Aug 31, 2012
SA exports 'crowded out' by Chinese productsBack
Beijing|Engineering|Africa|Ghana|Industrial|Africa|Angola|China|Democratic Republic Of Congo|Germany|Ghana|Kenya|Malawi|Mozambique|Nigeria|South Africa|Tanzania|United Kingdom|United States|Zambia|Zimbabwe|USD|University Of East Anglia|Manufacturing|Manufacturing Sector|Products|Jacob Zuma|Sub-Saharan Africa
© Reuse this
South Africa’s industrial production, which grew by 14% between 2001 and 2010, could have been about 5% higher had the country not lost market share to China, while its exports to sub-Saharan Africa would have been 10% higher.
The research has warned that South African industrial exports to sub-Saharan countries were at risk of being crowded out by Chinese exports, which had grown from $4.1-billion in 2001, to $53.3-billion in 2011.
Sub-Saharan Africa accounts for over a fifth of South Africa’s total exports, with Zimbabwe, Zambia, Mozambique, the Democratic Republic of Congo, Kenya, Angola, Nigeria, Tanzania, Malawi and Ghana the most important markets.
Despite the value of South African exports to these countries increasing markedly over the past decade, its share of total exports to the ten countries had declined from about 21% in 1997 to 15% in 2010.
In contrast, China’s share of exports into the region increased from 5% in 1997 to 24% in 2010, with a marked increased seen since the Asian nation joined the World Trade Organisation (WTO) in 2001.
The most significant trade losses were felt in Angola and Tanzania, while the impact was least severe in neighbouring countries, particularly Zimbabwe and Zambia, as well as Malawi.
Notwithstanding this loss of market share, the report put forward that economic growth and demand for imports in a number of African countries had risen in response to the commodity boom, led by the surging demand for raw materials in China.
“South African exporters to Africa have benefited indirectly from this over the past decade,” the document stated.
Meanwhile, a further major concern in South Africa, which has an official unemployment rate of 25%, had been the effect of Chinese imports on employment. The manufacturing sector alone shed over 350 000 jobs since 1990 and employed less than 1.2-million in 2010.
The direct loss of employment attributable to displacement of domestic production by imports from China in the period 1992 to 2001 was 24 117, but this figure grew to 77 751 after China joined the WTO.
Many of the ten industries with the highest level of Chinese import penetration were traditional labour-intensive sectors, including textiles and clothing, footwear, leather products and furniture.
The report found that Chinese competition in these industries was likely to have a particularly severe impact on employment, especially of unskilled workers.
Econometric analysis during the study confirmed a significant negative impact of Chinese imports, particularly in low-wage industries, suggesting that it was largely contributing to the failure of the manufacturing sector to create jobs in South Africa.
However, the report indicated that there were positive benefits to consumers from the availability of cheaper consumer goods, which may have stimulated increases in employment in the retail sector.
Producers also benefited in the form of cheaper intermediate inputs and capital goods.
The declining share of the manufacturing sector in South Africa’s gross domestic product (GDP) has also been partly attributed to increasing competition from imports.
The country has faced increased difficulties in competing with China domestically and in international markets, as the Asian giant is the world’s second-largest economy in terms of GDP, after the US, and has overtaken Germany as the world’s largest exporter.
By 2010, it had become the largest source of imports ahead of Germany and the US.
Trade between South Africa and China has grown dramatically over the past decade; however, the levels and structure of trade showed significant asymmetries.
The current structure of trade with China is of particular concern to policy makers in South Africa.
President Jacob Zuma stated at the Forum on China–Africa Cooperation, in Beijing, in July, that the imbalance in trade between China and Africa was unsustainable in the long term, as it comprised mainly African exports of raw materials to China and Chinese exports of manufactured goods to Africa.
Coauthor of the report, Professor Rhys Jenkins of the School of International Development at UEA, told Engineering News Online that China’s export growth was likely to continue in the future, although at a reduced rate, given the greater emphasis that was being placed on the domestic market and the recession in Europe.
International Monetary Fund projections over the next five years showed Chinese exports growing at over 10% a year in volume terms.
“However exports to Africa may well continue to expand even more rapidly, as China needs to find new outlets for exports because of the slowdown in developed country markets,” Jenkins said.
He indicated that Chinese imports would therefore probably continue to impact on industrial production in South Africa over the next five years with more industries being affected.
Meanwhile, Jenkins pointed out that the impact on employment in the most labour-intensive industries might be less dramatic in future, as the increases in import penetration could be in more capital-intensive industries.
“The impact on [South African] exports is also likely to continue for several years, although eventually South African exporters may move out of those products and markets where they compete with China and once that has occurred then the negative effects diminish,” Jenkins stated.
The experience of quotas on textile and clothing imports in South Africa in 2007 and 2008 suggested that protectionist measures were not an answer to mitigating the impact of Chinese imports.
“The Department of Trade and Industry is negotiating with China to obtain better access for South African manufactured exports to the Chinese market and this might help reduce the deficit with China in the future,” Jenkins noted.
He added that at a general level, it was important to maintain a stable and competitive real exchange rate and an active industrial policy to enable manufacturers to upgrade and develop new markets.
Jenkins said problems could arise if commodity prices fell, which would affect the growth of other African economies, so that the relative loss of market share to China in sub-Saharan Africa would turn into an absolute decline in exports and further depress the domestic manufacturing sector.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Manufacturing News
The seasonally adjusted Kagiso purchasing managers’ index (PMI) increased marginally to 47.9 index points in March, compared with 47.6 points in February, mainly owing to a 3.9 point rise in the employment index. The slight improvement in the headline PMI brought the...
International brewers are helping transform Ethiopia's business landscape as it slowly sells the assets of the former communist state and opens up to foreigners drawn to one of Africa's fastest growing economies. Heineken, Diageo and privately-owned Dutch brewer...
Article contains comments
State-owned freight transport group Transnet has announced that Richard Vallihu has been appointed CEO of Transnet National Ports Authority (TNPA) from April 1, following the retirement of Tau Morwe. Vallihu, who has hitherto headed Transnet Engineering (TE), would...
Updated 40 minutes ago Toll tariffs for the proposed N1 and N2 Winelands toll roads in the Western Cape have not been set, the South African National Roads Agency (Sanral) said on Wednesday. These tariffs will only be set by the minister of transport once the competitive bidding process...
Updated 41 minutes ago One key component of the South African government’s current economic policy relates to encouraging economic growth and fostering job creation through promoting the procurement of locally produced goods and services. But supporters of the policy believe a shift in the...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...