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Tuesday, April 16, 2024

South Africa Slow in Taking Advantage of China’s Belt and Road Initiative (BRI)

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Jaya Josie, Advisor, China Africa Center Zhejiang University International Business School (ZIBS) and Professor Adjunct University of Venda

South Africa signed a Belt and Road Initiative (BRI) Memorandum of Understanding with China in December 2015 to build the Silk Road Economic Belt and 21st Century Maritime Road. However, it took eight years for South Africa and China to sign the letter of intent on 23 August 2023 to jointly build the BRI to enhance bilateral cooperation between the two countries.

China’s National Development and Reform Commission (NDRC) and the South African department responsible for the country’s Economic Reconstruction and Recovery Plan (ERRP) framework have finally decided to continue communications to facilitate bilateral cooperation and implement the consensus reached by the leaders of both countries.

Despite the slow progress in implementing the level of bilateral cooperation some progress was made in certain areas. In June 2023, at the China-South Africa New Energy Investment and Cooperation conference, held in Sandton, South Africa’s ambassador to China Siyabonga Cwele highlighted progress on major issues such as green and sustainable, development; the digital economy; the just energy transition; technology exchange and skills required for the future.

The big problem facing South Africa currently is the regular electricity blackouts that plague the country and negatively impact the economy. The negative impact is felt by many major industries and, small and medium industries are finding it difficult to sustain their businesses in a climate of uncertainty.

While many countries in Africa have moved ahead in BRI collaboration in the areas of energy, transport, rail and port infrastructure South Africa has lagged behind. The results of South Africa’s recent economic slowdown and growing unemployment, inequality and poverty trends have given the South African government a rude wake-call.

On 11 August Engineering News reported that South Africa’s Trade, Industry and Competition Minister, Ebrahim Patel signed purchasing agreements between South Africa and companies from China with the intention of boosting the economy and job creation for young people in South Africa.

The signing followed discussions with China’s Minister of Commerce Wang Wentao on 9 and 10 August 2023 during the eight session of the South Africa-China joint economic and trade committee hosted by the Department of Trade, Industry and Competition (DTIC), in Johannesburg.

The delegation from China included importers from China representing different economic sectors from renewable, metals and agriculture and, several trade contracts were signed on 10 August 2023. While the bilateral trade between the two countries has exceeded R900 billion. However, South Africa’s share of exports to China exceed only R500 billion representing a R400 billion trade deficit with China. Although China currently invests R200 billion in the South African economy, Minister Patel emphasised that the second phase of the trade relationship should look towards a more balanced relationship with more companies from China investing into the South African economy and companies from South Africa investing in the Chinese economy.

The discussions between the two delegations resulted in estimated deals valued at about US$2 Billion. Minister Patel highlighted that fact the trade relationship between the two countries continues the centuries old commercial relationship between the South East Coast of Africa and China.

A statement form the DTIC reported on Minister Patel’s reflection of the ancient ties that bind China, South Africa and, the East Coast of Africa while hosting Minister Wang on a visit to the DTIC in Pretoria. Minister Patel reminded his counterpart from China of the Kingdom of Mapungubwe in South Africa and Southern Africa where more than a thousand years ago a prosperous people inhabited the land.

They had advanced urban settlements and manufactured metals and goods and traded with other parts of the world. Using Africa’s own trade networks goods moved from South Africa and Southern Africa to the ports in Mozambique, Kenya, Tanzania and, Somalia from where they were traded with China, India, Persia and the Middle East.

Goods included ivory, gold from Africa and Chinese porcelain, Persian glass beads and other products. The rise of Mapungubwe coincided with the Song and Ming dynasties in China and in 1433 Admiral Zheng He visited the East Coast of Africa on a number of peaceful voyages promoting trade and exchanges.

