This may be China’s ”year of Africa”, but as Premier Wen Jiabao toured the continent signing resource deals and promising development assistance, considerable ambivalence was evident in South Africa’s response.
Anxiety over the competitiveness of the domestic manufacturing sector in the face of China’s extraordinary export performance jostles for space in the minds of policy-makers with plans to speed up the shipping of primary commodities to Chinese factories and admiration for the Chinese development model.
Enthusiasm for ”South-South” partnership at the World Trade Organisation and the United Nations, or at least for a new superpower to play off against the United States, sits uncomfortably with concern about the effects of Chinese ascendancy on programmes such as the New Partnership for Africa’s Development (Nepad), on which South Africa has staked considerable prestige.
The ”developmental state” approach to building South Africa’s economy looks not to China, with its powerful state-owned companies and centrally directed investment plans, for some of its inspiration, but it is trade that has attracted the most attention locally ‒ just as it has in Chinese relations with Europe and the US.
Trouble over trade
There are at least two dimensions to the question of the trade balance with China. The first is at the level of raw trade-deficit figures. According to South African data Chinese imports to South Africa in 2005 exceeded South African exports to China by R23-billion.Cash-flush local consumers stocked up on appliances, clothing, and electronic goods worth R31-billion, while the Chinese spent just R8-billion on South African products — the vast bulk of them primary commodities such as iron ore.
Chinese officials, however, counter that the trade is, in fact, in balance.
South African minerals exports are traded by multinational agents, or through the London metals exchange, so their final destination may not accurately be reflected in trade statistics, they argue. Indeed, one of the primary concerns for local resource companies, such as iron miner Kumba, is that creaking ports and rail infrastructure make it impossible for them fully to capitalise on Chinese demand.
The second dimension is harder to wish away. In 2005 almost all Chinese imports were manufactured goods — appliances (41%), clothing (26%) and other light manufactures (13%). In contrast, 73% of South African exports to China were from the minerals sector, and 9% were in petroleum and basic chemicals. We are importing labour intensive, value-added products from China, and exporting iron ore, platinum, and chemicals, which create only limited jobs.
And the effect of strong Chinese demand on commodity prices may be compounding the problem. China’s hunger for resources is seen by many analysts as the primary factor in the sustained commodity boom of recent years. The result has been strong cash inflows into resource-based economies on the continent, and around the world. But the flip side of booming commodity exports can be the ”Dutch disease” of a currency so strengthened by resource exports that the manufacturing sector becomes uncompetitive.
The concern for economists such as the Congress of South African Trade Unions’s Neva Makgetla is that this can trap resource-based economies at the bottom of the development ladder, unable to develop more sophisticated — and employment-creating — industrial capacity
The hard-pressed clothing and textile industry is the poster child for this argument, and South African negotiators spent the weeks ahead of Wen’s visit pressing for a deal that would see China agreeing to limit further growth in its clothing and textile exports.
What they emerged with was an agreement that China would, as Wen put it, ”exercise self-restraint”. Full details were not immediately available, but Department of Trade and Industry officials said the agreement would cut imports by 30% for three years, to give the local textile sector time to restructure. It was not clear, however, what the baseline figure for that agreement is, or how enforceable it will be.
”It doesn’t mean much,” argues Martyn Davies, the director of Stellenbosch University’s Centre for Chinese studies. ”The textile sector in China is privately controlled, and it just isn’t manageable from Beijing.”
Certainly South Africa has pulled back sharply from broader plans to open up trade. Wen and President Thabo Mbeki watched on Wednesday as Chinese and local officials signed a limited set of cooperation and trade facilitation agreements, ranging from standards for the export of citrus fruit to commitments to work together on nuclear energy projects. These, Wen suggested, were the ”first steps in a journey of 10 000 miles”.
That is a long way from the full free-trade agreement that was mooted two and a half years ago — a proposal that provoked intense protest from trades unions. Officials are now talking about a much more modest agreement.
”We want to do something specific to China. Because of the imbalances you wouldn’t do a classical free trade agreement; there is concern about being overwhelmed, which is probably legitimate,” Director General in the Department of Trade and Industry Tshediso Matona told the Mail & Guardian. Instead, he said, talks would look to harness the capacity of the Chinese state to direct investment.
An overstretched trade team at the department certainly will not be rushing into anything, however, with few observers expecting substantive talks to start this year.
A new scramble for Africa?
African diplomacy is even more complex. China is now a major player in the competition for African resources and, as Western diplomats point out, its relatively late arrival on the scene has left it with no alternative but to look for them in some problematic parts of the continent.
Sudan is the most obvious example. Chinese state-owned companies have made major investments in the Sudanese oil sector and, in return, for this access, China has provided its powerful diplomatic backing, in 2004 threatening to veto any UN resolution that would impose sanctions over the crisis in Darfur.
In Angola, Wen this week added $2-billion to an existing $3-billion line of credit backed by oil contracts. That means President Jose Eduardo dos Santos can bypass International Monetary Fund and World Bank governance rules. Angola is now neck and neck with Saudia Arabia in the race to be China’s top oil supplier and Chinese construction firms are now in the vanguard of Angola’s infrastructure redevelopment programme, rebuilding roads, schools, and clinics destroyed by years of civil war.
”State-owned Chinese companies have a different time line, and they are able to do deals that simply aren’t commercial,” said one Western diplomat who has seen firms from his home country lose out in the battle for oil rights.
Davies is more sanguine: ”Here is an economy that is much less cognisant of risk than our traditional European partners, I wish others were as gung-ho,” he says. ”In any event South Africa is also engaging commercially in Sudan, in Angola, in Equatorial Guinea.”
Asked this week whether he was confident that China would support and accommodate the economic development and governance goals of Nepad, Mbeki stressed the history of Chinese support for decolonisation across the continent, and said ”China has always insisted that its involvement would be guided by what the Africans themselves wanted.”
Wen repeated his insistence that China has ”no selfish interest in Africa”. ”We respect the principle of mutual benefit, equality and non-interference in each other’s affairs. We encourage African countries to improve democracy and the rule of law … and have full confidence that [they] can deal with these issues.”
This week’s brief meeting between Wen and Nepad head Firmino Mucavele is a clear sign that China wants to acknowledge Mbeki’s desire to have Nepad on the agenda. But many observers are still nervous that the contest for resources, particularly oil, between China and the West will see a repeat of the ideological proxy battles of the post-independence period, ultimately doing little to enhance Africa’s development.
”This notion that the Chinese are coming is not accurate,” Davies maintains, ”The world is coming, and it is coming out of China.”
Chicago-based economist David Hale argues in a recent discussion paper for the Brenthurst foundation that South Africa should make China one of the ”critical foundation stones of its foreign policy, not just an appendage of its trade policy”.
”If Pretoria could become influential in Beijing it would not only achieve greater power on the African continent but would also enjoy greater respect in Washington, Tokyo, London and other capital cities concerned about the rise of China.”
For all their ambivalence, South African officials seem to realise that. Whether they can pull it off remains to be seen.