Zuma visit a success with thorns

Domestically it has been a rough two weeks for the Zuma administration, especially on the labour front, but in the international relations sphere his visit to China seems to have been a great success. The path forward in that relationship, besides its clear and wide-ranging benefits, will, however, not be without some important thorns – not all of which would be easy to sidestep.

President Zuma’s three-day official visit to China with 13 members of his government and some 370 business and other civil leaders has seen the announcement of a comprehensive strategic partnership between the two countries and the signing of no less than 12 agreements between companies from both sides, ranging from memorandums of understanding to possibly develop power grids, the setup of a cement plant in South Africa, on mining and transport infrastructure. It has taken South Africa one important step closer to adding the status of being the Africa representative on the informal Bric grouping of developing nations (Brazil, Russia, India and China) to that role with the G-8 and G-20 summits.

How important this can be is underlined by the fact that some analysts expect the joint economies of the Bric nations to be larger than that of the Group of Seven developed economies (including the US) within the next 25 years. It could make them the dominant international force in trade and finance.

The strengthening and expanding relationship between South Africa and China could also bolster South Africa’s ambitions to cement its position as the leading nation on the African continent and membership of the UN’s Security Council.

Domestic thorns

Although the recent jibe at President Zuma from the ranks of the Congress of South African Trade Unions (Cosatu) on his being in China during the time of the protracted public service strike can be seen as a cheap opportunistic shot, there are also potential longer-term implications.

The developing relationship with Bric could put further strain on the governing alliance in which Cosatu is an important partner. Cheap imports from China have already just about wiped out the domestic clothing industry and China often sends its own workers abroad in the wake of investment capital to work on joint infrastructure projects.

A widely held local perception that foreign workers are displacing South Africans already exists and the addition of large numbers of Chinese labourers, could add to the danger of xenophobic outbursts.

Some reservations have also come from the South African construction industry. Henk Langenhoven, a senior economist with the SA Federation of Civil Engineering Contractors, was quoted as saying that the precedent was that if the Chinese financed a project, they would also build it, excluding the local construction and engineering sector.

Regional and continental challenges

China last year became South Africa’s largest individual trading partner, replacing the US and being second only to the European Union.

South Africa for its part, as the biggest developingc-ountry investor into Africa with local companies involved in some 2 000 projects across the continent, is an important gateway for the Chinese into Africa. The $2.61 billion invested by SA companies between 2006 and 2008 is even bigger than the $2.53 from China.

There are, however some important sensitivities that will have to be carefully managed – and might explain why South Africa handles its relationships with its neighbours like Zimbabwe as carefully as it does.

Despite the wide-ranging strategic partnership now formally in place and the likelihood of large Chinese investment and international strategic cooperation, China’s and other Bric nations’ interests in Africa stretch much wider and blind loyalty should not be expected. It would be mindful not to become involved in regional tensions or potential tensions.

Among these factors are:

• Zimbabwe is home to substantial Chinese investment in mines;
• Angola, which has leadership aspirations of its own in Africa, is China’s largest supplier of crude oil; and
• Brazil has a vested interest in cooperation with Angola in the possible exploration of ultra-deep crude-oil sources in the Atlantic Basin between the two countries.

Scope of things to come

China secured a substantial stake in South Africa’s Standard Bank nearly three years ago via its Industrial & Commercial Bank of China with an investment of $5.5 billion. From this base one of the first new projects indentified as a possible joint venture is a rapid rail service between Durban and Gauteng.

This follows on deals reached in May of this year to build a $217-million cement plant and an investment of $877 million to take control of a mining company and the development of a new platinum mine.

Among the new agreements concluded during the visit to Beijing was for South African health-insurer Discovery to buy 20% of Ping An Health Insurance for a reported R216 million to develop China’s health insurance market.

There were reports that China National Nuclear Corporation, which runs the country’s nuclear energy programme, is involved in talks to build a nuclear power plant in South Africa. Until recently South Africa’s international relations on this front were almost exclusively occupied by France.

In the meantime it has also been reported that the Industrial Development Corporation (IDC) has secured Chinese assistance to establish solar and wind energy projects in two South African provinces. A solar-energy initiative is to be piloted in the Northern Cape and a wind-energy facility will go to the Western Cape following the signing of an agreement during the Zuma visit in terms of which China Construction Bank would advance $50 million for operational activities with China’s Africa Development Fund providing technical and project finance.