---Interview with H.E. Dr. Siyabonga Cwele, Ambassador Extraordinary and Plenipotentiary of the Republic of South Africa to the People’s Republic of China
South Africa is the preferred location for multinational investors in Africa. Its unique value proposition makes the country an attractive destination for a growing array of investors and industries. Today South Africa is not only a resource rich economy with access to both a vibrant local market and a growing regional market but also a financial, technical and innovation hub attracting companies looking to tap the country’s talent pool.
VICTWO: How would your Excellency evaluate China-SA relations?
Ambassador: China and SA has a long-term friendship in many aspects since the official establishment of diplomatic relations in 1997. The pleasant cooperation in trade and investment has witnessed the positive progress in bilateral relations. Since 2009, China has been the largest trade partner of South Africa. South African exports to China totalled RMB 64 billion in 2019, making up 11% of our total exports to the world.
SA wine exports have increased by 50% in the past 5 months, an excellent effort by our representatives and importers. The prosperity and development of our export products illustrates the hard work and efforts made by governmental and private business. Additional products that are enjoying success in the Chinese market is citrus fruit, beef and South Africa’s unique rooibos tea.
VICTWO: Why is SA a good place to invest?
Ambassador: President Ramaphosa promised the global investment community that the government would provide the political and policy certainty to allow an enabling environment for business to grow and operate where their investment would be protected.
South Africa has a lot to offer, in the form of our people, in natural and mineral resources, a young and able workforce, world class infrastructure, sophisticated telecommunications systems, and a well-regulated financial and banking sector which is rated 19th by the WEF.
There is the rule of law in South Africa, the judiciary is independent and the legal framework is strong, especially around commerce, taxation, maritime issues, competition law, intellectual property, property rights and other basic human rights. On July 13, 2018, the Protection of Investment Act came into operation, providing a degree of protection to investors in relation to their investments and aiming to achieve a balance of rights and obligations that apply to all investors. South Africa’s democracy is strong, resilient and wonderfully noisy and our institutions are durable, confirming the political stability of our country over the past 25 years and into the future.
VICTWO: How has Chinese investment been doing in SA?
Ambassador: Since 2003 a total of 26 South African companies are investing in China, with a capital expenditure of RMB 41billion between January 2003 and August 2019. On the other hand, a total of 88 Chinese companies are investing in South Africa, with a capital expenditure of RMB 53billion over the same period.
There was a positive growth in FDI into South Africa from 2018, with FDI inflows totalled RMB 32 billion, mainly due to the Presidents Annual Investment Conference. FDI inflows into developed economies declined by 40% in 2018, while developing economies managed to secure a 3% increase in FDI inflows. Africa FDI flows totalled US$ 40 billion of which South Africa was the largest recipient in 2018.
South Africa received ongoing and significant investment from China over the previous years:
•2016 - RMB 5.4 billion
•2017 - RMB 2.1 billion
•2018 - RMB 4.1 billion
•2019 - RMB 2.2 billion
Investment has been more diversified and has targeted not only natural resources but also the autos and construction sectors. In 2017, for example, China Minsheng Investment channelled RMB 7.93 billion of investment into building affordable housing in South Africa. In 2016, Beijing Automotive Group committed to invest a total of RMB 8.6 billion in a vehicle assembly plant in South Africa.
Chinese companies with notable investments in South Africa include appliance and electronics manufacturer Hisense and vehicle manufacturers FAW and BAIC, which both have production plants at the Coega special economic zone in Nelson Mandela Bay. Other major investors include Huawei, SinoSteel, CRRC, MinMetals, ICBC, Hebei Jidong Development Group cement plant and most recently DiDi.
On the mining front, Chinese investors agreed to build a RMB 66 billion metallurgical complex in 2019. The complex would be a stainless-steel plant, a ferrochrome plant, and a silicomanganese plant, according to the Mining Indaba.
VICTWO: Which sectors in SA could be the main target sectors for investors in the following years?
Ambassador: The government’s industrial policy has highlighted a number of priority industry sectors to direct resources towards fast tracking growth. The current sectors which have a direct relation to growth industries in China are mining and minerals beneficiation, new energy with specific emphasis on renewables, agro-processing, automotive, and ICT.
However there are a number of other industries which present viable opportunities for Chinese investors. Pharmaceuticals and healthcare is one of the fastest growing sectors as a result of the pandemic and there are existing Chinese investors who are seeking to increase their investment in South Africa in the next 12 months.
VICTWO: What incentives are available?
Ambassador: We have identified special economic zones as platforms that can attract investors and enhance economic growth. With the assistance of China to build capacity and train of our officials, we have established 10 special economic zones in strategic locations around the country such as Durban, Johannesburg, Pretoria, Port Elizabeth, where investors are able to produce and export value-added products. Investors are offered a preferential corporate tax regime, building support, employee tax incentives, favourable customs regulations and support for capital investment and training. Recently a new automotive special economic zone was launched in Gauteng Province.
There is a broad suite of incentives that are also available that are tailor made for specific sectors aimed at facilitating and assisting investors. Specific incentives are available for the automotive, clothing and textiles, critical infrastructure and agro processing industries, to name a few.
