South Africa and China have emerged as major players in their respective continents and today need to cooperate in most of the major world organisations. This, in turn, has also increased their mutual interdependence which is so clearly reflected in their expanding bilateral trade and other interactions.
Economically, China became South Africa’s biggest trading partner in 2009, when total trade between the two countries amounted to $14.1-billion (R119.5 billion). China's total foreign trade value with South Africa hit about $45-billion (about R363-billion) in 2011, according to December's figures from China's customs authorities1.
Previously, Germany had been South Africa’s biggest trading partner up to 2008, when Germany-South Africa trade totalled $17.9-billion, compared with $14.2-billion between South Africa and China. The fact is, due to historical realities, most of South Africa's trade had traditionally been confined to a few selected countries in Europe, followed by Japan, South Korea and Taiwan in Asia and, of course, with some African countries2.
However, since official relations between China and South Africa were established in January 1998, bilateral trade between the two countries has surged from $1.6-billion to $25.7-billion. Last year, figures for the first nine months show that China is now the number one destination for South Africa’s exports, followed by the US, Japan and Germany, with India now in fifth place3.
South Africa's major exports to China have traditionally been mining products, especially iron and steel, heavy chemicals and nonferrous metals exports in the region of $5.5-billion a year in minerals to China. In contrast South Africa imports Chinese clothing, machinery, televisions, communication equipment, furniture and footwear.
Over the years, Chinese and South African officials have signed a series of memorandums of understanding (MOUs) such as investment MOUs in 2010 with respect to clean energy, power transmission and railways, as well as a $303,6-million loan agreement between South Africa's third-largest cell phone operator, Cell C, and the China Development Bank.
Cement producer Jidong Development Group (60%) and the China-Africa Development (CAD) Fund have agreed to set up a more than $200-million cement plant in the Limpopo province which is another major Chinese large investment over the past few years4, and the Chinese manufacturer First Automobile Works has invested $100-million to build a vehicle assembly plant in Coega, in the Eastern Cape.
So far, the project has produced 1 000 jobs and finally, in 2007, the Industrial and Commercial Bank of China (ICBC) invested $5.46-billion in the Standard Bank of South Africa, which was China's largest financial investment. Furthermore, another South African bank, FirstRand Bank Limited has partnered with China Construction Bank. The two institutions have noted that the partnership is aimed at enhancing their ability to tender for, and win, projects in Africa. The two banks are planning to offer advice and expertise to clients of the China Construction Bank as well as work with African clients who want to partner with Chinese counterparts and invest in projects and opportunities in China. This partnership will allow the two banks to take part in larger transaction deals and investment prospects5.
It must be noted that South Africa has also heavily invested its Foreign Direct Investment in China since 1994. For example, global brewing giant SABMiller has opened 50 breweries in China, while South African energy firm Sasol, whose coal-to-fuel technology continues to attract global interest, has established collaboration with the Chinese coal company Shenhua in the Ningxia Hui and Shaanxi provinces. Other South African investments have been in the fields of boat making, media, restaurants, mining, financial services and banking6.
However, given China’s status as the world’s second largest economy and as a major Brics player, it is critical for what does this all mean for South Africa’s domestic and foreign policy interests? Foreign policy consists of self-interest strategies chosen by the state to safeguard its national interests and to achieve its goals within international relations milieu.
Domestic policies, on the other hand, while focused on national issues, are constantly affected by developments outside the country, with nations thereby compelling nations to enter into dialogue with targets or initiating entities or form alliance(s) for the purpose of enhancing their economic or developmental growth.
Given the current industrial development challenges South Africa faces, it is a given that the government has to prioritise domestic challenges, before tackling the long-term structural pathologies of the global political economy. Whilst it is axiomatic that South Africa's long-term success is linked to that of the continent of Africa, the country's short-term imperatives are those of rapid economic growth, social development and service delivery. This can only be achieved in a country that is configured to be globally competitive in all of its key sectors. Thus, the point of departure for the Zuma administration ought to be a clear identification of South Africa's domestic and developmental goals and the alignment of its foreign policy with China to achieve these in a rapid, yet sustainable, manner7.
From a domestic perspective, it will benefit South Africa to collaborate with China in facilitating its own African industrialisation revolution with a view to boosting employment among unskilled and semi-skilled labourers. This collaboration can be premised on the Beijing Declaration adopted in the context of the Comprehensive Strategic Partnership Agreement (CSPA) which was signed by both countries in August 2010.
Another tsrategic vehicle to be used for industrial development is one of the several MOUs signed last year between the Beijing International Brand Management Centre and Trade and Investment South Africa, would also help South African enterprises gain access to the Chinese market. Moreover, both countries took forward some of the cooperational agreements and endorsed technical support by the Chinese to assist South Africans around the establishment of Special Economic Zones and skill development in the clothing and textile sector8.
However, that said, it would be foolhardy to ignore one of the glaring challenges facing South Africa – China relations, which is the current unbalanced international trade exchange.
As indicated earlier, South Africa's major exports to China have traditionally been raw mining products, in the region of $5.5-billion a year to China. In contrast, South Africa imports finished goods from China sometimes made from the same raw products. In order to grow its economy, South Africa needs to shed its current label of being perceived as “China’s mineral provider’ when the country has the capacity to become more productive in its export capacities.
President Jacob Zuma’s open declaration in Beijing that China-Africa trade relations need to move beyond ‘unsustainability’ in their current form to one in which a diversity of finished and unfinished African exports penetrate the Chinese market is a clear indication of forthright dialogue on China-South Africa trade relations.
This key aspect can also be attributed towards the Beijing Declaration, which indicates that both countries will work together to ensure a higher proportion of value added products in the exports which South Africa provides to China.
If South Africa were to export more value added minerals to China, it would in turn facilitate more employment, and promote the government’s mineral beneficiation objectives.
While China–South Africa relations only turn 15 this year, and there are still challenges that need to be ironed out, there is also cause for celebration as both countries can benefit more from each other in the near future.
As a major world economic power, China serves as a strong ally for the country. It is, therefore, up to South Africa to strategise its domestic and foreign policy interests with China to ensure that they benefit South Africa’s domestic and foreign policy interests.
Written by Funeka Yazini April, Research Specialist: Democracy and Governance at the Africa Institute of South Africa
1 Jackie Cameron. China, South Africa New Trade Statistics: It’s a Whopper. January 12, 2012. www.moneyweb.com
Sino-South African Relations: Coming Full Circle by Swaran Singh. African Security Review Vol 6 No 2 1997
3 John Frasier. December 11, 2012. China Tops in Trade with South Africa. www.ipsnews.net
4 Mbendi Information Services. China in South Africa. www.mbendi.com
5 Denine Walters. Sino-South Africa Relations: The Essence of South-South Cooperation. www.ConsultancyAfrica.com
7 Diplomatic Pouch. March 23, 2009. Has South Africa’s Foreign Policy Influence Peaked? www.saia.org.za
8 Bilateral trade relations between South Africa and China. www.trademarksa.org.za