This is an opportunity to leapfrog into the future
SOUTH Africa is a country faced with many complex developmental problems coupled with copious apartheid legacy issues. Global cyclical forces manifested signs of severe discomfort and were unhelpful to our economic growth in recent years. South Africa’s golden years between 2004 and 2007 when the economy grew at a magnificent 5 percent per annum were largely attributable to a boom in global commodity prices.
Systematic failures of implementing government policy, a strong resistance to transformation and economic reforms and a toxic political environment have been a disadvantage to our economic prospects.
Downward risks and uncertainties persist against the backdrop of continued financial volatility.
The disparity that is an asymmetrical economic divide is a resultant of inherent systematic dysfunctions in our society. In tackling this, we need collective wisdom, honesty from all the sectors of our society and economic growth strategies that are inclusive and sustainable. For us to prosper as a nation, we need to improve the structure of our shameful economy and de-racialise our apartheid-type economic patterns before hitting the tipping point.
Our relationship with China affords us the opportunity to leapfrog into the future, breaking out of the apartheid economic legacy and many years of stagnation or decline.
Since World War 2, only two out of 200 developing economies have fluxed from low-income to high-income economies. China may become the third by 2025.
China’s socialist market economy system, which emerged in the 80s, is a combination of a neo-liberalism and structuralism. Market forces are involved and so are the capitalist ones, but they don’t exercise effective control of the nation’s economic engine. State driven capitalism reigns supreme and this has proved successful over the years.
When President Xi Jinping unveiled his new political theory as an over-arching framework and strategic blueprint to reach China’s development goals, a honorific slogan called the Four Comprehensive Pillars of Xisms was born. The Four Comprehensives aim for a moderately prosperous society, reform, rule of law and the enforcement of party discipline.
The latter is fundamental in ensuring that policies that favour the prioritisation of economic reform and economic prosperity are effectively implemented in government. Such policies revive business confidence, and enhance both competitiveness and certainty if they are properly socialised and articulated in a manner that attracts trade and investment and are good for inclusive growth and social cohesion.
South Africa could increase its leverage with China by exploiting synergies and complementarity and by acquiring political wisdom that has seen China turn itself into an innovative, invigorated, interconnected and inclusive global economic champion.
China has been Africa’s largest trading partner for six consecutive years since 2009, with South Africa being the largest partner in the continent and the largest destination for Chinese investments in Africa.
China-Africa trade exceeded $10 billion (R130bn) for the first time in 2000 and reached more than $220bn in 2014. Chinese investments have been growing at an annual average of above 20 percent.
Beginning of 2015, the stock of China’s direct investment in Africa sat at $30bn.
To live up to its aphorism of a strategic partnership with Africa characterised by political equality and mutual trust and mutually beneficial economic co-operation based on sincerity, real results, affinity and good faith, it had cancelled 20 billion yuan (R39.11bn) in debt owed by African countries, the line of credit it had extended had amounted to $14.2bn.
South Africa’s relative strength lies in its highly developed services industry, particularly financial services, construction and mining.
In 2008 China’s Industrial and Commercial Bank of China purchased a 20 percent take in the Standard Bank of South Africa for $5.46bn. This was followed by a $4bn Chinese direct investment into the gold sector by a consortium of partners led by Citic Group and China Development Bank. Today the Chinese investment spectrum spreads across many sectors and regions within South Africa.
Critical to South Africa’s creation of new paths for growth and effective participation in the global economy would be to leverage Brics as a key platform and an effective mechanism for mutual co-operation and reciprocal influence with other leading nations.
The oligopolistic coterie in South Africa, without fact, alleges that Brics does not benefit South Africa. This narrative is based on the deeply flawed premise that Brics co-operation is a zero-sum game, producing only winners and losers.
Fact of the matter is that this co-operation is not perfect, but it is our ticket for achieving a form of economic independence that can ensure the delivery of a comprehensive and credible strategy for sustainable growth.
South African firms – those that are genuine about transformation – should work with the government and Chinese financing institutions to deliver complex financing solutions for greenfield and bulk infrastructure projects. The New Development Bank affirms its support to the developmental agenda of Brics nations and other emerging economies.
The recent unveiling of the Chinese funded Kenyan railway project linking the port city of Mombasa to the capital Nairobi is testimony to the Brics facilitation of infrastructure connectivity and economic integration in Africa.