Chinese vehicle manufacturer Beijing Automotive Group’s (BAIC’s) decision to invest in a vehicle assembly plant in the Coega Industrial Development Zone (IDZ), near Port Elizabeth, could help drive further investment by Chinese firms in South Africa.

This is according to Thandukwazi Nyawose, economic counsellor at the South African embassy in Beijing, who pointed out last month that the BAIC project was the biggest Chinese investment in South Africa to date.

“China has more than $300-trillion dollars of foreign currency reserves and, therefore, has sufficient funds to invest even more into South Africa. South Africa is a new market for Chinese investments and we hope the BAIC project will kick-start a deluge of further megaproject investments,” he told Engineering News during a tour of BAIC’s head office in Beijing.

Nyawose further noted that the country’s recent credit rating downgrade by S&P Global Ratings would negatively affect foreign direct investment (FDI) from countries wanting to invest into South Africa; however, this would most likely not deter FDI from China.

He pointed out that China was setting up its own ratings agency which would complement S&P’s, Moody’s and Fitch Ratings.

“We want to reassure Chinese investors that South Africa is an attractive destination for investors.”

South African embassy economic first secretary Seth Mompei, meanwhile, said both countries’ membership of the Brazil, Russia, India, China and South Africa grouping, or Brics, could play a role in growing bilateral investment.

He added that South Africa had a mature automotive market that would benefit from investment by Chinese firms.

Further, BAIC’s investment would bring stability to the automotive sector, which recently saw a big automotive company, General Motors, exit the country.

Mompei noted that Chinese manufacturers’ investment in the South African automotive industry could help offset potential job losses as a result of other manufacturers pulling out of the country.

He added that it would also have a trickle-down effect into other areas of the manufacturing sector.

Nyawose stated that many South African small, medium-sized and microenterprises, especially those owned by people from previously disadvantaged backgrounds, would benefit from the BAIC investment.

“It will also serve to increase the level of skills in the country among our emerging industrialists,” he noted.

The R11-billion automotive assembly plant being established at the Coega IDZ is a joint venture between BAIC and South Africa’s Industrial Development Corporation.

At full capacity, the plant will have the capacity to produce 100 000 vehicles a year.

The first phase will have the installed capacity to assemble 50 000 units a year.

About two-thirds of production will be exported.

BAIC will assemble the D20 hatchback and sedan range, as well as the X25 sports utility vehicle, in South Africa.