Reflections on 10 Years of Bilateral Relations, South Africa and the PRC: A View from South Africa, Deputy Minister van der Merwe, 19 August 2008, Parliament

Honourable Members
Acting Consul General of China – Ms Yuan
Members of the Diplomatic Corps
DDG’s, CD’s and Dir.
Distinguished Guests

South Africa and the Peoples’ Republic of China (PRC) celebrate 10 years of diplomatic relations this year (2008). This dynamic relationship has grown over the past decade to reflect a strategic partnership built on political trust; a commitment to economic interaction in a balanced manner that would deliver sustainable mutual benefits; and cooperation in multilateral fora to promote democracy in international relations and uphold the legitimate rights and interests of developing countries.

South Africa’s strategic interests, however, cannot be separated from Africa’s strategic interests. China’s engagement with Africa, therefore, also sets the stage for its strategic partnership with South Africa.

The Forum for China Africa Cooperation (FOCAC) was established in 2000 and serves as the chief instrument of engagement between the PRC and Africa. During the Asia-Africa Summit in April 2005, the Chinese President, Mr Hu Jintao called for the creation of a Strategic Partnership with Africa that would focus on three main areas of cooperation: political solidarity, economic development, and socio-cultural cooperation.

These areas of co-operation are undertaken with view to harnessing the various strong relations China has with many African countries towards a common and multilateral approach to addressing developmental challenges. Africa and China also regard economic development as being critical to this partnership. Towards this end, both partners seek to improve the current form of their economic interaction for the benefit of both. Finally, building on the solid government-to-government relations, Africa and China consider the promotion of people-to-people contact equally important and thus the need for socio-cultural exchanges to understand each other better.

China's Africa policy, launched in 2006, is a further indication of China's intentions to intensify and broaden its engagement with Africa. This repositioning of Africa in terms of China was manifested in the FOCAC Summit in Beijing in November 2006. At the conclusion of the Summit, China and Africa adopted the sector-specific Beijing Action Plan (2007-2009) based on the shared imperative to “promote friendship, peace, cooperation and development” and to “advance the new type of strategic partnership between China and Africa”, as stated in the FOCAC Beijing Declaration.

In light of South Africa's own commitment, focus and contribution to the regeneration of the continent, it is important to engage China in harmonising, synchronising and aligning FOCAC with the policies and positions of the AU, including NEPAD. NEPAD has already been developed as the integrated socio-economic development framework for Africa and therefore provides a basis upon which Africa and China could start to engage.

Within the NEPAD process, specific action plans have been developed in the various priority sectors. The scope for China to assist in scaling up and accelerating the implementation of these action plans is enormous.

Since 2000, China's trade with Africa has nearly tripled. In 2004 China's trade with Africa stood at almost US$30 billion. By 2007 this figure stood at $74 billion and all indications are that it will continue to rise as commodity prices, Africa’s main competitive advantage, remain in demand.

Much focus has been placed in the media on the PRC’s engagement with Africa in terms of market access for Chinese products as well as access to mineral and energy resources. However, the full picture is one of a mutually beneficial relationship that includes, inter alia, support for the African Agenda; skills and knowledge transfer; increased FDI (recent investments include the agri-industries, electricity, road construction, textiles, tourism and telecommunications); debt relief (since the inception of FOCAC China has granted debt relief of US$1.3 billion to African states, with a further US$1.3 billion in write-offs promised at the Beijing Summit in 2006); a US$5 billion China-Africa Development Fund; the construction of primary schools and hospitals; and economic development zones that would expose Africa’s markets to China and vice-versa.

Both Africa and China are satisfied with the progress made, thus far, in implementing the outcomes of the FOCAC Summit in Beijing, particularly the eight policy measures announced by the Chinese side to boost practical cooperation with Africa . A Senior Officials Meeting (SOM) is being planned for mid-October in Egypt to discuss, amongst others, to open up discussion regarding implementation that has taken place to date on the FOCAC Programme decided in Beijing in November 2006, as well as to look forward to the 4th SOM Ministerial scheduled for 2009 in Egypt.

A remarkable increase in people-to-people contact, between South Africa and the PRC, has developed over the past 10 years. This has been built on informal relations between the liberation movements and the Communist Party of China, during the apartheid era. The following milestones can be noted with reference to our bilateral relations:

Over the past 10 Years of Diplomatic Relations, the two countries also hosted a number of high-level bilateral political exchanges, including two incoming and two outgoing State Visits and President Mbeki is scheduled to visit China in later this year.

