Tue, Dec 28, 2004 - Page 9 News List

As China takes on a global role, will southern Africa benefit?

By Peter Draper

China and southern Africa have received growing international attention in recent years, but for very different reasons. As a rising, rapidly modernizing power, China -- already a permanent member of the UN Security Council -- is now on the verge of coveted G8 membership and a powerful role in the World Trade Organization.

By contrast, southern Africa is beset with problems. Its position in the world economy is marginal -- tenuously plugged into global investment flows and dependent on northern markets for its commodity exports, tariff preferences and financial aid. South Africa is a notable exception, offering the best prospect for driving regional economic integration, but it, too, has chronic social problems and, compared to East Asia, anemic economic growth.

What implications does China's emergence onto the global stage hold for southern Africa? Can China help lift the world's poorest region out of its deep economic and political malaise?

In theory, at least, China's rapid growth, if it continues, offers southern Africa a highly promising economic opportunity, not least by underpinning commodity prices and thus boosting southern Africa's terms of trade. This, in turn, would support fragile balance-of-payments positions throughout the region, potentially assisting with pervasive debt-repayment problems.

Although in South Africa, for example, imports of cheap Chinese manufactures have produced a large and widening bilateral trade deficit over the last decade, southern Africa as a whole stands to gain from the "minerals nexus." China's manufacturing boom is fuelled by imported minerals, such as iron ore and chromium, which southern Africa possesses in abundance. This implies increasing minerals exports to China, together with growing Chinese investment in the region to secure sources of supply.

China's agricultural imports should also continue to rise, as land is taken out of agricultural production and its urban population expands. Southern Africa has the potential to export such goods to China. Although much depends on greater regional investment in increasing export capacity, further Chinese investment in the region would most likely follow.

Finally, South Africa, with its world-class banking sector and internationally competitive construction companies, can supply services to the Chinese market. Moreover, these services are set to benefit from the broader trade expansion with China, potentially establishing a virtuous circle of investment and exports.

But China's rise also holds risks for southern Africa. Imports of cheap Chinese goods threaten to displace regional production, particularly in labor-intensive manufacturing sectors that are finding it difficult to compete.

In a region of pervasive unemployment, the key question will be how to ensure future employment growth.

This raises troubling questions about the region's industrial trajectory. Indeed, fears are growing that southern Africa will be condemned to the role of exporter of raw materials.

The composition of South Africa's exports to China supports these concerns. In 1993, advanced manufactured goods accounted for 50 percent of total exports to China, while raw materials and intermediate goods comprised the remainder. By last year, advanced manufactures accounted for a mere 8 percent of the total, with resource and intermediate products accounting for the rest.

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