South Africa and China: Trade relations grow stronger

In brief

South Africa's trade relationship with China is growing, resulting in several announcements regarding trade at the BRICS Summit in August 2023. Among the announcements was the news that Chinese companies had signed deals to buy South African products worth around USD 2.2 billion. Also announced were plans for China to import more South African beef and other South African agricultural products, as well as the donation of Chinese energy equipment worth USD 8.9 million to South Africa, in addition to a grant valued at USD 26.9 million to assist the country with its energy crisis. Across Africa, China is increasingly importing agricultural products and manufacturing goods on the continent, in addition to its strong focus on oil, critical minerals and metals. African imports from China mainly focus on manufactured goods such as electronics, clothing, appliances and technology. 


In depth

Trade between China and South Africa is set to grow further after several announcements on trade were made at the BRICS summit, held in South Africa in August 2023. At the summit, the countries agreed to narrow the trade deficit by increasing access to Chinese markets for South African products. In this regard, China has recently begun importing South African beef after a block on the product (due to foot and mouth disease) was lifted. The two countries also agreed to allow avocados to be exported from South Africa to China. China also announced at the summit that it would donate energy equipment worth around ZAR 167 million (USD 8.97 million) and a grant valued at around ZAR 500 million (USD 26.9 million) to South Africa to assist with its energy crisis, although no deadlines were given.

In August, the countries jointly announced that Chinese companies had signed twenty deals to buy products worth around ZAR 41 billion (USD 2.2 billion) from major South African companies. The Minister of Trade, Industry and Competition in South Africa, Ebrahim Patel, said at the signing ceremony that the deals would assist South Africa in creating jobs and growing the economy. It was also noted at the signing that two-way trade between China and South Africa amounted to USD 47 billion in 2022 and that both countries were committed to strengthening the relationship.

China Minister of Commerce Wang Wentao noted at the summit that there was a prospect of even greater growth in trade, not only with South Africa but with other African countries.

Across Africa, China is increasingly importing African agricultural products and manufactured goods, in addition to its consistent strong focus on oil, critical minerals and metals. African countries mainly import manufactured goods from China.

The Chinese Ministry recently noted that over the last twenty years, the country's trade with Africa has risen twenty-fold, reflecting China's role as one of the continent's biggest trading partners. In 2021, China pledged to import African products worth USD 300 billion by 2025 and increased the number of African products that qualify for tariff-free trade with China.
A recent Economist Corporate Network report, supported by Baker McKenzie and Silk Road Associates (BRI Beyond 2020), further outlined these strengthening trade links between the regions and referenced the favorable financial incentives offered to qualifying African exporters to China. The report showed that 97% of the exports of 33 of Africa's poorest jurisdictions into China qualified for tariff- and duty-free trade. The report further outlined how bilateral trade between the regions was still mainly focused on China’s import of Africa’s natural resources. To counter this, China has, in recent years, increased the import of manufactured goods from more diversified African economies. At an official session of the Joint Economic and Trade Committee held at the 2023 BRICS summit, Minister Patel said the aim going forward was for South Africa to export more manufactured and value-added products to China.

According to Baker McKenzie's recent report with Oxford Economics (AfCFTA: A Three Trillion Dollar Opportunity), more than three-quarters of African exports to the rest of the world still focus on natural resources, while on the import side, manufactured goods accounted for more than half the total volume of imports into African countries. The report outlined how Africa’s most important suppliers of manufactured goods were Europe (35%), China (16%), and the rest of Asia, including India (14%).

Further, the Forum on China-Africa Trade Cooperation (FOCAC) has, since its launch in 2000, focused on developing relationships between China and African countries. At FOCAC's last conference, held at the end of 2021, it was announced that China would move away from state-backed projects on the continent and focus instead on increasing reciprocal China-Africa trade, strengthening cooperation between the regions, and incentivizing Chinese private investors to invest in the continent.

At China’s Foreign Ministry Spokesperson Wang Wenbin’s regular press conference in August 2023 it was noted that Chinese companies were growing in confidence in the African market, with 3000 Chinese enterprises, of which more than 70% are private, currently invested in Africa. It was also noted that the progress of the African Continental Free Trade Area (AFCFTA) meant that Chinese investors would find more opportunities to invest in the African market. Successful pan-African trade under AfCFTA will connect the region’s wealthier and poorer nations, promote the growth of value chains and lay the foundations for increased international trade in the process. 

Reducing the overdependence on natural resources and increasing manufacturing capacity in Africa also requires that such projects be developed in a sustainable way. To this end, both regions are working together to improve the environmental, social and governance aspects of new developments, having already rolled out numerous projects that focus on sustainable agriculture, wildlife protection and clean energy, for example. The trade in sustainable goods and services is also expected to continue to grow. A joint statement issues by the two countries in August 2023 acknowledged "the need to defend, promote and strengthen the multilateral response to Climate Change and undertake to work together for a successful outcome of the 28th Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC COP28) in the United Arab Emirates in December 2023".

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