Unlike America, SA is welcoming China trade agreements. Find out why!

26 June 2019 | Web Article Number: ME201915156

Automotive
Government & Municipal
Import / Export
Special Economic Zones

THE Coega Development Corporation (CDC), operator of the Coega Special Economic Zone (SEZ) has welcomed a signing ceremony to mark cooperation agreements between South Africa and the People’s Republic of China.

The event saw approximately 40 major Chinese companies signing 87 cooperation agreements with South African counterparts at the Cape Town International Convention Centre (CTICC) on Friday 21 June 2019.

The agreements flow from consensuses reached by President Cyril Ramaphosa and Chinese President Xi Jinping during the 2018 Forum on China–Africa Cooperation (FOCAC) Beijing Summit.

According CDC Head of Marketing Ayanda Vilakazi, China remains one of South Africa’s strongest and strategic trade, economic and investment partners.

“Over the past 10 years, China has been South Africa’s largest trading partner while South Africa, on the other hand, is China’s largest trading partner in Africa. In 2018, two-way trade between the countries totalled approximately R627 billion ($43.55billion) – a 27-fold increase since the establishment of diplomatic ties between South Africa and China.”

Vilakazi believes the trade agreements will further stimulate trade between China and SA.

“In general, FOCAC has been designed to reduce costs on the one hand and increase the volume of trade between SA and China. It will also stimulate infrastructure development and support Africa in terms of regional and continental integration. “In short, these cooperation agreements will solidify and deepen trade and economic relations between our two countries.”

Vilakazi noted that FDI from China to SA reached R360 billion ($25 billion) in accumulative terms and it had been estimated that more than 400 000 jobs had been created for South Africa.

He said two of the most important strategic policy directions of Beijing were enshrined in FOCAC and the Belt and Road initiative (BRI). China’s BRI is a strategic initiative to improve connectivity and cooperation on a transcontinental scale.

“In relation to BRI, a recent World Bank study that looked at transportation corridors across Africa, Asian countries and Europe revealed that China’s BRI initiative could boost trade in BRI corridor countries with 9.7%, and at a global trade with 6.2%.

“South Africa’s special economic zones along the Indian Ocean coast are prime locations for Chinese foreign direct investment, and economic and industrial activity because of their proximity to the BRI corridors. They provide access to China’s 21st century maritime ‘silk’ road with an emphasis on Africa, and access to the markets of Eurasia through the Middle East.” He said there had been strong focus on catalytic investment projects by Chinese firms in the Eastern Cape.

“The single largest automotive investment in Africa in the last 40 years by a Global Fortune 500 automotive manufacturer was three years ago in the Coega Special Economic Zone with the BAIC SA project. The investment is valued at USD800 million (USD 150 million for Stage I).

“Construction is underway creating in excess of 1800 jobs and is expected to be operational by the end of 2019 and is expected to create another 2300 jobs. The project was also driven by BAIC Group’s Internationalization Strategy, cultivating SA auto market with BAIC Investments SA established in 2014 soon after the establishment of BAIC International, further to the previous BAW business operation in SA.”

Another sizable Chinese investment in Coega came from First Automotive Works (FAW), in the form of a USD 50 assembly plant opened by former President Jacob Zuma in 2015. FAW SA welcomed its 4000th truck off the assembly line at the end of 2018.

Commenting on the China-US trade war, Vilakazi said, “It is a difficult situation not only for both the US and China. We hope resolutions can be reached swiftly between the two countries as trade wars affected all the interlocking chains or countries of a globalized economy”.

He noted that China’s foreign currency reserves were sitting in excess at $3 trillion, while US foreign currency reserves stood at $120 billion.

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