Developmental Impact of South Africa-Sino Relations

PESA Editorial - South Africa - 2Q2018/19

China has rapidly become an important trade partner and investor in the South African economy. Post-1994 the South African government sought to re-establish its presence in the international community through fostering bi-lateral relationships. South Africa established a formal bi-lateral relationship with China in January 1998[1]. South Africa’s membership in BRICS has further strengthened the bilateral relationship between South Africa and China. China’s global economic influence has resulted in BRICS becoming a powerful bloc in the international community. However, this power seems to have yielded very little benefit for South Africa. While China’s share of South Africa’s imports grows, South Africa’s share of China’s imports remains insignificant[2]. This means that there is an imbalance of power and unequal benefits in the bi-lateral relationship between South Africa and China.

 

South Africa and China have a strong cultural exchange. The Chinese diaspora has long had a community in parts of South Africa, since 1870[3]. The Chinese immigrant community has long been part of South Africa. The Pretoria High Court ruled in 2008 that South African Chinese citizens would benefit from the country’s black empowerment and employment equity legislation, as other people of colour in the country fully benefit[4]. In more recent years, education programmes and exchanges to China have become regular and more popular amongst young South Africans. The South African department of education further signed an agreement to allow schools in South Africa to teach Mandarin. This may have positive impacts for education and opportunities to study abroad for students. However, this has been criticised for being neo-colonial since the Chinese do not teach any South African indigenous languages. There appears to be potential for an imperialist complexity in the socio-political relationship between South Africa and China.

 

China is the second largest importer of mineral resources, after the United States[5]. The majority of Chinese mining projects and mineral resources imports are from Sub-Saharan Africa. Along with zero tariff treatment for Africa’s least developed countries, the Chinese’s demand for mineral resources has given a boost to African exports, including South Africa. South Africa and China’s trade relationship is dominated by exports of crude materials to China. From 2011 to 2016 exports to China averaged 10.3% of total South African exports, decreased to 7.9% in 2017 on the South African market [6]. This is a large stake of the export market for a single country[7]. This means that China’s consumption of South African goods has a significant impact on the South African exports and economic growth.

 

PESA Editorial - South Africa - 2Q2018/19
Source: UNCTAD 2018, UNCTADStat Database.

South Africa primarily exports crude materials, manufactured goods, machinery, transport equipment and chemicals[8]. Other minor exports include mineral fuels, beverages, tobacco, food and live animals[9]. These exports increased between 2011 and 2015. Particular highs were in 2011 and 2013. Exports to China were 11.6% of total exports in 2011, and 12.7% in 2013[10]. 2015 saw a decrease to 8.3% of total exports[11]. The decline of Chinese exports to 7.9% in 2017 is indicative of South Africa’s declining exports and gross domestic product between 2014 and 2017.

 

South African imports of Chinese manufactured goods have become a substitute for Western manufactured goods. South Africa has been able to import manufactured goods at a cheaper price from China[12]. However, this has had an adverse effect on the South African manufacturing industry. An influx of cheaper manufactured goods makes it difficult for local industries to compete. The domestic market is stifled therefore by cheaper imported goods. Chinese goods are priced at approximately 63% of the price of other imported manufactured goods[13]. This has driven down the price of domestic goods and local producers seek to compete with Chinese goods.

Beyond trade relations, China’s Foreign Direct investment (FDI) in South Africa has played an important role. China has become a major source of FDI for South Africa. In 2015 the South African government signed agreements worth USD 6.22 billion in FDI agreements with China[14]. Chinese firms are investing in maritime economic development, development and training in the health and medical sciences, science and technology research, and education[15]. Chinese firms have also entered into an agreement with the department of public enterprises to partner on infrastructure projects[16]. The Chinese governments also has loan agreements with some public enterprises such as Eskom and Transnet, and partnerships with private companies such as Standard Bank and Naspers[17]. In July 2018, the president of China pledged to invest USD 14.7 billion in South Africa, in addition to the loan agreements for state-owned enterprises[18]. China thus has a large footprint in South Africa’s FDI inflows. However, infrastructure projects from China have proven to be costly for South Africa as the quality of the infrastructure has often been found unsatisfactory.

