South Africa: China ties take flight

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The announcement in December that direct flights will soon link Beijing and Johannesburg was a fitting end to a year that has seen South Africa-China trade ties rise past expectations.

National carrier South African Airways said late last year that China’s capital and the African nation’s business hub would be linked by the air route in late January 2012, with a 15-hour flight three times weekly on Airbus A340-600 long-haul aircraft.

The news caps an important year in business relations between the two BRICS members, which has seen South African exports to China increase some 44% to a record $15bn in 2011, according to projections by South Africa’s Standard Bank. Trade between China and the African continent as a whole is forecast to grow by $30bn to $155bn in 2011, and is expected to rise to $300bn in the next three to five years. Imports from China rose to $13.5bn, from $8.8bn in 2010, including $2bn worth of nuclear reactors and machinery and $2bn in electrical equipment and appliances in 2011.

By comparison, South African exports were dominated by primary commodities, led by minerals, although sales of coal to its largest trading partner also surged to a projected $602m.

Billing itself as a gateway into Africa, South Africa’s mineral resources minister, Susan Shabangu, said at a Mining Ministers’ Forum in Tianjin that the value of South Africa’s mineral exports to China for the past four years indicated a compounded annual growth rate of more than 50%, attributing this in part to the “galloping” growth of the Chinese economy.

November also saw Shabangu remind Chinese investors of the country’s potential, promoting the ability of the country’s one-stop shop for mineral rights, environmental authorisations and water licences to shorten turnaround times for prospecting and mining concesssions, and improve the general competitiveness of the mining industry

The importance of the mineral market was brought into focus by major deals inked in September, with a memorandum of understanding (MoU) on geology and mineral resources cooperation and a $2.5bn agreement for the development of financial cooperation signed between deputy president Kgalema Motlanthe and Chinese Vice-President Xi Jinping.

“To that end, the difference is, instead of just exporting these minerals as raw materials, there will be ... value added to create jobs on both sides,” Deputy President Motlanthe said. South Africa’s government is aiming to dramatically reduce the unemployment rate in the coming years, which is estimated at around 25%.

For its part, Beijing has also sought to stress that ties are not solely based on mining, with Chinese Premier Wen Jiabao pledging in September that he would encourage Chinese companies and financial institutions to participate in transport, energy and communications infrastructure, and “support the two sides to expand cooperation in new energy and renewable energy, manufacturing, green economy and agriculture”.

Trade and investment diversification between the two countries has already made sizeable inroads in other sectors. In early autumn, for example, national oil company PetroSA signed an MoU with China International United Petroleum and Chemicals (Unipec) on the purchase and sale of crude oil and refined petroleum products. In the same month it inked an agreement with China’s state-owned petroleum and petrochemicals group, Sinopec, that it said would pave the way for “cooperation” on the development of a $11bn, 400,000-barrels-per-day crude refinery planned for the Coega industrial development zone in the Eastern Cape.

The trend of diversification would fit with a recent report by the African Development Bank (AfDB) which stated that Sino-African ties have “matured” and are no longer based on resource extraction alone. “In recent years, (China-Africa) relations have extended to actual development issues such as climate, food security and energy,” said the AfDB.

In the past, South Africa’s business ties with China have been strained by concerns that the Asian giant was more a competitor than a partner, particularly in light manufacturing and textiles. However, the AfDB said in its report that while improved quality controls would limit the continent’s import of many items, Africa’s medium-sized firms have become competitive enough to target China’s large domestic marketplace.

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