Why does China invest in South Africa?

China and South Africa have broad prospects for cooperation in infrastructure construction

Faced with the severe impact of the COVID-19 epidemic on the economy, the South African government recognizes that investing in infrastructure is the key to achieving sustainable economic growth driving force. At present, China has funded and constructed more than 30% of infrastructure projects in Africa. China and South Africa have broad prospects for cooperation in infrastructure construction.

The economy continues to shrink, the fiscal deficit is high, and the unemployment rate reaches record highs... The sudden COVID-19 epidemic has made South Africa's already fragile economy even worse. Faced with the severe impact of the COVID-19 epidemic on the economy, the South African government recognizes that investment in infrastructure is a key driver of sustainable economic growth. Recently, the South African government held a seminar with the theme "Investing in Infrastructure to Achieve Shared Prosperity: Seizing the Present and Planning for the Future" and decided to invest in infrastructure in six priority areas including energy, and welcomed foreign investors to participate in relevant projects. China has financed and constructed more than 30% of infrastructure projects in Africa. South African scholars said that they look forward to China and South Africa taking the "One Belt and One Road" construction as an opportunity to continue to strengthen cooperation in traditional and new infrastructure construction and inject new energy into the development of China-South Africa comprehensive strategic partnership. New motivation.

Economic and social development faces many pressures

Before the outbreak of the COVID-19 epidemic, South Africa’s economy had shrunk continuously in the third and fourth quarters of 2019, falling into a technical recession. Annual growth was only 0.2%. According to data recently released by Statistics South Africa, the South African economy fell by 2% quarter-on-quarter in the first quarter of 2020, continuing the recession trend again. In the first quarter of this year, South Africa's mining industry shrank by 21.5%, the manufacturing industry shrank by 8.5%, and the construction industry shrank by 4.7%. The sharp decline in the output of these industries was the main reason for South Africa's economic contraction in that quarter. Statistics South Africa predicts that the country's economy will shrink by 7.2% this year, the largest decline since the 1990s.

In order to help businesses and people tide over the difficulties, the South African government has currently launched a social assistance and economic support plan totaling 500 billion rand (approximately 200 billion yuan) to stabilize economic growth and address supply and demand. sharp contraction and lower unemployment. The South African government has allocated special funds to help local governments disinfect public transportation and public facilities, provide food and shelter for the homeless, and provide subsidies to families most affected by the epidemic.

Investment in infrastructure has become the core of recovery

“The serious impact of the epidemic on the economy has not weakened our determination to promote infrastructure development.” South African President Ramaphosa recently made a speech in South Africa. Speaking at the seminar on sustainable infrastructure development, he said that during the current epidemic, infrastructure investment is more attractive, important and urgent. The South African government has decided to make infrastructure a core plan to achieve economic recovery and sustainable development.

South Africa’s current infrastructure investment only accounts for 13% of GDP, which has brought great difficulties to the construction industry and related industries. The epidemic has also had a serious impact on ongoing infrastructure projects. Some projects have even been postponed or canceled by investors due to supply chain disruptions, rising logistics costs, difficulty in capital turnover, and low investment returns.

So far, the South African government has received 276 infrastructure project ideas submitted by all walks of life, and plans to prioritize investment in 88 projects in six major areas. The South African government believes that industries such as energy, transportation, medical care and digital infrastructure construction have significant "multiplier effects", that is, they can bring total social demand and national income several times the amount of investment, and are crucial to economic recovery. Given that agriculture can create a large number of jobs, South Africa has also made agricultural infrastructure the focus of this investment plan and hopes to revitalize the rural economy through the agricultural product processing industry. In addition, the South African government plans to improve the living conditions of low-income groups through the implementation of Habitat Projects and provide them with more decent housing.

In addition to the leadership of the government and state-owned enterprises, the South African government also hopes to attract private sector and foreign investment in infrastructure investment, promising to formulate clear policies to encourage private investors, further listen to private sector suggestions, and Eliminate corruption in infrastructure construction in a transparent and efficient manner.

Realizing sustainable development in the "post-epidemic era"

Statistics show that more than 30% of infrastructure projects in Africa are funded and constructed by China. As of 2019, China has helped Africa build more than 10,000 kilometers of roads, more than 6,000 kilometers of railways, more than 70 power plants, and many airports and ports. More than 80% of Africa's communications infrastructure is built by Huawei and ZTE and financed by Chinese financial institutions. Experts believe that China and South Africa have broad prospects for cooperation in traditional and new infrastructure construction.

Gert Grobler, former deputy director-general of the South African Department of International Relations and Cooperation and senior researcher at the Institute of African Studies at Zhejiang Normal University, said in an interview with a reporter from the Economic Daily that China is a trustworthy country for South Africa and Africa. Valuable friends, we have built a large amount of infrastructure for Africa under the framework of the Forum on China-Africa Cooperation, which has greatly promoted the economic development of the African continent. The infrastructure initiative proposed by South Africa will create new important opportunities for China-South Africa economic cooperation, further expand trade exchanges, improve South Africa's industrial capabilities and infrastructure construction levels, and promote the "Belt and Road" cooperation between the two countries.

Getter said that digital infrastructure construction is one of the six priority areas of infrastructure proposed by South Africa.

South Africa attaches great importance to the opportunities brought by the Fourth Industrial Revolution. Last year, President Ramaphosa established the "Presidential Committee on the Fourth Industrial Revolution" to provide policy advice and strategic planning for the development of South Africa's digital economy.

Getter said that both China and South Africa have proposed infrastructure construction initiatives. As a pioneer and leader in the digital economy, China uses emerging technologies to drive strong economic growth, which is worth learning from Africa.

It is expected that the two countries will take this opportunity to continue to deepen bilateral scientific and technological innovation cooperation, jointly achieve sustainable economic development in the "post-epidemic era", bring tangible benefits to the people of the two countries, and inject new energy into the development of the China-South Africa comprehensive strategic partnership. New power