This article discusses South Africa and China’s commitment to jointly build the Silk Road Economic Belt and the 21st Century Maritime Silk Road.
The Silk Road Economic Belt and the 21st Century Maritime Silk Road, which is taking place in at least 64 countries across Asia, the Middle East, Europe and Africa, was proclaimed by Chinese President Xi as the “Project of the Century”. The Belt and Road Initiative is refreshing in the sense that it is a bold move towards globalization and an attempt by China to benefit not only itself, but also its neighbours and beyond.
EXTENSIVE AREAS FOR CO-OPERATION
Financing opportunities and major projects in the power and infrastructure sector, which include technology, telecommunications, manufacturing, consumer goods and retail, will all become the main focus and will play a major role in the Belt and Road Initiative in the coming years. The initiative also aims to promote expansion of mutual investment areas, to deepen cooperation in agriculture, forestry, fisheries, machinery manufacturing and farm produce processing, as well as to promote co-operation in the marine product, deep-sea fishing, ocean engineering technology, environmental protection and marine tourism industries. In turn, South Africa provides Chinese enterprises investment opportunities in aquaculture, agro-industry, ocean economic, renewable energy, sea food and marine tourism, which are in line with the Belt and Road Initiative.
SOUTH AFRICA-CHINA MOU
China and South Africa signed a memorandum of understanding (MoU) in December 2015 to jointly build the “Silk Road Economic Belt and the 21st Century Maritime Silk Road”. The MoU aims to create opportunities for mutual learning and to realise the better exchange and integration of goods, technology, capital and personnel between the two countries. China is currently South Africa’s largest trading partner. This relationship will not only be favourable in boosting bilateral trade and investment between the two countries, but will also infuse a new momentum in the transformation of Sino-African relations and will provide economic development opportunities between China and various African countries. It will also help promote the Belt and Road Initiative in Africa.
As a result, a lot of investment is expected to roll into South Africa from China, together with infrastructure development and growth in trade. In 2014, The Silk Road Fund was set up by the Chinese government to lead the investment arm of the initiative. The Silk Road Fund had a fund value of US$40 billion back in 2014. In 2017, Fitch reported that US$900 billion in Chinese projects across Africa is already underway. Infrastructure development and trade across Africa will certainly take centre stage in the Belt and Road Initiative.
Indeed, the South African government celebrated another successful conclusion of the 2018 Forum on China-Africa Cooperation (FOCAC) recently on 3 September 2018. The South African President announced that the two countries have signed numerous agreements to enable economic growth and educational opportunities. On the promotion of trade and investment between the two countries, an agreement was signed to the tune of ZAR14 billion.
Other agreements signed includes various commitments on co-operation in the fields of climate change, water resources, transport-related infrastructure and refurbishments to a number of technical and vocational training colleges. Furthermore, an MoU was signed between the South African Department of Trade and Industry and its Chinese counterpart, the National Development and Reform Commission of China, to co-operate on international investment promotion for South Africa’s special economic zones and industrial parks.
African countries are also in the process of reorganizing themselves to facilitate trade within the continent. On 1 July 2018, South Africa become a signatory to join the African Union’s African Continental Free Trade Area, the largest free trade area since the formation of the World Trade Organisation in 1995. The agreement promises to fast track Africa’s economic and structural transformation by easing intra-continental trade.
THE POTENTIAL OF SOUTH AFRICA
Once the agreement is fully in place, more complex levels of production will be able to take place across the continent. It will also address a number of priority areas related to trade, namely: policy, infrastructure, information, market integration, boosting productivity, and trade facilitation. As the most industrialised country on the continent, South Africa remains a favourite destination for Chinese projects and has recently emerged as a low-cost manufacturing base for some Chinese companies. Following the election of Cyril Ramaphosa as the President of South Africa on 15 February 2018, the world witnesses some serious positive reforms by the ruling party and the president. Investor confidence in the country is slowly returning to previous levels.
Kenny Chiu is an executive and head of Asia practice group at ENSafrica. He can be contacted on +27 83 732 3900 or by email at kchiu@ENSafrica.com