Sihle Ngcamu

As South African President Cyril Ramaphosa attends the Forum on China-Africa Cooperation (FOCAC), the spotlight is on the promising relationship between China and KwaZulu-Natal (KZN).

Over the past decade, this partnership has evolved into a cornerstone of both South Africa’s and KZN's economic strategies. With trade and investment volumes reaching new heights, the China-KZN relationship is not only thriving but is also becoming increasingly vital for sustainable development in the region.

Trade between South Africa and China has grown remarkably, making China South Africa’s leading trading partner. From 2019 to 2023, South Africa’s exports to China rose by 55%, from R125 billion to R225 billion, while imports from China increased by 58%, reaching R404 billion by 2024.

In 2023 alone, South Africa exported goods worth R227.4 billion to China and imported goods valued at R404.3 billion, resulting in a trade surplus in China’s favour of R178 billion. KwaZulu-Natal has been a key player in this dynamic, with exports to China reaching R6.77 billion in 2023.

The significance of this trade relationship is underscored by the composition of exports.

South Africa’s exports to China are predominantly ores, slag, and ash, which accounted for 63.7% of total exports to China in 2023. Other significant exports include iron, steel, copper and edible fruits and nuts. For KwaZulu-Natal, this export profile shows its strategic importance within South Africa’s broader trade framework and highlights the potential for further diversification and value addition in these sectors.

On the import side, South Africa benefits greatly from China’s advanced industrial goods, particularly in technology and energy sectors. Electrical machinery and nuclear reactors made up 53.9% of South Africa’s imports from China in 2023, emphasising the country’s reliance on Chinese technology for its industrialisation.

This trade pattern, raw materials exchanged for high-tech products, represents a mutually beneficial relationship that could be further optimized for even greater economic integration.

In 2023, KwaZulu-Natal's exports to China were heavily dominated by raw materials and industrial products, reflecting the province's resource-rich economy. The leading export category was ores, slag, and ash, while other significant exports included pulp of wood, paper products and chemical products like dyes and pigments. Notable exports of inorganic chemicals and wood products were also significant. While metal exports such as copper and aluminium were important, the export of finished goods like vehicles and pharmaceuticals pointed to KZN';s potential for value-added production.

This diversified export portfolio indicates a broad-based trade relationship with China, albeit still heavily reliant on raw materials, leaving room for growth in higher-value sectors.

On the import front, KZN's trade profile with China was dominated by industrial and consumer goods. The largest import category was electrical machinery and equipment, reflecting the province's dependence on China for advanced technology and electronics.

Machinery, including nuclear reactors and boilers, followed closely emphasizing the importance of Chinese imports in supporting KZN' industrial infrastructure. Iron and steel imports, were crucial for construction and manufacturing sectors within the province.

Textile materials, specifically man-made filaments, were also significant, with imports worth R2.18 billion, indicating KZN's engagement in the textile and apparel sectors. Additionally, imports of organic chemicals and plastics highlighted the broad range of industrial materials sourced from China. On the consumer side, footwear and apparel imports were substantial, showcasing China's dominance in the global clothing market and its impact on KZN's retail sector. Overall, these imports signify a multifaceted dependency on Chinese products, vital for both KZN's industrial growth and consumer needs.

The bilateral trade figures reveal significant opportunities for further growth. The automotive sector, basic non-ferrous metals, and food and agricultural products hold immense potential, with projected trade opportunities valued at over USD 8 billion. The automotive sector alone offers a market potential of USD 4.28 billion, while paper products and non-ferrous metals present further avenues for export expansion.

Investment has also been a cornerstone of China-South Africa relations. Between January 2019 and August 2024, South Africa recorded 20 Foreign Direct Investment (FDI) projects from China, amounting to USD 1.10 billion (R17 billion) and creating 2,570 jobs. These investments spanned various sectors, including automotive components, electronic equipment, consumer electronics, and financial services, contributing significantly to economic growth.

It is important to highlight the fact that even though the relationship with China is showing positive returns, the China-South Africa relationship is not without its challenges. The trade surplus in China’s favour, which reached R178 billion in 2023, is a stark reminder of the asymmetry in this partnership. This trend is reflected in KZN, with the trade surplus in China’s favour reaching R34 billion. While China’s investment in KZN is substantial, there is an urgent need to address this trade imbalance.

Expanding KZN's export portfolio, particularly in value-added goods, and encouraging more Chinese investments in industries that promote local manufacturing and job creation are essential strategies to rectify this imbalance.

The future of KZN-China relations lies in deepening strategic engagements. Planned initiatives, through the Provincial entity, Trade & Investment KwaZulu-Natal, such as the Maritime Silk Road (MSR) International Expo Roadshow and delegations from the China Council for the Promotion of International Trade (CCPIT), are steps in the right direction.

Additionally, the integration of the Electric Vehicle Exhibition and Alternate Energy Roadshows into KZN Export Week 2024/25 will showcase innovative energy solutions from China, aligning with KZN’s focus on sustainable development.

KZN's active participation in international events like the China-ASEAN Expo (CAEXPO), the China International Import Expo, and the Maritime Silk Road (MSR) International Expo will be crucial in promoting its goods and services. These platforms offer opportunities to establish and expand KZN-based companies' footprints in China, fostering new business partnerships and driving economic growth.

As KZN continues to strengthen its ties with China, addressing trade imbalances, diversifying export portfolios, and deepening strategic engagements will be key to achieving sustainable economic growth.

With President Ramaphosa's participation in FOCAC signalling South Africa’s commitment to fostering deeper ties with China, KZN is poised to be at the forefront of this engagement. The future of China-KZN relations is bright, and with the right strategies, this partnership will continue to yield significant dividends, contributing to a more prosperous and interconnected global economy.

Sihle Ngcamu is the CEO of Trade & Investment KwaZulu-Natal

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