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South Africa targets new China partnership as growth slumps

South Africa targets new China partnership as growth slumps

South Africa and China are working on a renewal of their ten-year strategic partnership in a bid to boost a commercial relationship that has been hampered by the Covid-19 pandemic.

The bid to renew the partnership, which was last agreed in 2014, was confirmed by South African finance minister Pravin Gordhan and Chen Xiaodong, China’s newly appointed ambassador to South Africa, in an event at the Chinese embassy in Pretoria on Monday.

The agreement, which the partners hope to have finalised by the end of the year, will focus on sectors including higher education, skills transfer, health, the digital economy, science and technology, according to Gordhan.

China is South Africa’s largest trading partner, but business has slumped amid the global slowdown prompted by the Covid-19 pandemic. Trade between the two countries fell by 27.6% in the first half of the year, with Chinese imports from South Africa down by 32.2% to $8.68bn, according to data from China’s General Administration of Customs. Chinese exports to South Africa slumped by about a fifth to $6.2bn. Total trade between the countries stood at $43.2bn last year.

The IMF projects that Chinese GDP will expand by just 1.2% this year compared to 6.1% in 2019, while South Africa will contract by 8% following pre-pandemic growth of just 0.2% in 2019. In early September, Ramaphosa confirmed that the government was finalising another major economic plan in talks with business and labour, but businesses are aware that past plans have been left unimplemented. 

“The economic relationship is important, and the political and diplomatic ties are strong. Although South Africa is seeking to develop a diverse portfolio of international partners, China certainly remains a key player in the basket,” says Chris Vandome, research fellow with the Chatham House Africa Programme.

“In this current environment, one of the key sectors will be extractives and primary commodities. Strengthening commodity prices, and the Chinese ‘infrastructure driven recovery’ could support a recovery in vital sectors. Chinese interests in South Africa have become increasingly diverse, from investments in financial services to the number of Chinese tourists visiting Cape Town each year. With a tentative opening of the South African border, these may play a role in recovery, but not in the immediate term.”

While South Africa hopes that a new partnership with China will return the relationship to its commercial pre-eminence, the negotiations also offer a chance to renew diplomatic ties. In March, outspoken Chinese ambassador Lin Songtian – known for Twitter diatribes against the United States – was recalled from Pretoria. Songtian had bluntly commented on the shortcomings of South Africa’s investment climate, warning that the government had to renovate its infrastructure and revitalise state-owned enterprises, including power utility Eskom, to attract investors and resuscitate the economy. His replacement by ‘heavy hitter’ Chen offers a chance to strengthen ties, writes Eric Orlander, co-founder of the China-Africa project.

“Chen’s appointment to the post reaffirms Beijing’s view that South Africa remains its most important diplomatic outpost on the continent. Chen is a senior diplomat with a long resume in both Africa and Asia,” he says.  

Despite the commercial opportunities, some South Africans remain wary about strengthening ties with China.

“In most cases China has become the go-to partner when it comes to sourcing development and infrastructure funding, often through not so transparent transactions. South Africa like other countries on the continent is beginning to look up to China for bailouts in infrastructure funding. This may create a dependency on China skills and funding in sustaining infrastructure on the continent, creating dependency relations with China,” says Ralph Mathekga, a Johannesburg-based independent political analyst. 

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Written by David Thomas

David Thomas is the Editor of African Business Magazine. He has also been published in the Financial Times, the Wall Street Journal, the Economist and South Africa's Cape Times.

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