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South Africa-China trade ties: President Zuma bids to shore up 'Gateway to China' status

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Adrian Bradshaw/Reuters

(Read caption) South African President Jacob Zuma (l.) shakes hands with Chinese Premier Wen Jiabao at the Zhongnanhai Leaders' Compound in Beijing on Wednesday. South Africa-China trade plans currently being developed should soon help South Africa's economy generate 7 percent annual growth for years, President Jacob Zuma said on Wednesday during his state visit to China.

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When I saw the sheer size of South African President Jacob Zuma's China Posse (17 Cabinet Members and 300 businessmen), I could not help but feel that the size of the posse was commensurate with this new "late cycle" China-Africa engagement.

The numbers are breathtaking. The China-Africa trade curve topped a $100 billion from a standing start in just 10 years.

China has overtaken the United States as South Africa's biggest trade partner. The fingerprint trail of the recent engagement is to be found in the trade data. Another example is iron ore and iron ore concentrates; China was importing $297 million a month a year earlier and it reached $549 million last month. This is as hyper a growth curve as curves get.

Chinese Vice Commerce Minister Gao Hucheng has said, "The African continent’s biggest economy is China’s No. 1 source of African iron, copper, manganese, chrome, and diamonds."

History of China's 'soft power' in Africa

This recent engagement was preceeded by one many centuries earlier and that tale of the Chinese Muslim Admiral Ze is something the Chinese are trying to ventilate in their quest for a China-Africa soft-power story that might resonate today and on which they might hang their hat.

Admiral Ze came to Africa in the 1400s and left behind Chinese DNA from that time. This was recently discovered via some DNA tests done on some villagers in the Lamu Archipelago, near Somalia. So watch that space.

Adding value to South Africa's economy

President Zuma was quoted as saying "South Africa is open for business in a big way" and talked of a new economic policy of "beneficiation."

I have to admit I thought I read "beatification" at first glance. Beneficiation is basically a neater phrase for getting up the value or food chain. There is a sense that commodities are being carted off without any further processing and that it might make much more sense to do some of the processing in South Africa. If nothing else, encouraging the processing or refining of minerals or other commodities in Africa would help to create jobs, and thereby increase wealth at home.

The South Africa-China axis, while founded in trade has a number of embedded angles.

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South Africa: Gateway to China

South Africa wants to join the BRIC (the group of emerging economies, including Brazil, Russia, India, and China) and then probably it will be newly minted as BRICSA; and they are pitching for China's support. South Africa wants to be the gateway to the African continent for China.

President Zuma apparently produced his wish list, which ranged from a nuclear reactor to a new $30 billion Chinese-financed railway, among much more.

If truth be told, this trip confirms the answer to the question, "Who has the money?"

Hu does, with $2.4 trillion in reserves, and in that regard, President Zuma is but paying his newest and most deep-pocketed banker a visit.

--- Follow Nairobi-based financial analyst Aly-Khan Satchu at Rich Wrap-Ups.


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