In line with the outcomes of the 3rd Session of the BNC held in September 2007, a Strategic Dialogue, at Ministerial level, was launched in January 2008. Following on the outcomes of the Strategic Dialogue, a Strategic Dialogue Mechanism, at Deputy Ministerial level, was launched in April 2008. During the first Phase of the 10 Year Celebrations held in China.

The bilateral relations between South Africa and China is underpinned by a series of joint agreements, memoranda, programmes of action, joint declarations and exchange notes exist between the two countries. These cover the areas of diplomatic relations, protection of investments, trade, housing, civil air transportation, scientific and technological exchanges, water, double tax avoidance, animal health, and arts and culture, amongst others.

In the field of Science and Technology, the two sides agreed in 2007 to expand the areas of cooperation from transportation, agriculture, IT, advanced materials, and renewable energy to palaeontology, archaeology and those areas identified by the Joint Science and Technology Committee. Further attention and support will be afforded to such flagship projects as the telemedicine project in Limpopo. The healthy relationship in the field of Science and Technology is further reflected in high level visits, such as the visit by the South African Minister of Science and Technology in April of this year, and the participation by China in what is our premier science and technology event, i.e. the International Science, Innovation and Technology Exhibition (INSITE) , that will be taking place in September 2008.

The strategic nature of the bilateral relationship has also been demonstrated when South Africa provided financial assistance of R1, 5 million after the Wenchuan earthquake.

South Africa is China’s key trade partner in Africa, accounting for 20, 8 percent of the total volume of China-Africa trade in 2007 figures.

Total trade between South Africa and the PRC amounted to approximately R 88 billion (approximately US$13 billion if the rand/dollar exchange rate for end of December 2007 is taken into account.) for the year 2007. According to the above-mentioned statistics, total trade between the PRC and South Africa has increased from approximately R60, 7 billion in 2006 to R88, 3 billion in 2007. This represents an overall increase of approximately 45 % if the total value of trade for the 2006 and 2007 years are compared.

Total trade between South Africa and Hong Kong amounted to approximately R7, 4 billion for 2007, with a trade balance of approximately R1, 8 billion in South Africa’s favour.

China is the 5th largest export destination for South Africa and offers the second largest import market for the 2007 year. South Africa’s exports to the PRC consist mostly of basic commodities such as chromium ores and concentrates, manganese ores and concentrates, copper ores and concentrates, copper waste and crap, shorn wool, aluminum alloys, petroleum oils etcetera. Exports from the PRC to South Africa consist mostly of portable automatic data processing machines, telephones for cellular networks, parts and accessories of machines, tricycles, transmission equipment etcetera. Bilateral trade is clearly dominated by commodity exports from South Africa and value-added imports from China. The current structure of our trade is, therefore, skewed in favour of China and unsustainable in the long-term.

In recognition of this factor, the Presidents of South Africa and China, pronounced during the Chinese President’s State Visit to South Africa in 2006 that the two countries need to work towards establishing a more equitable trade balance and to establish what President Hu Jintao called a “win-win situation.”

The Partnership for Growth and Development (PGD), led by the dti, is intended to address the current imbalance in bilateral trade.

The key objective of the proposed PGD as entering into a structured and predictable arrangement with China as, amongst other things:

China has set up more than 80 companies in South Africa since 1998. They have invested in predominantly the following sectors: energy technology, mining and metallurgy, home appliances, textiles and apparels, food processing, etcetera. Chinese FDI to South Africa amounts (cumulatively) to nearly US$6 billion. This figure includes an investment of approximately US$5, 5 billion by China’s ICBC bank that purchased a 20% stake in Standard Bank in March of this year.

South African investment in China is valued at approximately US$700 million. South African companies mainly invested in the breweries, media and energy sectors in China and include SABMiller; MIH (part of Naspers); Property group LRPS; Sasol and Mining companies Anglo American, Anglo Coal, Exxaro, Kumba Iron Ore, Anglo Gold Ashanti and Goldfields.

South Africa will participate in 2010 World Expo in Shanghai. The World Expo with its 150-year history is regarded as the Olympic Games of the economy, science and technology. The last Expo, which South Africa participated in, was held in Japan, Aichi and had 121 participating countries with a total number of 22,049,544 visitors. The Shanghai Expo has 180 confirmed Participating Countries (Africa – 41; America 22; Asia – 42; Europe – 41; Oceania – 14) and 27 Participating International Organisations. The Expo is expected to draw some 70 million visitors and will afford South Africa the platform to showcase the progress it has made with regards to the development of its society using economic growth and advances in science and technology.

