Michael Jones

The South African Exporter,

Business Day, July 2006

 

Last month's visit by Chinese Premier Wen jiaobao to SA, as part of a seven-state African tour, was never expected to herald a significant milestone in SA-China relations. The visit remains significant, however, in the sense that our two nations are going to great lengths to regain the momentum in developing relations that saw a high between 1998 and 2004, but which have cooled somewhat over the past two years due to a number of factors.

 

Indicative of the renewed enthusiasm for solid bilateral relations was Deputy Foreign Minister Aziz Pahad's six-day visit to China from May 31 to lay the ground for Wen's impending African tour.

 

Upon Pahad's arrival in Beijing, the Chinese government announced that China and SA had concluded a draft agreement to restrict Chinese textile exports to help protect the embattled local industry. The statement, however, was scant on details as to this would be attained.

 

The effect of low-cost textile and apparel exports on SA's textile industry, and the resulting losses in employment in a country already haemorrhaging from unemployment is understandably extremely sensitive. But to irrationally engage in what was a daily exercise of China-bashing is not going to help anyone, least not the countryman, family member or friend that just lost his or her livelihood.

 

Trade between our two countries remains unbalanced in China's favour, a situation that is expected to persist into the near future and medium term at best. A case in point is Western Cape that has been most affected by textile job losses.

 

According to statistics provided by Western Cape's trade and investment facilitation agency, Wesgro, last year, Western Cape imported R6.2bn of goods from China, compared with exports to that country valued at only R861m.

 

The onus lies with Western Cape industries to increase their engagement with Beijing-ideally with national and provincial government support, in order to realize more exports and sustain existing employment levels.

 

SA's problem remains that raw materials dominate our exports while imports form China, while generally benefiting the man on the street through lower consumer product prices, affects a multitude of local industries resulting in job losses. To date though, the greatest risk that China has posed to the South African economy is its seemingly limitless capacity for churning out low-cost products and, therefore, a direct danger to our local low cost manufacturing industries.

 

But as China's manufacturing starts to climb the value chain, more of our higher-end industries too will be exposed to risks in our domestic economy.

 

In addition to the challenges South African companies are facing in our domestic market, it would be prudent for our companies who are operating, or are planning to engage, in the rest of Africa to take note of the serious attention being paid by Chinese political and business leaders with regards to the continent.

 

Local companies have reached levels of excellence in Africa that make them stand head and shoulders above their nearest rivals, while Chinese companies thus far have found it as frustrating and confusing to do business on the continent as western companies have reciprocally experience in China.

 

South African operational know-how matched with Chinese low-cost hardware-and in some cases technology-seem to indicate we could achieve win-win co-operation.

 

The alternative of going it alone does not seem too attractive considering that in a decade from now China will have hoards of business people versed in African languages, knowledgeable of culture and customs, and armed with competitive low- and high-end products and technologies. If SA is not a meaningful partner by that stage, we will have lost out to a zero-sum game.

 

China is aggressively targeting Africa and will conduct business on the continent with or without SA as a partner. Unless we increase our engagement with China we will render ourselves irrelevant, and future visits by the Chinese leaders will be reduced to mere courtesy calls.

 

Jones is a senior consultant with The Beijing Axis, based in Beijing.