Ramaphosa looks east to save South African economy
President believes China is forging deeper relations with South Africa for ‘mutual benefit’
FELIX NKUNJANA
AFRICA’S largest and most industrialised economy, South Africa, is increasingly looking to China – its biggest trading partner and one of its most important sources of foreign investment – to revive the embattled economy, which the National Treasury projects to grow 0.5% in 2019, against the Reserve Bank’s 0.6% estimate.
Data from Statistics SA showed that the unemployment rate increased to 29.1% in the third quarter of 2019, its highest level since the global financial meltdown more than a decade ago.
The joblessness rate was 27.6% in the first quarter, but surged to 29% during the second quarter.
“The South African economy is in dire situation,” said President Cyril Ramaphosa, during his oral replies in Parliament last month.
“The unemployment figures announced earlier this week underline the extent and the urgency of the challenge we must confront,” he said.
Finance Minister Tito Mboweni painted a bleak picture of the challenges dogging the economy when he tabled his mini-budget in October.
The country’s national debt exceeded R3 trillion and was expected to climb to R4.5 trillion in the next three years, the minister said.
Moody’s Investor Services announced that South Africa’s credit outlook on November 1 was negative. It is the only one of the three major ratings agencies that has not relegated South Africa to junk status.
It’s feared that a downgrade could lead to a surge in borrowing costs and result in capital flight from of the country.
In August, the National Treasury released Mboweni’s controversial economic blueprint for public comment.
The document, which labour has rejected, makes wide-ranging proposals aimed at boosting economic growth, such as looking at labour-intensive sectors to create jobs by implementing industrial and trade policies to facilitate growth.
If it is implemented, analysts believe thousands of much-needed jobs could be created.
South Africa is now looking to its key ally, China, to address the slow growing economy.
Under former president Jacob Zuma, the country dumped Europe and the West as its major trading partners and adopted the “Look East” policy, which Ramaphosa has warmly embraced, leading to some describing the current president as China’s fiercest advocate in Africa.
In his weekly newsletter, From The Desk of The President, Ramaphosa wrote: “China, Russia, the Organisation for Economic Co-operation and Development countries and other large economies are eager to forge greater economic ties with African countries because they want to harness the current climate of reform, the deepening of good governance, macro-economic stability and the opening up of economies across the continent for mutual benefit.”
According to market data, trade between China and South Africa was valued at R133 billion in 2008 but surged to over R570 billion in 2018, with over 50 Chinese companies investing an estimated R61 billion over the period under review.
According to the Presidency, there are about 26 South African companies invested in China with a capital expenditure of R88 billion between January 2003 and August 2019.
“China on the other hand has a total of 88 companies investing in SA with a capital expenditure of R116 billion over the same period,” the Presidency said.
On October 29, SA Deputy President David Mabuza embarked on a week-long trip to China for the South Africa-China Bi-National Commission, where he met government leaders and businesspeople in an effort to woo investors for South Africa.
Chinese Vice-President Wang Qishan is among those that met with the ANC deputy president.
Mabuza travelled to Shanghai earlier this month for the trade and investment leg of his working visit to China.
While in China, Mabuza said South Africa and China enjoyed “solid economic relations” and that they were determined to increase trade and investment between the two countries “particularly in the areas of agricultural produce, value-added goods, technology and investment in infrastructure development, among others”.
“China remains our largest trading partner and we believe both our countries have much to benefit from this partnership,” said Mabuza, adding that South Africa was looking forward to China’s support at the investment conference held recently.
About 1 500 investors and businesspeople attended the conference.
“Our mutual friendship and cordial relations between our two countries should continue to grow from strength to strength.
“South Africa will remain a trusted partner to China for the benefit and prosperity of our two countries.”
Nelson Mandela University political analyst Ongama Mtimka said China had a big market from which South Africa could recruit its foreign direct investment.
“China is an emerging superpower and is estimated to be the biggest economy by 2050. There’s a lot of technology and skills transfer which may happen,” said Mtimka.
He said because China was a global manufacturing hub “there’s a greater benefit for our country as that could help us strengthen our own industrial base.”