Despite this new found enthusiasm for injecting a greater South African appetite for the Belt and Road Initiative (BRI) South Africa lags far behind the rest of Africa. South Africa had a head start when in 2015 it signed the MOU to join the BRI however, the momentum was lost along the way. Today countries in Africa such as Kenya, Egypt, Ethiopia, Tanzania, Nigeria, Mozambique have all benefitted from BRI investment and the concomitant developments for physical infrastructure in transport, energy, ports, roads, dams, economic zones, hydroelectricity and, much more. One of the most impactful side effects of the billions of dollars invested in sub-Saharan Africa’s infrastructure is the thousands of primary and secondary jobs it created and, the improvement in the trade corridors within Africa and its external trade partners.

The latest data on developments in the BRI was published in the China Belt and Road Initiative (BRI)Investment Report 2023 H1 – the first ten years, by Fudan University’s Green Finance & Development Center, Shanghai. Data on Chinese engagement through financial investment in the Belt and Road Initiative (BRI) suggest that globally, China’s BRI Investment shows a marked increase of 130% in Sub-Saharan countries in Africa and, with a 69% increase in construction contracts.

With this level of BRI investment Sub-Saharan Africa has become, after South East Asia, the second most significant destination for BRI construction investment. The perception that South Africa is not taking advantage of the BRI may be the motivation for the new invigorated level in promoting bilateral cooperation between China and South Africa.

During the State Visit by President Xi the two countries signed 11 cooperation agreements. A significant part of the agreements is that they seek to align South Africa’s Economic Reconstruction and Recovery Plan (ERRP) with the objectives of the BRI. The agreements focus on promoting implementation of key projects in modernizing South Africa’s production methods and infrastructure including ports, rails, roads and, digital infrastructure. For China President Xi committed to strengthen bilateral cooperation in electricity generation, renewal energy and scientific and technological innovation.

In addition China is ready to import more quality products from South Africa and will encourage more Chinese companies to invest in the country. Over the past few years China invested in several projects including the Durban port facilities and establishing the Musina-Machado Special Economic Zone in Limpopo.

Minister Patel intimated that the State Visit of President Xi and cooperation agreements will strengthen economic relations between the two countries and South Africa must take advantage of the opportunities as doors are opening for trade and investment. He also promised to hold a similar event in the next few months to signal the commitment of the two countries to work together. China committed continue to support South Africa in addressing its energy security challenges, and pledged to cooperate in infrastructure and logistics; trade and investment; manufacturing; agro-processing, energy and many other areas. T

A key element in South Africa’s ERRP is the revitalisation of the rural economies in the provinces to address unemployment, poverty and inequality. China has had a long relationship with Mapungubwe in Limpopo province and recently with intentions to establish the Musina-Machado Special Economic Zone near the ancient heritage site of the great Mapungubwe Hill. Mapungubwe and the Musina -Machado Economic Zone is near the borders with Botswana, Zimbabwe and Mozambique.

The route to the Beira port in Mozambique’s Sofala Province is approximately 900 kilometres. It is the same area where admiral Zheng He from the Ming Dynasty must have visited for trade with Africa on the old Maritime Silk Route. The route also passes through the famous Kruger National Park in South Africa and a National Park in Mozambique.

Thoyondou, is where the University of Venda is located and it is not far from the village where President Cyril was born and spent his early childhood. Zhejiang University International Business School (ZIBS) signed a memorandum of understanding and service level agreement with the University of Venda on the 13 August to assist with establishing a new Southern African business school in the Machado-Musina Economic Zone.

I accompanied the ZIBS academics to the University of Venda in Thoyondou. On route the Dean of ZIBS remarked at the enormous potential the area had for agro-business; tourism, small business development, people to people exchanges and Chinese BRI type investments.

Investment in a high speed freight and passenger rail and road through to the port of Beira will provide the logistic and infrastructure necessary to finally make the New Maritime Silk Route a reality in Southern Africa. It will create jobs and the logistics necessary for transport and trade.

President Xi Jinping has strong ties with Zhejiang Province in which ZIBS is located and, President Ramaphosa has familial ties with Limpopo province and the area where the University of Venda is based. BRI investment in this area will be a fitting tribute to China’s commitment to development of the civilizational, economic and peace and security initiatives that the country promoted over the past ten years.

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