Those who believe that China can be for South Africa a like-for-like trade substitute for the US, the world’s largest consumer market, is mistaken. Given the global trade changes unleashed by US President Donald Trump’s sweeping tariffs, South Africa must negotiate a new trade deal with China, which doggedly safeguards its business, economic and political interests.
This means that South Africa cannot negotiate a trade deal with China based on misplaced ‘South’ solidarity with China, or based on outdated views that China is somehow the ANC alliance’s ideological ally, or just because it is in Brics Plus with China.
China, in response to sweeping US global tariffs, announced earlier this year at the Forum for China-Africa Cooperation (Focac that it would introduce lower market access for 53 African nations, eliminating tariffs on imports, excluding only Eswatini due to its diplomatic relations with Taiwan. China has not outlined the fine print on what this means. The fine print is likely to be that African countries will have to give reciprocal market access to Chinese products.
It appears China wants all the African countries, excluding Eswatini, to sign one catch-all trade deal with it, as if the 53 different countries are one. However, South Africa must not sign up for a generic China trade deal that covers all African countries.
South Africa must negotiate a separate trade deal with China, which is in its strategic interests. The lesson for South Africa so far from its failed negotiations with the Trump administration is to have a South Africa Inc negotiating team. Not just a government team or ANC party leaders,but also non-ANC partners in the Government of National Unity, business leaders who actively trade with China and civil leaders who understand the Chinese market and politics.
It appears China wants all the African countries, excluding Eswatini, to sign one catch-all trade deal with it, as if the 53 different countries are one. However, South Africa must not sign up for a generic China trade deal that covers all African countries.
South Africa’s current trade with China is immensely damaging to the country's economic interests. There needs to be a reset of the trade partnerships with China to benefit South Africa.
In a media briefing this week trade, industry and competition minister Parks Tau rightly said while South Africa and China have made in-principle agreements to enhance trade ties, this should not be seen as a quick solution to South Africa’s trade fallout with the US.
“There have been a few developments with regards to China. These include the fact that China announced at Focac this year that it will reduce tariffs to 0% for all countries but one. We took the opportunity to engage with the Chinese to say: ‘What does this mean? How do we implement it?’ This was two weeks ago. They said we need to sign the China-Africa economic partnership agreement, or some form of economic agreement, so we are able to unlock this.”
“You have to think about how you safeguard your own market and which industries will be impacted. There is a bit of detail to be done, but the negotiations are ongoing and we are modelling the sort of offer we will be able to give,” Tau added.
China is the world’s second-largest economy. China is South Africa’s largest trading partner by volume. The US is the world's largest economy, with the biggest consumer market. The US is South Africa’s second-largest trading partner.
However, if one includes the US state’s direct and indirect development aid, business, private and civil society development aid, US financial support for South Africa-US people-to-people exchanges, capacity building whether music or research, the large number of US companies in South Africa, and the multiplier domestic impact of South Africa’s manufactured exports to the US, the country's US partnership becomes much more significant, in terms of jobs, opportunities created and growth impact, than that of China.
Among the key differences for South Africa is that the US offers a market to South Africa’s manufactured products, while China up now to has mostly taken South Africa’s raw materials. Manufactured products have a higher multiplier impact in that they create more business opportunities, more employment and more inclusive economic growth. Exporting raw materials produces fewer jobs, fewer business opportunities and less inclusive growth.
China’s export development model to developing and African countries is based on exporting manufactured products to countries that create jobs, growth and opportunities in China, but displaces the manufacturing industries in countries receiving Chinese manufactured products. In South Africa, the textile industry, alongside the manufacture of white goods and tools in the now-dead factories in Germiston and on the East Rand, have been devastated by the import of Chinese products. South Africa’s car manufacturing is now also facing headwinds, not only from US tariffs but Chinese car makers.
Another element of the Chinese export model is that it wants domestic regulations, such as human rights, workplace rights and democratic rights, lifted in the countries it exports to.
Like South Africa, most African countries export raw materials to China and import manufactured products. The reason African countries have stayed poor since 1847 when Liberia became the first African country to become independent, is that they have been unable to manufacture products and have continued to export raw materials. Africa’s trade with former colonial powers and the new emerging powers, such as China, has persisted on the basis that the continent exports raw materials, and not manufactured, beneficiated or refined products.
China has displaced South African trade in Africa, its heavily state-subsidised companies muscling out South African companies, which undermines the country's economic, business and political interests. China’s lower tariffs to African countries will directly undermine South African trade with the continent.
South Africa must make an audit of its trade with China — like the US did for other countries — see where the imbalances are, then negotiate a trade deal based on eliminating imbalances that favour China. The country must also insist that China take South African manufactured products and set up Chinese manufacturing in South Africa that does not compete with existing domestic manufacturing.
William Gumede is founder of Democracy Works Foundation and author of South Africa in Brics (Tafelberg)
For opinion and analysis consideration, email opinions@timeslive.co.za
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