SA tries to change China's relations with Pretoria and Africa

18 December 2014

President Jacob Zuma's state visit to China earlier this month was euphorically referred to in one report as a ‘second coming,' a reference, literally, to the fact that he had just visited Beijing in 2012. But the double entendre was surely not accidental, giving some impression of how reverentially this relationship is regarded in Pretoria.

The African National Congress government has long eyed the wealth of China with envy, hoping to tap it as a major contributor to the solution of its development dilemma.

South Africa's determined campaign, which culminated in its acceptance into BRICS in 2011, was largely about getting closer to China.

Once it had done so, there was some gloating in the government and a tendency to use the BRICS membership as a rod to beat on South Africa's Western partners. Zuma went public a few times to say South Africa's new allies treated it as an equal, whereas its traditional European partners treated it as a ‘former colonial subject.'

Ironically, though, South Africa's economic relationship with China remains, in a sense, more colonial than its relationships with the European Union (EU) or the United States (US).

South Africa's trade relationship with both the EU and US is much more balanced than that with China, to a large extent because of considerable exports of manufactured goods to the EU and US. By contrast, the trade gap with China remains very large because China still imports mainly raw materials and still exports mainly manufactured goods, a pattern which is repeated in its relationships with much of the world.

South Africa's trade relationship with the EU became even more favourable this year with the signing of the EU-SADC Economic Partnership Agreement (EPA), which significantly increased South Africa's access to the EU market. (Although the restrictions that the EU placed on the imports of citrus because of black spot fungus had the opposite effect.)

Nonetheless through the EPA deal, South Africa won greater access to the EU market for 32 agricultural products, especially wine - with an increase in the quota from 40 million litres to 110 million litres a year; sugar, with a new quota of 150 000 tons a year and ethanol, with a new quota of 80 000 tons a year, all duty free.

It was rather instructive to compare this with the agreements that South Africa signed during Zuma's state visit, in which China agreed merely to ‘expedite the negotiations' which are taking place for protocols on the phytosanitary requirements which will have to be met before South Africa may export just two agricultural products to China - maize and apples.

However it is precisely to try to redress the unbalanced economic relationship that South Africa has been cosying up to Beijing, ever since Pretoria switched relations from Taiwan to China in 1998. It now engages Beijing actively on three fronts: the bilateral, with an enhanced strategic partnership; the regional, through the Forum for China Africa Cooperation (FOCAC); and the multilateral, through BRICS and otherwise.

The signs of Pretoria's active diplomacy to correct the economic imbalances in the relationship were evident in the agreements reached on the state visit. The agreements to accelerate negotiations for South African food exports were among them. Others included a more general agreement on agricultural cooperation and several agreements by China to help South Africa advance its industrialisation strategy to improve beneficiation and addition of value to raw materials.

China agreed to help develop science, technology and industrial parks and to support South Africa's strategy for developing its blue ocean economy. China specifically agreed to support the development of railway parks in South Africa to boost the local participation in joint carriage manufacture.

China also agreed to reduce South Africa's skills gap and especially to help create black industrialists to participate in the mainstream economy, although how it would do that was not made clear.

Beijing promised to encourage Chinese companies to invest in South African economic zones and industrial, science and technology parks and said it was ‘ready to consider favourable lending rates for financing specific projects.' And it would facilitate missions to South Africa by Chinese companies to consider buying into enterprises that add value to raw materials.

This was an impressive list of commitments that, if realised fully, would significantly boost Pretoria's industrialisation plans and address the trade imbalance. However it remains a promise and sceptics might suggest that such promises and plans have lain on the drawing board for some time.

Yet there are signs that the plans are now beginning to be realised, as Chris Alden and Yu-Shan Wu of the South African Institute of International Affairs pointed out in a recent article in Independent Newspapers.

‘The announcement of a joint agreement between the Industrial Development Corporation (IDC) and Hebei Iron and Steel Group to open a steel mill in Phalaborwa could signal a new stage in the longstanding relationship between South Africa and China.

‘Financed in part by the China Africa Development Fund, the deal reportedly involves the Chinese company taking a 51% share in the joint venture and building a processing plant that will go beyond the mere extraction of resources for export and generate local employment.'

As the authors note, Chinese investors are still very cautious about venturing into South Africa, and so South Africa has three or four times more investment in China than vice versa. Yet with investments such as Hebei and the expansion of Hisense and the FAW automotive manufacturing plants, that is slowly changing.

South African officials also insist that something comparable is happening in China's economic relationship with the whole of Africa.

In the same way that it is using its strategic partnership and its relationship through BRICS to advance its agenda of re-balancing the bilateral relationship, so South Africa is using FOCAC - and, to some extent also BRICS - to try to alter Africa's relationship with China.

Before FOCAC was launched in 2000, Beijing focused on bilateral relations with Africa. That enabled it to retain control more easily. And its relationships tended to focus on countries with useful raw materials, such as Angola and its oil.

But, very much under Pretoria's guidance, Africa has pushed towards a relationship of China with Africa as a whole, through the African Union (AU), the regional economic communities (RECs), New Partnership for Africa's Development (Nepad), the African Development Bank (AfDB) and the regional development banks such as the Development Bank of Southern Africa.

And the main aim of this shift in engagement with Africa is to harness Chinese support for regional integration here. To put it simply - the idea is to encourage Beijing to build fewer national stadia and more highways and bridges connecting different countries.

South African officials say this is happening, as China is establishing a widening range of relationships with the African multilateral institutions, including the economic ones. To a degree, this new relationship with Africa also remains on the drawing board. But officials say that is also slowly changing.

They say Beijing is ‘putting real money' into the AfDB's initiative to move regional integration projects from the drawing board to bankability and it is now reaching out to the RECs, most recently the Southern African Development Community (SADC). The officials also say they believe two big Chinese companies will invest in the fabled Inga hydroelectric project on the Congo River, probably as a result of Pretoria lending its credibility to it, by agreeing a year ago to buy the major part of the power that will be generated in its first phase.

‘And we will continue to put pressure on Beijing to engage Africa as a whole,' one official said.

Peter Fabricius is Foreign Editor, Independent Newspapers, South Africa.

This article first appeared in ISS Weekly, the online newsletter of the Institute for Security Studies.

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