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With 25 per cent unemployment, South Africa is seeking labour-absorbing investments in sectors such as roads and energy. Photo: Bloomberg

South Africa enlists Bank of China to help pull in Chinese investment

State visit by South African president will see signing of agreement to boost Chinese spending in infrastructure, minerals and green energy

South Africa's Department of Trade and Industry will sign a memorandum of understanding with the Bank of China during the state visit of South African President Jacob Zuma to Beijing next month in a bid to attract more Chinese investments into South Africa's troubled economy.

Under the memorandum, the Chinese state-owned bank will recruit Chinese investment firms to invest in Africa's second biggest economy in sectors including infrastructure, minerals and green energy, said Brian Soldaat, director of investment promotion at South Africa's Department of Trade and Industry.

Over the next three years, the South African government will spend over 800 billion rand (HK$561.4 billion) on infrastructure including railways, roads, energy, water and telecommunications, said Zanele Sanni, chief director of export promotion and marketing at the department of trade and industry.

"The unemployment rate in South Africa remains high. It is important that we promote a more labour-absorbing industrialisation with a particular emphasis on labour-intensive goods and services. South Africa needs to ensure diversification beyond commodities," said Sanni.

South Africa hopes to see significant co-investment in the African state's infrastructure by Hong Kong and Chinese companies, and the South African government is talking to Hong Kong and Chinese companies on this matter, said Soldaat.

In previous years, the South African government's investment in infrastructure had been much less. South Africa needs to create jobs to alleviate its 25 per cent unemployment rate.

In March, two Chinese state-owned rolling stock makers, CSR Corp and China CNR Corp, won a 50 billion rand contract to supply rolling stock to Transnet, a South African state-owned rail, port and pipeline company. CSR and CNR are investing in rolling stock factories in South Africa, said Sanni.

South Africa aims to achieve gross domestic product growth of more than 5 per cent by 2019, she added.

Standard & Poor's cut South Africa's credit rating to one level above junk on June 13, citing concerns that the government's finances may be harmed as growth slows. Fitch Ratings reduced its outlook on the nation's creditworthiness to negative from stable on the same day.

From 2003 to August this year, 45 Chinese companies have invested 13 billion rand in South Africa, creating 12,354 jobs, Soldaat said. China is among the top 10 investors in South Africa. From 2006 to July this year, South Africa attracted the biggest share of Chinese investment among Sub-Saharan African nations at 14 per cent, followed by Nigeria, Africa's biggest economy, which attracted 12 per cent, according to a report by Mayer Brown, an international law firm.

"China has become our largest trading partner, but it is heavily skewed towards China, characterised by raw commodities," Sanni added.

South Africa's trade with China rose 32 per cent to 270 billion rand in 2013, but South Africa's trade deficit with China increased to 38 billion rand in 2013 from 36 billion rand in 2012, according to official South African data.

This article appeared in the South China Morning Post print edition as: S Africa enlists BOC to help draw investment
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