Ramaphosa hopes to narrow trade deficit ‘that exists in China’s favour’

In his latest Desk of the President newsletter, President Cyril Ramaphosa has reflected on the trade imbalance between China and South Africa, outlining plans to get more South African goods into that country.

Ahead of the Brics summit and a meeting with Chinese President Xi Jinping this week, Ramaphosa said the two countries “have long shared a common understanding that trade and investment are the foremost catalysts for improving the living standards of our respective peoples”.

While bilateral trade has surged from less than R1 billion in 1998 to over R614 billion in 2022, and China remains SA’s biggest trading partner, Ramaphosa said a trade deficit exists between the two nations.

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Use state visit to discuss trade deficit

“We hope to use this state visit to discuss how to narrow the significant trade deficit that exists in China’s favour, mainly through facilitating greater entry of value-added South African goods, products and services into the Chinese market,” he said.

Ramaphosa said tourism and energy cooperation also holds “great promise” and will be an important topic of discussion.

The president said that the country will be looking to tourism to help correct the imbalance.

“With the end of the Covid-19 pandemic, China is an important source for tourism. It is significant that the number of visitors from China in June 2023 was four times higher than the same time last year,” he said.

Tourism – a tool to narrow the gap

Ramaphosa also related that South African Tourism believes that Chinese tourism will be back to normal by 2026.

“We’re actively promoting our country to Chinese tourists at events like the China International Import Expo and the China-Africa Economic and Trade Expo. More direct flights between South Africa and China are also on the rise,” he said.

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Ramaphosa also added that South Africa was moreso looking to learn from China in terms of its development path.

“Among other achievements, China has lifted nearly 800 million people out of poverty over a 40 year period…South Africa is eager to deepen its collaboration within the frameworks of China’s common prosperity doctrine and strategy and our own National Development Plan and Economic Reconstruction and Development Plan,” he said.

Economist weighs in

KPMG Economist, Frank Blackmore has said that while this bilateral trade relation with China as well as the discussion to narrow the trade deficit is good for us, South Africa as a country still needs to focus on sorting out domestic issues.

“We’ve had the ability to grow alot faster than we have over the last 10 to 15 years, but it was our inability to be able to export goods via our rail and port infrastructure, the inability to manufacture goods through the lack of electricity, that has stopped our business,” he said.

Blackmore said that just potentially siding with faster growing emerging markets is not going to bring us any closer to higher levels of growth unless we can sort out those infrastructure problems we have.

Good for South Africa

He did, however, reiterate the president’s sentiments about the trade relation being good for South Africa, on the whole.

“Trade relations with China are a good thing because this exposes South Africa to a large east Asian market.

“Already, 10% of our trade is with China, which is the largest proportion of trade with any specific country. That is followed by the US with around 9%.

“The biggest trade blocks are still with the EU around 27%, followed by sub-Saharan Africa with around 24%,” he said.

As with investments, Blackmore explained that it is also important to have diversity with trade, as this helps a country move through periods of difficulty in some parts of the world, so when there is slow growth in some parts , other parts may be growing still at a more rapid rate, protecting South Africa’s interests.

“If we hitch too much with one country such as China, we observed during covid and the Chinese’ zero-covid policy, one would not have done very well because of the degree to which they closed their ports and trade infrastructure over that period of time.

“So diversification is always good, so that you have a good, well-diversified portfolio of investment and trade partners. It should also be noted that hitching our wagon, so to speak, to fast-growing economies, doesnt mean we will grow faster,” he concluded.