Ramaphosa wants to level the playing field with China
President Cyril Ramaphosa is currently leading a state visit to the People’s Republic of China, and attempts at narrowing the country’s widening trade deficit is sitting at the top of the agenda.
The President, numerous ministers and government officials met with their Chinese counterparts ahead of their participation at the Forum on China – Africa Cooperation Summit (FOCAC).
Delivering his opening remarks during the official talks with Chinese President Xi Jinping in Beijing on 2 September, Ramaphosa began by highlighting the importance of the close economic alliance between the two nations.
China is South Africa’s largest trading partner globally, and South Africa is China’s number one trading partner in Africa. The two countries engage in hundreds of billions of rands in bilateral trade annually.
While the close trade partnership between South Africa and China has increased, so has South Africa’s trade deficit, given the increasing nature of manufactured Chinese exports.
According to data from the South African Revenue Service (SARS), in 2010, South Africa exported R59.06 billion worth of goods to China while importing R83.89 billion.
This increased to R226.5 billion of exports to China in 2023 and R404.42 billion of imports – leaving an over R177 billion trade deficit between the two, which is the largest among any of the country’s trading partners.
“We have witnessed an increase in our bilateral trade. However, as South Africa, we would like to narrow the trade deficit and address the structure of our trade,” said Ramaphosa.
“As we enter a new phase of our partnership, we should continue to consult closely in pursuit of a just, equitable and prosperous world.”
“I believe that our elevated levels of mutual trust will accommodate each other’s interests, views and concerns – and deepen our cooperation as we build a shared future,” added the President.
In a joint statement, both sides said that they agreed to enhance cooperation and synergy between China’s Belt and Road Initiative and South Africa’s Economic Reconstruction and Recovery Plan, and to foster stable, fair, and supportive environments for businesses from both countries.
The two countries also agreed to leverage mechanisms to further expand economic and trade ties “by improving the current trade structure, increasing market access and the export of value-added goods from South Africa.”
Eight memorandums of understanding, which are meant to foster more equitable trade between the states, were signed by South African ministers of Agriculture, Science & Technology, and Trade alongside their Chinese counterparts.
South Africa eyeing an export-oriented economy
The Department of Trade, Industry and Competition (DTIC), who are on the state visit, have said that their goals include spearheading the country’s industrial policy which among other things, attempts to formalise South Africa as an export-oriented and manufacturing-led economy.
DTIC minister Parks Tau told Business Day that it is important for South Africa to pursue manufactured goods for export rather than primary goods, which make up the bulk of what South Africa trades with China.
“For us, it’s important to be able to find an agreement on the electric vehicle sector but also to increase the quality of trade,” the minister said, adding that “our attitude has been let’s form a co-operative relationship with a country such as China, and where there are gaps, we find improvements.”
Tau said that in meetings with his Chinese counterpart, stakeholders agreed to increase the range and volume of manufactured goods to be sent to China, a move set to bolster South Africa’s exports and lessen the deficit gap.
During a debate in the National Council of Provinces (NCOP), DTIC Deputy Minister Andrew Whitfield said that “it is essential that South Africa’s economic growth is grounded in manufacturing-led growth.”
“Manufacturing is indeed less volatile and less vulnerable to economic downturns and will create real, sustainable and decent paying jobs for our people.
“South Africa must also create an export-oriented economy. A dedicated focus on manufacturing growth will also lead to export growth,” he said.
The Deputy Minister said that the creation of an export-oriented economy can be realised through:
- A dedicated focus on implementing measures to boost the competitiveness of local industries in global markets;
- Streamlining export processes;
- Lowering trade barriers;
- Offering financial and technical assistance to exporters; and
- Cultivating beneficial trade alliances.
This was recently echoed by a report by the World Bank titled Unlocking South Africa’s Potential: Leveraging Trade for Inclusive Growth and Resilience.
The World Bank said that “over the past 15 years, South Africa has lost its economic growth momentum, systematically underperforming other middle-income economies.”
Although the country has been subject to challenging global and domestic shocks over the past several years, it notes that some of the current policies have not done enough to ease these woes.
“Promoting inclusive growth and development in South Africa requires bold microeconomic reforms to adapt to global changes and address domestic constraints,” said the World Bank.
Like the DTIC’s arguments, the report argues that spearheading an export-oriented strategy can enhance economic growth and job creation in South Africa while strengthening the economy’s resilience to shocks.
Read: Massive visa changes to draw more Chinese and Indian tourists to South Africa
Loading ...
