The South African branch of Bank of China, in partnership with the School of Economics and Finance of the University of the Witwatersrand, launched the Chinese Investors’ Confidence Index for South Africa in 2023. A first of its kind, the index reports on South Africa’s economic and investment environment based on the views and experiences of Chinese investors in South Africa. It is ambitious in that it analyses “changes in objective economic indicators” and tries to “uncover underlying causes and dynamics.” This includes “the impact on governance, policy environment… offering investors a comprehensive assessment of the investment environment.” The researchers for the index solicit opinions of the Chinese and South African companies, including on challenges and future prospects. 

Why does this study matter, especially in the context of this month’s state visit to China by South African President Cyril Ramaphosa, who is also attending the Forum on China-Africa Cooperation Summit in Beijing? 

The index reflects the strong ties between South Africa and China. It shows the quality of the Chinese firms that have invested in South Africa and their positive sentiment on the South African environment. Importantly, the Chinese firms investing in South Africa have diversified from mining and resources to high-value manufacturing and services sectors. These are top Chinese state-owned enterprises that are building critical economic infrastructure such as bridges, roads and highways. The South Africa-China Economic and Trade Association chaired by the Bank of China is not a club of hustlers, but a grouping of highly competitive firms that are doing business in all corners of the world. This matters for the South African economy because investors not only bring resources, but also transfer skills and help to diversify products and services.

Some of the members include carmakers whose products are popular among the consumers. Over a decade ago, China introduced a minibus taxi in the South African market. Fast-forward to 2024, and the market is showing preference for cars made in China. At least two brands have made it into the top 10 new vehicles by sales. People choose a car model carefully as it involves loans and medium-term commitments. Consumers therefore tend to be circumspect when making such decisions. With the embrace of Chinese automobiles, they are showing trust in their quality. This is a significant marker of the strengthening of people-to-people contacts as consumers constitute an important frontier in building lasting relations between nations.

Similarly, the Chinese market is opening up for the South African goods and services. Media companies like Tencent have investment from South African firms. Medical insurance companies like Discovery are making inroads into China as the middle class demands additional cover to top up on the national health insurance. The same middle class has a growing taste for South Africa’s agricultural products ranging from avocado, maize, citrus and nuts to wine and red meat. In the past two years, maize farmers have seen their market share grow in China. As Europe restricts South African citrus, China is opening up. As South African wines experience higher trade barriers in the form of higher tariffs in some markets, the Chinese consumers are demanding more. As China buys less maize and soya beans from the US, they are looking for more from South Africa and other countries in the Global South.

The two countries are intensifying ties in the fields of energy and green transition. They are cooperating on exploring South Africa’s abundant sun and wind resources in provinces like Eastern Cape. In this context, the commitment by President Xi Jinping and President Ramaphosa to have the two countries co-host the China-South Africa New Energy Investment and Cooperation Conference, and hold the Job Fair of Chinese-Invested Enterprises in South Africa to boost local employment and improve people’s lives adds impetus to efforts to deepen energy cooperation. This will be made possible by an agreement by both sides to encourage the respective business communities to enhance new two-way investments and increase their manufacturing bases within the proximity of the relevant source of raw materials to enable the transfer of skill and technology, and job creation.

Favourable business environment 

Further, the joint statement of President Ramaphosa’s state visit says that “the two sides committed to providing a stable, fair and enabling business environment for companies from both sides and to ensure the safety and legitimate rights and interests of the relevant personnel, projects and institutions. The two sides encouraged mutual visits by economic and trade delegations.” 

It is these types of agreements that turn bilateral relations into all-weather strategic partnerships built on mutual bonds. China is South Africa’s largest trading partner. In 2023, bilateral trade exceeded $34 billion. Exports accounted for $12 billion of this amount, with imports standing at $22 billion. China is the country’s largest source of foreign direct investment. 

China has been successful in the areas of economic governance, industrial development, rural growth, infrastructure development and poverty alleviation. Much as China learned from some other countries during the opening up period after 1978, South Africa also stands to learn from China. As we can see in the joint statement of the state visit that China is committed to sharing with South Africa experience in poverty alleviation and rural revitalisation, in building poverty alleviation model villages, and offering support for South Africa’s coordinated urban and rural development.

In his opening address to the parliament in July, President Ramaphosa said that the country’s economy will be undergoing structural transformation. This means shifting production frontiers from the processing of raw materials and dependence on the primary sectors to high value-added production. Moving up the production value chain that the country aspires received a major boost from the state visit during which the sides agreed to expand cooperation on “new scientific and technological revolution and industrial transformation, focusing on key areas such as the digital economy, new energies and artificial intelligence, boost cooperation on quality productive forces, and further expand mutually beneficial cooperation in renewable energy, energy storage and power transmission and distribution.”

Building new quality productive forces is possible for South Africa, but that will require effective coordination of policies, capital and programmes. That is why it is encouraging to see that a growing number of senior officials from South Africa are receiving economic governance training in China. And their number is set to grow in future.

The author is Principal of National School of Government, South Africa. African Times published this article in partnership with ChinAfrica Magazine