Pretoria's efforts to build close ties with Beijing are paying dividends
Industry Reports by Synergy Media Specialists
While Western economies battle with sluggish growth, sovereign debt crises and government inertia, China is becoming an increasingly assertive commercial actor in South Africa. Beijing views South Africa as its foremost strategic partner in Africa and a major player in multilateral global politics.
I wrote in 2010 that China and South Africa's "strategic partnership" was underperforming on the commercial front. I said that South Africa needed to "do more to leverage its political relations with Beijing for greater investment return". This is no longer the case. Politics has enabled China's strong pipeline of investment into South Africa. Since August 2010, there have been four high-level political engagements between Pretoria and Beijing - President Jacob Zuma's state visit (August 2010), Vice-President Xi Jinping's visit to South Africa (November 2010), the BRICS (Brazil, Russia, India, China and South Africa) summit, which Zuma attended in Sanya (March 2011), and Deputy President Kgalema Motlanthe's trip to Shanghai and Beijing. Pretoria's political efforts to build close ties with Beijing - far more than under former president Thabo Mbeki - are now paying commercial dividends. Most of the investment is in mining resources and manufacturing. In May 2011, the China-Africa Development Fund, state-owned mining firm Jinchuan and China Development Bank, providing debt finance, invested US$877 million into the listed platinum firm Wesizwe Platinum. The investment created 3,500 permanent jobs in Northwest Province. Other investments are into Johannesburg Stock Exchange-listed mining firms Metorex (US$1.335 billion), Gold One (US$158.7 million), FAW into a car manufacturing plant in the Eastern Cape (US$100 million), and another car factory in Harrismith to the value of US$1 billion. These projects reflect China's confidence in South African business.
South Africa in China
In contrast, the relatively few South African corporations that have invested in China have been extremely successful in penetrating its often challenging market. A handful of firms have been "industry shapers" in the Chinese economy. After entering the market in 1994, SABMiller is the largest brewer by volume in China and Naspers is the leading foreign media player in what is China's most closed sector for foreign firms, having adopted an apolitical approach to investment, in contrast to that of Google. South Africa possesses the only private sector in Africa that is able to effectively engage the China market and this comparative political advantage needs to be further leveraged in the future.
The pace of China's industrial rise and integration into the global economy through trade continues to force other economies to adapt. It is exposing competitive weaknesses in industrial sectors in our economy at a speed that has taken government by surprise. One could argue that government's recent Industrial Policy Action Plan (IPAP) is a strategic response to competition from China - our single largest trading partner.
South Africa's public and private sectors need to get a handle on China's drivers of competitiveness in order to compete better. Protectionism and insular policies designed to discriminate against Chinese competition are not sustainable and only satisfy a domestic political constituency. Ultimately however, the structural issues of improving competitiveness need to be addressed.
Aligning our interests in Africa
As China expands its presence in Africa, the interests of China and South Africa will increasingly intersect. For South African business, China's move into the continent poses a major strategic consideration. Chinese firms have rapidly established themselves in markets which South African firms have been slow to expand; into Angola for instance. Perhaps the question of the previous government in Pretoria is "who lost Angola to China"?
Do we seek to compete or collaborate with Chinese business in the sub-Saharan region, which has - at least Anglophone Africa - become South Africa's commercial sphere of interest? To better engage China's "state capitalist" approach, it is imperative that we reduce the disconnect between the state and the private sector in South Africa in order to enhance our ability to project a more co-ordinated and focused economic diplomacy in Africa - a region in which China is now the most influential trader, provider of capital and commercial actor. South Africa needs to make a conscious decision to strategically position itself and couple its economy with the Chinese long-term growth train.