Transcript Document

UIA MACAU - 57th Congress
3 November 2013
---------------------------INWARD OUTWARD INVESTMENT:
The Chinese and South African
experience
BACKGROUND
“Comprehensive strategic partnership”
Beijing Declaration signed by Presidents Zuma and Hu Jintao in 2010
• Diplomatic relationship in 1998, previously with
Taiwan.
• Bilateral trade volumes increased 40-fold, from
$1.5 billion in 1998 to $60-billion by 2012.
• First eight months of 2013, trade volumes
reached $44.2-billion – 13.3% higher than same
period in 2012.
“Comprehensive strategic partnership”(cont’d)
• China’s trade with Africa had increased from $20.5billion in 2000 to more than $200-billion in 2012.
• China has become South Africa's largest trading
partner country, largest export market and largest
source of imports for the past four consecutive
years.
• South Africa had become China’s largest trade
partner on the continent.
Comprehensive strategic partnership”(cont’d)
The Beijing Declaration makes provision for:
• Working towards balanced trade,
• Encouraging trade in manufactured value–added
products,
• Increasing trade and investment Missions,
• China to encourage its enterprises to increase
investment in SA’s manufacturing industry,
Comprehensive strategic partnership”(cont’d)
• Value-added activities close to raw materials.
• Encouraging joint venture opportunities in
infrastructure construction projects such as:
• roads,
• railways,
• ports,
• power generation,
• airports and
• housing
“Unity, cooperation and friendship”
The People's Republic of China Ambassador to South Africa Tian Xuejun at the South
African-Chinese Ambassadorial Forum in September 2013
• Ambassador Xuejun : - South Africa–China
partnership like a large vessel proceeding with
"sails" of unity, cooperation and friendship.
• Governmental decisions:
– 2014 “the year of South Africa in China“
– 2015 "the year of China in South Africa".
– Establish a stronger bilateral agreement and
ensure balanced and equitable strategic
partnership.
“Unity, cooperation and friendship”(Cont’d)
– The mutually beneficial tie-in should see an
increase in skills and knowledge transfers.
– the facilitation of cooperation in projects
envisaged by the Beijing Declaration.
– benefits coordinated regionally for small
and medium-sized businesses and ensure
that Africa benefited.
CHINESE INVESTMENT IN
SOUTH AFRICA
• Grown from 0 in 1998 to US$38 billion in
2010.
• China currently in the top 6 investors in South
Africa.
Inward FDI in South Africa
• South African policy framework is largely laissez-faire regarding the
entry of foreign firms – except in a few sectors such as banking.
• Foreign investors are subject to the same laws and regulations as
domestic investors.
• Policy interventions affecting corporate behaviour and performance
are largely concerned with domestic redistributive aims and do not
discriminate between domestic and foreign investors.
• For example, all firms in the mining sector must comply with a set of
licensing and royalty requirements, which affects all greenfield
operations, both domestic and foreign, while
• foreign entrants acquiring shares in already operating mines are
unaffected.
• Firms must comply with Black Economic Empowerment (BEE, or
affirmative action) policies and codes if they are in regulated sectors,
(including mining), or are larger than a threshold size (in
employment terms), or intend to bid for procurement contracts in the
public sector
Outward FDI in South Africa.
• The only regulation of outward FDI is that South
African residents, including corporations, are still
subject to exchange controls, though these have
been eased extensively though very gradually.
• Since 2008, approval was required only for new
investments above ZAR50 million (US$7.75
million at the time) and in 2009, the threshold
was raised so that now approval is required only
for new investments larger than ZAR500 million
(US$59.25 million).
Chinese FDI in South Africa
• Industrial and Commercial Bank of China (ICBC) acquired 20
percent of Standard Bank of South Africa in a deal with a reported
value of US$5.5 billion.
• six Chinese mining companies, amongst which the largest is
– Sinosteel, involved in two joint ventures, a 60 percent stake in
ASA Metals and a 50 percent holding in Tubatse Chrome.
– ASA Metals, a chrome mine and smelter in Limpopo province set
up in 1997 with unknown initial investment.
– Zijin,
– Minmetals, and
– Jiaquan Iron and Steel
South African FDI into China
Of the 25 ‘genuinely’ South African corporations present in
China, only four had substantial assets:
• Bidvest (logistics and infrastructure), Bidvest acquired an
Australian foodservices company with substantial facilities
in China, Singapore and Hong Kong for US$80 million in
May 20
• Sappi (pulp and paper), Sappi purchased 34 percent of a
paper mill in Jiangxi, China
• Sasol (coal to liquid fuel ) JV with the Shenhua Ningxia
Group.
• Naspers (Press and internet) owns 34 percent of IT
company Tencent which at end-2007 had just under RMB7
billion in assets, equivalent to about US$1 billion.
Challenges to FDI
• New South African draft bill on the promotion
of investments;
• Establishment of more
manufacturing/beneficiation industries in
South Africa and Africa;
• African concerns.
Africa must get real about Chinese ties
By Lamido Sanusi (Nigeria Central Bank Governor)
The romantic view of China is quite common among African imaginations - including mine. ……This
African love of China is founded on a vision of the country as a saviour, a partner, a model. But working
as governor of Nigeria's central bank has given me pause for thought. We cannot blame the Chinese, or
any other foreign power, for our country's problems. ….
That said, it is a critical precondition for development in Nigeria and the rest of Africa that we remove
the rose-tinted glasses through which we view China…..
We must encourage a shift from consuming Chinese-made goods to making and consuming our own.
We must add value to our own agricultural products. …Africa must recognise that China - like the US,
Russia, Britain, Brazil and the rest - is in Africa not for African interests but its own. The romance must
be replaced by hard-nosed economic thinking. Engagement must be on terms that allow the Chinese to
make money while developing the continent, such as incentives to set up manufacturing on African soil
and policies to ensure employment of Africans.
…….I cannot recommend a divorce. However, a review of the exploitative elements in this marital
contract is long overdue. Every romance begins with partners blind to each other's flaws before the
scales fall away and we see the partner, warts and all. We may remain together - but at least there are
no illusions.
EXTRACTS FROM LONDON FINANCIAL TIMES ARTICLE