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UIA MACAU - 57 th Congress 3 November 2013 ---------------------------- INWARD OUTWARD INVESTMENT: The Chinese and South African experience.

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Presentation on theme: "UIA MACAU - 57 th Congress 3 November 2013 ---------------------------- INWARD OUTWARD INVESTMENT: The Chinese and South African experience."— Presentation transcript:

1 UIA MACAU - 57 th Congress 3 November 2013 ---------------------------- INWARD OUTWARD INVESTMENT: The Chinese and South African experience


3 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.

4 “Comprehensive strategic partnership”(cont’d) China’s trade with Africa had increased from $20.5- billion 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.

5 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,

6 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

7 “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.

8 “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.

9 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.

10 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

11 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).

12 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

13 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.

14 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.

15 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

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