CHINA AND SOUTH AFRICA: what’s the brief story?

Mike MorrisSchool of Economics, University of Cape Town and

School of Development Studies, University of KwaZulu-Natal

Situating SA Chinese imports/exports

Africa SADC S Africa Imports

2000 5,541 3,100 1,037 2005 21,114 10,968 3,444

Exports 2000 5,057 1,367 1,015 2005 18,687 5,200 3,826

Chinese African Trade 2005

• OIL dominates imports from Africa 69.3%

• Also other raw materials - iron, cotton, diamonds, logs

• All iron ore & diamonds from SA

• Exports – mainly light manufacturing

• Clothing & Textiles, footwear, bicycles, etc

What this doesn’t tell us

• Specificity of South Africa• Indirect impacts of China on SA

– In third country sector markets (need sector based research for this)

– Exchange rates from Chinese activity

What Makes SA Different?

• Substantial Domestic Market– Size, Income Level and Sophistication– Concentration of Retail– Buyers

• Substantial Domestic Manufacturing– Diversified– Struggling to adopt WCM

• Substantial Mineral/Resource Base

• No Oil

China - Imports from South Africa (US$m)

Description D1995 D2000 D2003 D2005Total 688.25 1,037.30 1,842.78 3,443.64

IRON ORES & CONCENTRATES, 131.80 209.80 287.16 704.62DIAMONDS, 36.02 135.60 267.41 501.96REPAIRED IMPTS; RETURNED EXPTS 0.00 314.89 285.97 461.73PLATINUM, 4.24 11.12 81.31 417.82STAINLESS STEEL PRODUCTS, 0.00 15.37 153.25 189.62IRON & NA STEEL (cold/no clad) 1.13 6.46 90.38 98.61MANGANESE ORES/CONCNTRTS 19.15 3.92 9.17 63.89CHROMIUM ORES/CONCNTRTS 27.34 1.40 6.13 61.43ALUMINUM, 2.55 11.45 42.82 56.98FERROALLOYS 0.01 1.16 21.80 55.76NIOBIUM, TANTALUM, etc 12.16 13.55 28.80 55.59NICKLE, 0.01 5.05 29.95 51.51IND MONOCARB FAT ACIDS; 0.05 8.05 18.09 46.88OIL (NOT CRUDE) 0.16 3.55 0.35 43.39COBALT ORES/CONCNTRTS 0.19 5.35 5.57 38.96IRON & NA STEEL (hot/no clad) 0.56 2.62 33.45 38.11IRON & NA STEEL (hot/no clad) 0.55 22.04 44.20 36.07ALUMINUM PLATES, SHEETS 0.07 0.71 23.99 29.51POLYMERS OF PROPYLENE 10.43 7.07 22.21 28.07COPPER ORES/CONCNTRTS 0.00 11.57 11.11 23.05Top 20 246.44 790.74 1,463.12 3,003.54Top 20 as % 35.8% 76.2% 79.4% 87.2%

China - Exports to South Africa (US$m)

Description D1995 D2000 D2003 D2005Total 633.35 1,013.71 2,030.71 3,825.88

WOMEN/GIRL SUITS, NOT KNIT 5.35 29.02 57.83 149.31FOOTWEAR 30.30 37.77 108.59 143.79DATA PROCESS MACHINES 9.30 22.70 62.93 141.58ELEC HEATERS; HAIR DRY 4.84 19.86 33.66 101.53MEN OR BOY SUITS, NOT KNIT 22.39 29.70 39.04 91.94WOV EN SYN FABRIC 0.47 7.14 47.45 91.35TV PRODUCTS 15.28 29.02 45.33 88.54T-SHIRTS ETC, KNIT/CROCHET 16.12 15.18 41.49 83.37FOOTWEAR, 23.13 21.03 33.37 64.67PARTS/ACCESS MOTOR VEH 2.56 7.96 18.19 62.16SWEATERS KNIT/CROCHET 4.16 6.99 14.22 55.56TRAVEL/HANDBAGS/WALLETS 23.52 27.67 32.92 51.54FRIDGES/HEAT PUMPS 1.58 1.26 4.26 45.39VIDEO RECRDNG/ 0.35 2.11 36.00 40.86CERAMIC TABLEWARE ETC. 19.76 36.33 17.53 38.48MICROPHONES; SPEAKERS; 2.86 5.98 17.04 38.29TYPEWRITER/OFFICE PARTS 0.85 2.91 20.77 37.15AIR CONDITIONERS 0.74 2.60 11.84 36.68COKE 0.00 27.86 69.92 35.08TYRES, 1.17 2.76 7.13 33.56Top 20 184.74 335.83 719.53 1,430.84Top 20 as % 29.2% 33.1% 35.4% 37.4%

IMPACT on SA?Don’t know enough but …..

FDI? • Clothing -Taiwanese• Steel - Mittal• Construction squeezed out of part of SSA

Trade on Manufacturing?

• Substantial formal sector job losses in C&T (85,000), Furniture, Footwear decimated

• C&T systemic value chain competitiveness response to upgrade local manufacturing

Aid? – Indirect impact through SSA

Indirect impacts: 3rd country markets and exchange rates

Two sector stories show this:

• Autos – 2002 work on competitiveness but at R15 = £. Now because of Dutch disease R10.88 = £ how survive???

• C&T – Recent work for DFID – AGOA boost for exports but China 2 fold impact. Exports and Dutch disease affect Rand currency zone….