Fwd: (Standard Bank) Economics : What next for China - South African ties?

[Douglas Scott]

Economics 24 November 2011

What next for China - South African ties? By Simon Freemantle*, Jeremy Stevens* While the global economy stumbles, ties between China and Africa have quietly flourished this year. China-Africa trade, for instance, is on course to increase from USD125bn in 2010 to a record USD155bn in 2011. In fact, only growth in China’s trade with Latin America is comparable to that with Africa. South Africa has served as the engine for Sino-Africa commercial ties in 2011: South Africa is forecast to import nearly twice as much from China in 2011 as it did in 2009 (USD13.5bn), remaining China’s largest market in Africa. South Africa’s exports of goods to China (USD15bn) will grow even faster than imports (and expand faster than any of China’s plus-USD1bn partners in Africa). Incredibly, that excludes South Africa’s biggest export to China so far this year – seemingly ZAR notes — which has already added an additional USD10.9bn. At the start of the year, just seven countries in the world had larger official Chinese FDI stocks than South Africa did, and considering the large commodity-related investments this year, FDI surged once again. Therefore, South Africa's largest-ever exposition in China, which started today in Beijing, evidently punctuates yet another mutually-prosperous year in China-South Africa affairs. Looking ahead, we urge South Africa to capitalise on China's growing engagements in a manner that accurately matches the country’s capabilities to South Africa’s domestic and regional priorities. To this end, seven areas offer immediate opportunities: (1) Poverty alleviation: no nation has been more successful than China in this area. (2) The creation of manufacturing nodes which produce goods for African markets, creating jobs and facilitating skill transfers. (3) Mineral beneficiation. (4) Infrastructure upgrades and modernisation — perhaps using RMB — to enhance economic competitiveness and erode supply-side bottlenecks. (5) Sustainable energy solutions. (6) Agriculture. (7) Tourism. Importantly, China-South Africa partnership must entrench South Africa’s corporate ties in the rest of Africa. South Africa must not forfeit the only market where it enjoys a comparative advantage for its goods. However, South Africa must do so in a manner that strengthens African development. To this end, co-operation between regional leaders, Kenya, Egypt, Angola, Nigeria and South Africa (KEANS) needs emphasis.

Contacts

Simon Freemantle* +27-11-3787318 Simon.Fr...@standardbank.co.za Jeremy Stevens* +86-10-66496761 Jeremy....@standardbank.com.cn

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