China and South Africa: A Strategic Comprehensive Partnership

It is about time to give a fair bit of attention to the economic and geopolitical relations between China and South Africa. After all, we have covered the China – BRICS dimension through a dedicated article on the one hand and on the other hand, we have also analyzed the relationship between China and two of the four BRICS “club” members (with China being the fifth, of course) thus far: Russia and India. Of course, an article about the final BRICS dimension (ironically, the first letter) which is the China – Brazil equation, is coming shortly.

On a historical scale, Sino-South African relations can be considered remarkably young in light of the fact that during the apartheid days, official relations did not exist and empirically speaking, the two nations were anything but on the same page… on the contrary. For example, South African aided the UN in the Korean War against the People’s Republic of China and ended up establishing robust relations with Taiwan. On the other side of the fence, China was a supporter of the anti-apartheid PAC group (Pan African Congress), in contrast to the USSR-supported ANC group (African National Congress).

Eventually, however, relations improved, with Nelson Mandela adopting a more conciliatory attitude as of 1996 (which led to official relations being established in 1998), with future leaders such as Jacob Zuma following suit. As such, in tandem with relations between the United States and South Africa worsening, Sino-South African relations improved, especially as of 2009 and perhaps primarily in light of the BRICS paradigm on which South Africa insisted quite a bit, after being officially invited to join the BRICS club in late 2010. Furthermore, to explain the terminology chosen for this article’s title, South Africa ended up receiving the “Strategic Comprehensive Partner” status in 2010.

To provide a bit of perspective on just what the pre-1998 situation looked like in economic terms, the fact that bilateral trade amounted to a mere $14 million in 1992 speaks for itself, with it experiencing a 100-fold increase all the way to $1.4 billion by the year in which official relations had been established. At this point in time, bilateral trade volume is flirting with the mid double digit billion zone, with China sending over $25 billion in highly desired Foreign Direct Investments in the direction of South Africa since 1998.

The ChinaFund.com team cannot stress this enough: no, not all investments are created equal and we have dedicated quite a few articles to explaining that Foreign Direct Investments are highly superior to ultra-speculative Wall Street-type “hot” money which is here today but perhaps gone tomorrow, giving the economy potentially catastrophic false signals and oftentimes doing more harm than good after drawing the line.

To put it differently, meaningful cooperation is the name of the game, with there being two main platforms to that effect at this point in time:

1. FOCAC (Forum on China-Africa Cooperation), a paradigm which became more than obvious after China and South Africa worked together so as to co-host the FOCAC Beijing Summit as well as the 10th BRICS Summit (Johannesburg)
2. BRICS cooperation, with South Africa being more than content with the fact that it has been invited to be a member of this very select club in December of 2010, a club which enables it to both align itself with a strong identity on the international scene and gain access to resource as well as influence which would have not exactly been within reach otherwise. As mentioned in the article linked to closer to the beginning of this post, the BRICS paradigm isn’t perfect but even with this nuance, let’s just say it represents a priority for South Africa
3. Belt and Road Initiative cooperation, which yet again makes it clear that compared to other potential partners such as let’s say the United States, China tends to be far more willing to reach for its proverbial wallet in an effort to… yes, leaving hypocrisy aside, buy its way toward greater and greater geopolitical influence. As mentioned when referring to Foreign Direct Investments, it does so through “tangible” investments such as infrastructure-related ones rather than more or less volatile financial schemes and as such, the Belt and Road Initiative has the potential of being precisely the type of platform that enables China to “take its place” on the geopolitical scene, even if the costs seem remarkably prohibitive. For more information on the BRI, we would recommend clicking HERE to read the article we have dedicated to the topic in question
4. South-South cooperation, through which developing nations essentially band together so as to exchange anything from resources to technological know-how, in an effort to (of course) catch up with the proverbial West. While in the past, under-development made the scope of such collaborations limited, some developing nations have become financially robust enough for a financial dimension to also be articulated

Like many of China’s other partnerships, relations with South Africa revolve around geopolitical pragmatism on steroids, “Realpolitik” between developing nations if you will. While the two nations don’t exactly have a gloriously optimistic shared history (with, on the contrary, geopolitical interests oftentimes making them indirect or even direct adversaries), their current interests more than adequately align so that in the end, the cooperation equation makes perfect sense for both parties involved.

From South Africa’s resources to China’s financing potential when it comes to especially the highly desirable tangible dimension, there are a wide range of variables which contribute to painting the picture of a relatively new (on a historical scale) geopolitical love story which has staying power… in the absence of geopolitical black swan events which render our entire analysis moot, of course, with the region proving time and time again that such scenarios should not be eliminated from the equation completely. For the time being, however, market observers with skin in the game with respect to one jurisdiction of another have valid reasons to remain cautiously optimistic.