China’s Xi promises $14.7bn in investments in South Africa

Chinese
President Xi Jinping has committed China to investing $14.7-billion in
South Africa, President Cyril Ramaphosa said after meeting Xi in
Pretoria on his state visit to South Africa on Tuesday. This would be a
significant boost to Ramaphosa’s international drive to raise
$100-billion in investment over the next five years.

Xi
himself announced at the same joint press conference with Ramaphosa
that China would take “active measures” to boost imports from South
Africa to support the country’s development agenda and priorities.

State-owned
China Development Bank has also agreed to lend $2.5-billion
(R33.7-billion) to cash-strapped power utility Eskom to complete the
Kusile coal-powered power station project in Mpumalanga.

And
a $300-million (R4-billion) loan from Industrial and Commercial Bank of
China (ICBC) will go to another ailing state-owned enterprise,
Transnet.

The
two loans deals were among 14 different agreements signed between South
African and Chinese government departments, SoEs and private companies
after the Ramaphosa-Xi official meeting.

Trade
and Industry Minister Rob Davies explained to journalists that the
measures which Xi had agreed to take to boost South African imports
included sending more buying missions to South Africa, with a focus on
purchasing value-added goods from this country. Pretoria sees such
measures as steps towards establishing more balanced trade with China,
rather than just exporting raw materials to that country, and importing
Chinese manufactured goods.

As
an example of the type of Chinese investment South Africa is looking
for, Davies said that Ramaphosa and Xi would later on Tuesday
participate by video in the launch of the R10-billion car factory built
by the Chinese vehicle company BAIC in the Coega special economic zone
near Port Elizabeth.

He
said this investment had been announced at the time of Xi’s last state
visit in 2015 and the first vehicles would be rolled out on Tuesday.

“What’s special about the Chinese is when they make a commitment to invest, they’re reliable and they happen,” he said.

Davies added that the Chinese TV and domestic appliance manufacturer Hisense would also be expanding its local production.

But
he also disclosed that South Africa invests a lot more in China and
other BRICS countries than they invest in South Africa and that this
imbalance needed to be corrected.

He
said China’s accumulated total investment in South Africa to date was
about $11-billion and that South Africa had invested a greater amount
than that in China.

South
Africa’s investment imbalance with the other four BRICS countries as a
whole was even greater. Total outward investment was about $60-billion
against only $18-billion of inward investment. That’s why he would be
arguing at the BRICS Business Forum in Sandton on Wednesday that BRICS
needed to support more investment-led trade. If South Africa could
expand its production capacity, it and other BRICS countries could also
increase their manufacture of intermediate goods which would boost trade
in supply chains.

Davies
said about two thirds of world trade was now in such intermediate goods
and that the focus needed to be on investment-led trade, not the other
way round, (as many economists advocate).

The
BRICS Forum, which all the leaders of the BRICS countries – Brazil,
Russia, India, China and South Africa – are to attend, will be the first
leg of the BRICS summit. On Thursday the five BRICS leaders, Ramaphosa,
Xi, Brazilian President Michel Temer, Russian President Vladimir Putin
and Indian Prime Minister Narendra Modi will have a meeting among
themselves, followed by a retreat.

On
Friday the five leaders will have two separate “outreach” meetings, one
with several African leaders and another with non-African leaders,
mostly representing regional organisations.

Davies
said that apart from new investments, the other important announcement
by Xi on Tuesday was to take active measures to increase imports from
South Africa. In addition to sending more buying missions to this
country, he said China had already relaxed health restrictions on South
African beef imports and had undertaken to do the same for dairy
imports.

But Davies said South Africa and China were not now talking about easing trade tariffs through a free trade agreement.

Eskom
Chief Executive Phakamani Hadebe told journalists after signing the
loan agreement with the China Development Bank that the loan would help
Eskom reach its funding requirement for the financial year, currently at
62%.

The loan demonstrated confidence in Eskom’s new leadership appointed in 2018 after a new board had been appointed, he said.

And
Eskom’s group treasurer Andre Pillay confirmed that a $180-million loan
granted to Eskom by the BRICS New Development Loan two years ago would
definitely now be taken up. Other officials had indicated that the loan
had become “dormant” because it had been intended to finance the
building of power lines to link renewable energy plants, built by
independent power producers, to the national grid. It had been suggested
that in 2016 Eskom had no use for the loan as it had stopped buying
renewable energy and was focusing on building nuclear power plants.

But
Pillay denied this, saying the loan had never been abandoned and that
Eskom had only been waiting for projects with the right content to be
presented.

The
other agreements signed after the Ramaphosa-Xi meeting included a deal
to make it easier to get visas to travel to both countries, a financial
agreement and a special agreement for the development of small and
medium size enterprises (SMEs) on the continent.

“President
Xi and I have agreed to support each other to improve the lives of our
people. We have agreed that we must work together,” Ramaphosa said.

Xi
said the easing of visa restrictions was part of an agreement with
Ramaphosa to put people at the centre of developing relations between
the two countries.

This
would also include establishing cultural centres in each other’s
countries, recognising each other’s degrees and diplomas and boosting
exchanges of people in education, culture, tourism and among women and
youth.

He
also said the two countries should increase their co-operation in
China’s huge Belt and Road Initiative which will link China to central
Asia, Europe and Africa through vast land and sea development corridors.

Xi
said the two countries would prioritise co-operation in infrastructure,
trade and investment, science and technological innovation and
financial co-operation.

Xi
pledged China’s support for the big investment and jobs summit which
Ramaphosa plans to hold later in 2018 in an effort to attract
$100-billion of investment in five years and said China would take
“active measures to expand imports from South Africa to support the
government in achieving its development agenda and priorities”.

Xi
said China and South Africa held similar views on international issues
and so should work more together to strengthen multilateralism – the
inclusion of all nations in reaching international decisions.