South African Deputy President Cyril Ramaphosa is in China for an official visit from 13 July to 7 July that will focus on economic and trade matters, specifically, on how State-owned Enterprises (SOEs) can be utilised to promote economic growth and address challenges of poverty and unemployment.
South African SOEs such as electricity utility Eskom and flag carrier South African Airways have failed to provide reliable services to the public in recent years. Eskom has had to impose sporadic load-shedding since January 2008 as the Medupi power station was unable to be completed on schedule and within budget. South African Airways has this year cancelled its direct flight to Beijing following years of losses and is in need of another recapitalisation by the state.
The Presidency said the Deputy President would focus on China’s state-owned enterprises and how South Africa could utilise the Chinese model in its own re-industrialisation process. During his visit Deputy President Ramaphosa would pay a courtesy call on China’s President Xi Jinping and meet Premier Li Keqiang.
Premier Li noted the advantages to be gained from the BRICS partners “highly complementary” economies and would collaborate on the development of ports, oil, gas resources and fisheries.
Premier Li said China is willing to push forward cooperation with South Africa on industrial capacity, especially in the manufacturing of steel, construction materials and consumption goods, in which China is competitive in technology and prices.
“The economies of China and South Africa are highly complementary, and the prospect of cooperation is broad,” Li said.
China was South Africa’s largest trading partner for the sixth consecutive year in 2014 with $60.3 billion in bilateral trade.
While in Beijing, Deputy President Ramaphosa addressed the South Africa-China State-owned Enterprises Seminar and a Business Forum Lunch.
The Deputy President’s delegation included the Ministers of Public Enterprises Lynn Brown, who is responsible for SOEs, as well as Higher Education and Training, Blade Nzimande. Deputy Ministers of International Relations and Cooperation, Nomaindia Mfeketo, Energy Thembi Majola, Finance Mcebisi Jonas, Trade and Industry Mzwandile Masina, as well as senior government officials, business and state owned enterprises executives, are also part of the delegation.
The Deputy President will later in the week visit several Chinese state-owned enterprises in Qingdao and Shenzhen to learn how South Africa could utilise the Chinese state-owned enterprises model in its own re-industrialisation process.
The June 2015 Chinese industrial production data showed that Chinese SOEs were the poorest performers with only a 2.2 per cent year-on-year increase compared with collective-owned enterprises, which had a 3.2 per cent rise, while joint-stock enterprises achieved a 7.8 per cent growth rate.
“The first point that comes to mind is whether South Africa can learn anything from the Chinese model on SOEs. Our business model needs to be overhauled. What changes will be made, if any, will likely be modelled on ideology, rather than good business practice followed successfully by private enterprise in this country,” Lefika Securities economist Colen Garrow told The BRICS Post.
Deputy President Cyril Ramaphosa said the South African government would like to see more South African companies expand into China. He said over 60 South African companies have travelled to China last year to engage with the country and collaborate on joint opportunities.
“South African companies are focussing their efforts on emerging economies for new opportunities, and access to the Chinese market is at the heart of their strategy,” he said at the China-South Africa Business Forum in Beijing, China, on Wednesday.
“We would like to see more South African companies expand into China and the South African Expos in China provided a good platform to achieve this objective,” he added.
Ramaphosa said South Africa and Africa have to ensure structural transformation of their trade with China, to enable China to import more value–added and labour intensive products, and to move away from the dependence on raw materials exports.
China is South Africa’s largest export market. In the first five months of 2015 China took R38.4 billion worth of South African exports compared with R31.2 billion for the United States, R26.9 billion for Germany, R20 billion for Japan, R17.9 billion for the United Kingdom and R17.7 billion for India.
The Deputy President said the recent announcement of Chinese financing for local beneficiation through the development of a metallurgical complex in Musina, is part of a new trend aimed at employment-generating investment for South Africans.
He said this seems to be echoed in the expansion of Hisense and the FAW automotive manufacturing plants, discussions for the revival of the Coega Industrial Development Zone and even a prospective mixed-use residential, retail and light-industry facility east of Johannesburg.
For South Africa, the hosting of the sixth Forum for China-Africa Cooperation (FOCAC) in 2015 promises to be a major event on the diplomatic calendar, but as yet no time or venue has been announced, which is worrying African diplomats as most heads of state need sufficient advance warning to schedule such high-level meetings.
The World Economic Forum meeting in Cape Town in June this year for instance was not attended by another African head of state.
Ramaphosa said since South Africa chairs the African Union Commission, it is committed to initiatives that grow the African continent, and improve intra-African trade.
“China has consistently doubled its financing commitment to Africa during the past three FOCAC meetings — from $5 billion in 2006 to $10 billion in 2009 and $20 billion in 2012,” he noted.
Ramaphosa invited the Chinese business community to invest in South Africa, especially in the Special Economic Zones focussed on the ten investment projects agreed to between the respective governments.
Helmo Preuss in Pretoria for The BRICS Post