Popular Mechanics (South Africa)
THE CHINA FACTOR
Here’s the thing about developing markets: At some stage, you just stop developing. The Chinese consumer market has matured, and the country now needs to find its own China to keep up with consumer demand, and offset labour costs for the export market. Luckily for them (and us), there’s an entire continent made up of developing markets that is in desperate need of jobs, hospitals and schools to help lift themselves out of poverty. Africa is also rich in natural resources, and the global rules the world is trying to force China to comply with don’t really apply to our continent.
In 1971, the UN General Assembly voted on which government would represent China. The US opposed the People’s Republic of China and was supported by much of the African continent – the PRC won the vote and has represented China ever since. When the General Assembly was called in 2007 to decide on what should be done about human-rights violations in North Korea, China received the backing of the bulk of Africa.
Why the turnaround in voting allegiance? Two words: Economic influence.
Rail networks in Kenya and Addis Ababa, hydroelectricity in Guinea and now a massive automotive production plant in South Africa’s Coega industrial development zone in Port Elizabeth – China is taking up the risky investments no other country is willing to touch. And this is all Africa needs to get its foot in the economic- development door.
The hidden clause to these low- or no-interest loans and foreign investments is two-fold. On one hand, China is stacking its global influence so it can win decisive votes – like those that could bring economic harm to its global partners – and on the other, it buys industrial capacity.
Years of double- digit economic growth have seen the Chinese population transition into a middle- class society through improvements in their education and working conditions. When everyone wants to be an engineer, you’ll suddenly find yourself lacking a labour force, and when cheap labour was your stock-in-trade, you’ll suddenly find yourself with a big problem.
You need look no further than the trade activity between China and Africa for evidence of the deep influence. In 2016, that trade of goods equated to
$128 bn, and it continues to rise. Investment, however, has been quite flat, with $12 bn in loans and foreign aid coming from China in 2015, along with $3 bn in investment across the whole continent.
The Beijing Automotive International Corporation (BAIC) plant in the Eastern Cape saw the first semiknockdown (SKD) car roll off its assembly line on 24 July 2018. We were in attendance at the gala event at the plant, which included a live stream to Pretoria, where Presidents Ramaphosa and Jinping pressed the button for a BAIC X25 to be wheeled out on stage. This gala happened on the eve of the 10th annual BRICS summit in Joburg, and it was clear that the buildings we were standing in had a tough deadline.
When completed, the R11 bn facility will represent the largest Chinese investment into Africa. This plant is also the first of four global headquarters that are the focus of BAIC’S international expansion. Mexico and India represent the gateway to the Americas and the subcontinent, while South Africa is the gateway into Africa. Further expansion in greater China will service the Asian market.
Currently the PE plant is assembling SKD units of the X25, with a bakkie and SUV going into production in the near future. The goal is to have 60 per cent local production done on-site, with a panel-stamping shop and supplier park being added in phase three of development. By 2019, the plant is set to have created around 1 400 jobs, rising to 2 500 when the project is complete. Production estimates are at 100 000 units per year.
Industrial Development Corporation chairperson Busi Mabusa attended the event and confirmed that those job totals unfortunately include the construction jobs that will become redundant once the plant is complete. Although the temporary employment is much needed in the community, it does inflate the job- creation impact by almost 50 per cent. A hefty sum by anyone’s count.
BAIC has pledged to achieve 90–95 per cent local employment from the community and will also offer training at an academy on-site. These skills will also be transferable to the other plants in the area, such as FAW just across the highway.