SINCE I was going to discuss China in any case this week, I
was happy to find an editorial in another publication on the same topic last
However, I was surprised to find that this particular
editorial states that South Africa's trade relationship with China is "net
Unless I read the data incorrectly, South Africa has a trade
deficit with China. The data shows that between January 2010 and December 2011,
South Africa only had a trade surplus with China for five out of the 24 months.
In addition, the data to May of this year shows that South
Africa has an overwhelming trade deficit with China of just under R10bn and, in
fact, only has a trade surplus in four of the 22 sections under which we trade
This is certainly not a "net positive" trade
The editorial does, however, acknowledge that Africa wants
to push its trade with China up the value chain and this is where I agree.
China is very much in our crosshairs and yet I am certain
that few people are aware that on July 18th, the Chinese issued two
notifications concerning technical regulations of cotton.
The first notification specifies the quality requirements,
classification criteria, test methods, inspection rules, inspection
certificates, packages and marks, storage and transportation requirements, etc
for saw-ginned upland cotton.
The second notification specifies the same, except for
roller-ginned upland cotton. I imagine this is quite a leap for most readers,
so please bear with me.
The cotton industry and the exportation thereof provides
work and money for thousands of households in South Africa – one study showed
that 710 000 were employed in the cotton industry between April to June 2009.
In 2011, for example, South African exports of cotton generated
over R100m, 36% of which came from the exportation of cotton to China.
China then uses the cotton to manufacture clothes, among
other things, and then re-exports the cotton to South Africa in the form of
Since finished products are more valuable than raw or
semi-finished products, South Africa loses while China gains.
Making this situation worse is that over the last five
years, China is playing a more and more dominant role in South Africa's
exportation of cotton (see Figure 1).
In order for us to turn this around and stimulate one of our
key sectors - clothing, textiles, footwear and leather - the Chinese themselves
have provided the solution.
In the past week, the Chinese have offered $20bn in loans to
Africa to be used for infrastructure development, manufacturing and the
developing of small businesses.
Not that one size fits all, but I believe South Africa can
take advantage of the $20bn offer through establishing African value chains
that are export-driven.
South Africa, along with the rest of Africa, already
produces and exports large amounts of cotton to China annually so all we need
to do, using the Chinese money, is develop our infrastructure and manufacturing
Once this has been done, we can export not only raw cotton
but clothing as well.
This is but one sector in which South Africa can turn an
annual trade deficit into an annual trade surplus, through capitalising on the
available opportunities. If more sectors like this can be identified and acted
on, we might even become a net exporter.
This is, of course, a long-term objective and something
South Africa will need to focus on if it is to become a reality.
In the short to
medium term, however, we should focus on reliable and stable export
* Geoffrey Chapman is a guest columnist and trade policy expert at the SABS.
Figure 1: China's share of South Africa’s cotton exports
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