtable provided an useful platform for exchanges between all the stakeholders on enhanced investment and trade between South Africa and China which will be continued in other priority sectors in due course.

Presidents Xi Jinping and Cyril Ramaphosa, during their recent regular consultations, inter alia agreed to accelerate the implementation of existing agreements and initiatives, as part of an action-oriented and practical approach to enhance South Africa and China bilateral relations.

It is anticipated that bilateral co-operation , in particular in the trade and investment sector, as was reflected during the Roundtable, will be stepped up in a more strategic, focused and results oriented manner, to mutual benefit.

* Gert Grobler is a former ambassador and currently a senior research fellow at the Institute of Africa Studies at the Zhejiang Normal University, Jinhua in China.

** The views expressed here are not necessarily those of IOL.