Multilateralism is one of the pillars of South Africa’s foreign policy. This is a common vision that South Africa shares with China was confirmed by both countries during the 3rd Session of the BNC as well as during Strategic Dialogue and Strategic Dialogue Mechanism Meetings in January and April 2008 respectively.

Both countries agree on the need to strengthen the role of the UN in the maintenance of world peace and stability. They also support the efforts of the African Union and other regional organisations for regional peace and stability.

South Africa and China co-operated during our tenure as a non-permanent member of the United Nations Security Council to advance positions that promote the agenda of the South. In particular, China has been a key ally in supporting South Africa efforts to revitalise the relationship between the UN and regional organisations, which was the theme of our Presidency of the Council in March 2007, as well as enhancing the co-ordination of positions between the UN and African Union on African issues. South Africa was carried this theme through to its second stint as President of the Council in April 2008 after which resolution 1809, which was drafted by South Africa, was unanimously adopted.

UNSC Resolution 1809 should be recognised as a real achievement in this regard. Through resolution 1809 the Security Council welcomed the role of the AU in bringing peace and stability to the African Continent and therefore expressed its support for this work of the AU. Through the resolution the Council also expressed its determination to take effective steps to further enhance the relationship between the UN and regional organisations in accordance with Chapter VIII of the UN Charter. It also made the point that common and coordinated efforts undertaken by the UN and regional organisations, in particular the AU, should be based on complimentary capacities and make full use of their experiences. China effectively gives substance to this undertaking with more than 1400 personnel deployed in UN peacekeeping missions in Africa. South Africa also wishes to extend it gratitude for China’s support and President Hu Jintao’s sending of a Special Envoy to attend the Security Council Summit on 16 April 2008 during out Presidency.

The South Africa-China bilateral relationship remains amongst one of the most dynamic in the world today. As an emerging power, China provides a real opportunity for balancing the global distribution of power in favour of a multipolar world, which is more conducive to multilateralism as well as creating a just a equal world.

South Africa will use the opportunities presented by the occasion of the 10 Year Celebrations of Diplomatic Relations with China and it preparations for participation in the Shanghai Expo, to further enhance the Strategic Partnership through increased people-to-people understanding and creating a more sustainable trade relationship.

China’s FDI stock in Africa had reached US$1.6 billion by 2005, with Chinese companies present in 48 African countries. However, Africa still accounts for only 3% of China’s outward FDI. Sudan is the largest recipient in Africa, followed by Algeria and Zambia. (Source: UNCTAD: Asian FDI in Africa: UN report points to a new era of cooperation among developing countries).

The eight policy measures are:

Double its 2006 assistance to Africa by 2009.
Provide US$3 billion of preferential loans and US$2 billion of preferential buyer’s credits to Africa in the next three years.
Set up a China-Africa development fund which will reach US$5 billion to encourage Chinese companies to invest in Africa and provide support to them.
Build a conference centre for the African Union to support African countries in their efforts to strengthen themselves through unity and support the process of African integration.
Cancel debt in the form of all the interest-free government loans that matured at the end of 2005 owed by the heavily indebted poor countries and the least developed countries in Africa that have diplomatic relations with China.
Further open up China’s market to Africa by increasing from 190 to over 440 the number of export items to China receiving zero-tariff treatment from the least developed countries in Africa having diplomatic ties with China.
Establish three to five trade and economic cooperation zones in Africa in the next three years.
Over the next three years, train 15,000 African professionals; send 100 senior agricultural experts to Africa; set up 10 special agricultural technology demonstration centres in Africa; build 30 hospitals in Africa and provide RMB 300 million of grant for providing artemisinin and building 30 malaria prevention and treatment centres to fight malaria in Africa; dispatch 300 youth volunteers to Africa; build 100 rural schools in Africa; and increase the number of Chinese government scholarships to African students from the current 2000 per year to 4000 per year by 2009.

The International Science, Innovation and Technology Exhibition (INSITE), from 15 – 17 September 2008, is South Africa's premier science and technology event, providing an international showcase for innovative science and technology solutions to some of the world's most pressing social and economic challenges.

Official Chinese government statistics are indicating that the total value of trade between South Africa and the PRC amounted to approximately US$14 billion. The difference in the value of the statistics has possibly to do with a different methodology being utilized for calculating the trade statistics for example implications of trade with Hong Kong, destination country versus country of origin etcetera.

1 443 Military personnel in June 2008, the majority, i.e. 580 with UNMIL in Liberia and 466 UNMIS in the Sudan (Source: United Nations Peacekeeping).