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Red dragon offers SA trade opportunities

September 21, 2006

By Ethel Hazelhurst

Johannesburg - China's evolution to a hi-tech high-value exporter is reflected in its trade with South Africa. An Absa analysis of South Africa's global trade last year showed that R12.2 billion worth of electrical and other machinery and equipment was imported from China.

Jacques du Toit, a senior economist at Absa group economic research, said these categories represented 38.7 percent of total Chinese imports worth R31.5 billion.

But South Africa's exports to China are largely unbeneficiated. Last year R3.6 billion worth of metal and mineral ores were exported and R1.6 billion in iron and steel. The two categories amounted to 59.8 percent of total exports of R8.7 billion.

"Most of the remainder are also primary products," Du Toit said.

The figures are derived from a country breakdown of South Africa's trade with the rest of the world last year, which has only just become available from the SA Revenue Service.

Though low-value items figure on the list of Chinese imports, they are relatively small. Imports of clothing, which have become highly controversial, were worth R2 billion (6.3 percent of total imports from China), while imports of footwear were valued at R2.3 billion, or 7.3 percent. A two-year import quota is to be imposed on certain items of clothing and textiles from January because local manufacturers have been unable to compete against low-cost Chinese imports.

Overall, China supplied 9 percent of South Africa's imports last year, placing it fifth among import sources. As the destination of 2.7 percent of total exports, it ranked 15th.

Though the trade balance is asymmetrical, exports are growing faster than imports. Between 1998 and 2005 imports rose 632 percent, while exports rose 866 percent.

"While many South African manufacturers may view the red dragon as a threat, the opportunities that China presents for South African exporters should not be underestimated," said Du Toit. "The Chinese market, with more than 1.3 billion people, is largely untapped and could provide efficient and internationally competitive South African exporters with very real growth opportunities."

He said it was evident from the import and export data that China still has a huge demand for basic commodities.

A study by the Africa region of the World Bank explored the opportunities trade with China and India created for Africa. These societies, "particularly the growing middle class, present a rare opportunity for Africa to increase its exports", said the author of the report, Harry Broadman, at its launch last week.

He argued that there were opportunities for Africa, "if handled correctly, to engage in higher-value-added processing of commodities and the export of labour-intensive goods and services that fall outside the natural resources sector".

He said the volume of African exports to Asia was "not just increasing; the increase is actually accelerating. It grew by about 15 percent in 1990 to 1995 but at a rate of 20 percent in the past five years. Today, Asia's share of Africa's export is roughly on par with that of the EU and the US".

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