 

In conclusion, South Africa’s relationship with China has granted South Africa increased investment, a decreased dependence on the US and the UK, as well as an expanded export market. The BRICS partnership has helped South Africa position itself as an important partner in the global South and solidified bi-lateral relations with other members of BRICS. However, Chinese imports have had a negative impact on the domestic economy. Moreover, the balance of power is unequal as China is a large consumer of South African exports, while South Africa is an insignificant importer on China’s export market.

 

China is an important trade partner and thus has an impact on South Africa’s economy particularly where jobs are concerned. Furthermore, Chinese capital investment injections have been valuable to government development programmes. However, as a development partner, China has yet to have a profoundly positive impact. The effects of Chinese goods on the domestic economy require regulatory measures. Furthermore, quality on infrastructure projects needs to be assured by Chinese firms in order for China to be a more beneficial development partner.


[1] DIRCO 2018. Bi-Lateral Relations with the Republic of China, on the Department of International Relations and Cooperation Website, viewed on 1 August 2018, from http://www.dirco.gov.za/.

[2] Asuelime, L. 2018. ‘The Cons of South Africa’s Membership in a China-led BRICS: An Appraisal’, Journal of African Union Studies, Vol. 7, Issue 1, pp. 115-128. Available At: https://www.researchgate.net/ [Last Accessed: 12 September 2018].

[3] French, H. 2014. China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa, Random House LLC: New York.

[4] DTI 2013. National Broad-Based Black Economic Empowerment Summit: A Decade of Economic Empowerment (2003-2013), Department of Trade and Industry: Pretoria. Available At: http://www.dti.gov.za/ [Last Accessed: 1 August 2018].

[5] Owusu-Sekyere, E. 2017. ‘Southern Africa - China Economic Relations: Trends and Outcomes - Trade and Industry’, Presented at the Prospects for SADC Regional Integration through Industrialization and the Role of China Conference, Human Sciences Research Council, Johannesburg, 20-21 April. Available At: http://www.hsrc.ac.za/ Last Accessed: 12 September 2018].

[6] UNCTAD 2018. UNCTADStat, United Nations Conference on Trade and Development: Geneva. Available At: http://unctadstat.unctad.org/ [Last Accessed: 12 September 2018]; SARS 2018. Merchandise Trade Statistics 2018, on the South African Revenue Service Website, viewed on 1 August 2018, from http://www.sars.gov.za/.

[7] UNCTAD 2018. UNCTADStat, ibid.

[8] UNCTAD 2018. UNCTADStat, ibid.

[9] UNCTAD 2018. UNCTADStat, ibid.

[10] UNCTAD 2018. UNCTADStat, ibid.

[11] UNCTAD 2018. UNCTADStat, ibid.

[12] Edwards, L. and Jenkins, R. 2014. The Competitive Effects of China on The South African Manufacturing Sector, Development Policy Research Unit: Cape Town. Available At: http://www.dpru.uct.ac.za/ [Last Accessed: 12 September 2018].

[13] Edwards, L. and Jenkins, R. 2014. The Competitive Effects of China on The South African Manufacturing Sector, ibid.

[14] PoSA 2015. More Than Twenty Agreements Signed as President Zuma Hosts President Xi Jinping on a State Visit, on the Presidency of South Africa Website, viewed on 12 September 2018, from http://www.thepresidency.gov.za/.

[15] PoSA 2015. More Than Twenty Agreements Signed as President Zuma Hosts President Xi Jinping on a State Visit, ibid.

[16] PoSA 2015. More Than Twenty Agreements Signed as President Zuma Hosts President Xi Jinping on a State Visit, ibid.

[17] PoSA 2015. More Than Twenty Agreements Signed as President Zuma Hosts President Xi Jinping on a State Visit, ibid.

[18] Winning, A. 2018. China's Xi Pledges $14.7 Billion Investment on South Africa Visit, on the Reuters Website, viewed on 12 September 2018, from https://www.reuters.com/.


Share the Love

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.