South Africa wants to learn extra from its lively, albeit extremely unequal, buying and selling partnership with China.
South Africa’s whole bilateral commerce with China soared from US$1.34 billion in 2000 to US$34.18 billion in 2023. However as a result of South Africa exports primarily uncooked supplies to China, and imports primarily manufactured objects, the upswing has been overshadowed by a persistent commerce imbalance that favours China.
The surge in commerce was pushed by complementary financial wants, strategic partnerships and insurance policies beneath the Discussion board on China-Africa Cooperation (FOCAC), arrange in 2000 and BRICS, launched in 2009.
By 2008, China had overtaken america (US) as South Africa’s largest buying and selling companion, with South Africa changing into China’s greatest market in Africa. BRICS strengthened financial ties between the 2 international locations, providing a framework for high-level discussions and agreements to boost commerce.
Future buying and selling relations look promising. China is poised to deepen its financial integration with South Africa, capitalising on prevailing tensions between South Africa and the US on account of President Donald Trump’s damaging stance in the direction of South Africa and BRICS.
However South Africa’s commerce deficit with China is worsening, rising from lower than US$1 billion between 1988-2000 to US$9.71 billion by 2023 (Chart 1). Since FOCAC’s inception, this commerce imbalance has resulted in an amassed money outflow of US$114.83 billion from South Africa to China. Since 2014, South Africa’s imports from China have almost doubled the worth of its exports.
South Africa solely raised issues about these alarming developments in 2024, on the ninth FOCAC assembly. Motion to deal with the commerce imbalance is lengthy overdue – what will be finished to make sure a mutually useful end result?
Answering that query requires analyzing South Africa’s high traded commodities with China. South Africa’s exports have been closely dominated by ores, slag, and ash, which have elevated from 39% to 64% since FOCAC started (Chart 2).
Earlier than FOCAC, autos have been South Africa’s second-largest export to China. This class has nevertheless declined to only 0.4% between 2001-2023, changed by iron and metal, which almost doubled over the identical interval. Which means South Africa’s high 5 exports to China in the course of the FOCAC period comprised principally mineral merchandise and metals.
When it comes to imports to South Africa from China, electrical equipment, gear and electronics have been the main objects, accounting for 13% earlier than and 25% since FOCAC started (Chart 3). These have been adopted by nuclear reactors, boilers, equipment and mechanical home equipment, which rose from 11% to 21%.
Attire and natural chemical imports declined in the course of the FOCAC period. Nonetheless, these merchandise nonetheless rank amongst South Africa’s high 5 imports from China.
Whereas South Africa’s car exports to China dropped since FOCAC began (Chart 2), the Chinese language car market expanded in South Africa over that interval. The share of autos in South Africa’s imports from China greater than doubled from 1.6% earlier than FOCAC to three.3% after.
This evaluation highlights the financial dependencies and structural challenges contributing to the persistent commerce imbalance between South Africa and China. 4 important facets of the commerce relationship stand out.
First is export composition and the position of Chinese language investments. China primarily engages South Africa for mineral commodities and metals to feed its personal manufacturing trade. Which means South African export patterns are largely tied to the value volatility and manufacturing fluctuations of mining commodities, reflecting development by way of intensive slightly than in depth margins (diversification) or sophistication (worth addition).
These commodities are capital-intensive and predominantly managed by international buyers, together with China. A number of Chinese language corporations have substantial stakes in South African mining operations, resembling Wesizwe Platinum, Shanduka Group and varied chromium and iron ore initiatives. A lot of the nation’s mineral exports to China most likely originate from these Chinese language mining investments. Equally, different international mining buyers doubtless export ores to their dwelling international locations or third-party nations for processing.
Mineral beneficiation – or processing uncooked supplies domestically – is crucial to attain export development by way of diversification and worth addition. That may stimulate South Africa’s manufacturing sector and create job alternatives.
The second notable facet of the South Africa-China relationship is export diversification and agricultural merchandise. In 2024, Presidents Cyril Ramaphosa and Xi Jinping acknowledged the necessity to diversify South Africa’s export basket to incorporate extra agricultural merchandise to assist mitigate the commerce deficit. However the specifics of this diversification weren’t clearly outlined.
South Africa might exploit China’s rising demand for fruits and nuts whereas exploring different rising demand developments. It will require clear methods, agricultural sector investments and the event of value-added agro-processing industries.
Third is the influence of China’s manufactured imports on South Africa’s industries. Importing manufactured items, significantly clothes, electronics and different shopper merchandise, crowds out South African industries. Many small and medium enterprises battle to compete with comparatively cheaper Chinese language imports.
Protectionism measures resembling tariffs and quotas on Chinese language imports that immediately compete with native merchandise are wanted, together with import substitution insurance policies. These might embody incentivising buyers and supporting native entrepreneurs to develop industries that produce items presently imported from China.
Nonetheless, these initiatives – together with home mineral beneficiation – have to be supported by sturdy anti-corruption measures. Such measures can assure that tariffed items enter the South African market by way of professional channels and that uncooked mining merchandise aren’t exported of their unprocessed kind.
The fourth facet is the structural imbalance in bilateral commerce and pan-Africanism. South Africa-China commerce relations, and China’s general engagement with African international locations, are primarily pushed by its demand for uncooked supplies and have to safe markets for its manufactured items.
Whereas this association could possibly be mutually useful, African international locations are sometimes deprived by their uneven negotiating energy and fragmented method to commerce and funding offers with China and different international gamers.
The African Continental Free Commerce Space (AfCFTA) might foster unity in commerce negotiations and strengthen intra-African worth chains and commerce in intermediates and completed items. That may assist African international locations scale back their dependency on exterior financial and political relationships, whereas selling financial diversification and sustainable development.
South Africa’s commerce deficit with China isn’t just a bilateral difficulty; it displays broader classes for Africa’s engagement in international commerce.
First, financial partnerships should transcend uncooked materials exports to make sure long-term advantages. Commerce imbalances will persist with out diversification and native worth addition, limiting industrial development and job creation.
Second, whereas international funding is crucial, African nations should negotiate from a place of energy, making certain that such investments align with nationwide and regional growth priorities slightly than reinforcing dependency.
Third, resilience in international commerce requires adaptive methods. International locations should anticipate shifts in demand, develop high-value sectors and construct aggressive industries that may face up to exterior shocks.
Final, no single African nation can successfully problem structural commerce imbalances alone. Strengthening regional cooperation by way of frameworks like AfCFTA gives collective bargaining energy, higher commerce phrases and extra mutually useful relationships with international financial companions, together with China.
This text was first printed in Africa Tomorrow, the weblog of the ISS’s African Futures programme.
Marvellous Ngundu, Analysis Marketing consultant, African Futures and Innovation, ISS
