Search

 

Cablegate: China's Engagement: A South Africa View

VZCZCXRO1497
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHSA #0504/01 0711404
ZNR UUUUU ZZH
R 111404Z MAR 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3768
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0762
RUEHKO/AMEMBASSY TOKYO 0519

UNCLAS SECTION 01 OF 02 PRETORIA 000504

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EINV ENRG EMIN CH SF
SUBJECT: CHINA'S ENGAGEMENT: A SOUTH AFRICA VIEW

REF: 07 PRETORIA 00569

1. Summary. According to Stellenbosch University's Centre
for Chinese Studies Executive Director Martyn Davies, while
the Western world views Africa as a "development burden",
China sees Africa as a "commercial opportunity", which has
focused China's strategy in developing a parallel market for
energy security and commodities. China's design is to
monopolize the entire commodity chain, from mining,
financing, processing, and shipping to developing new
exchanges that will eliminate the middle man of the
Western-dominated metal and mineral exchanges. In addition
to this new parallel trading model, China is pursuing a
coalition investment strategy manifested by targeted special
economic zones (SEZ). Davies warns that the SAG needs to
better engage with China and provide incentives to become a
SEZ, or risk losing its leading role as the trade gateway to
Africa. End Summary.

---------------------------------
DRIVERS BEHIND CHINESE ENGAGEMENT
---------------------------------

2. In a February 29 briefing organized by the American
Chamber of Commerce for its members on the reorientation of
Africa economic strategic relations, Stellenbosch
University's Centre for Chinese Studies Executive Director
Martyn Davies highlighted the drivers behind China's surge of
interest in Africa's emerging markets. He noted that while
the Western world views Africa as a "development burden",
China sees Africa as a "commercial opportunity", which has
focused China's strategy in developing a parallel market for
energy security and commodities. According to Davies, China
is excluded from Middle East oil reserves (apart from Iran)
and is often blocked from open market purchases (like CNOOC's
bid for Unocal, "vetoed" by the U.S. Congress), leaving
Africa as the only option. Strong relations with Africa will
also enable China to gain a toehold in the global economy and
counter rising competition from Japan.

-----------
CHINA, INC.
-----------

3. Davies outlined China's strategy as the new "commercial
player" on the block. China intends to create a parallel
market controlled wholly by the Chinese (or "manipulated" as
Davies cynically commented.) China's design is to monopolize
the entire commodity chain, from mining, financing,
processing, and shipping to developing new exchanges that
will eliminate the middle man of the Western-dominated metal
and mineral exchanges. Davies warned that the impact of the
new "China, Inc." will be "trade and commodity market
disruption" with rising concern from the traditional powers.
In this regard, Davies disagreed with the recent Brenthurst
Foundations trilateral Africa-China-US meeting's finding that
there is no strategic conflict between the U.S. and China in
Africa.

-----------------------------
SEZS AND COALITION INVESTMENT
-----------------------------

4. In addition to this new parallel trading model, China is
pursuing a coalition investment strategy manifested by
targeted special economic zones (SEZ). Utilizing the success
of economic zones in China, coupled with the European model
of incentive packages, Davies stated that China is
establishing mining, trading, manufacturing, assembly, and
logistics hubs throughout Africa. At the same time, China is
facilitating cooperation between several industries, such as
banking, mining and oil, in each economic zone to form a
coalition investment that can better dominate the market.

5. With an introduction of "if this doesn't scare you,"
Q5. With an introduction of "if this doesn't scare you,"
Davies unveiled an African map with a transportation corridor
connecting the Atlantic and Indians Oceans via Tanzania and
Angola. Davies explained that current shipping patterns were
limited to the old North-South corridors established by the
British and other colony holders. China is building the
first East-West corridor that will be a new growth mode for
Chinese development between the SEZs, and a major competitor
to South Africa's trade routes.

----------------------
IMPACT ON SOUTH AFRICA
----------------------

6. South Africa has not been designated as an SEZ despite
its role as the economic powerhouse and transportation hub

PRETORIA 00000504 002 OF 002


for sub-Saharan Africa. According to Davies, the SAG needs
to better position itself to attract Chinese interest.
Davies noted that Finance Minister Trevor Manuel will not
offer incentives to obtain SEZ status and those incentives
are necessary from China's perspective. In addition, South
African manufacturers have faced stiff competition from
Chinese imports, resulting in South-South "competition"
rather than "cooperation." South Africa also risks
squandering its position as the gateway to Africa with the
opening of the East-West corridor.

7. Not only has South Africa failed to embrace China's
interest in the region, it is wary of China's competitive
edge and strategic tactics. As a result, the SAG tends to be
reactive, not welcoming, to China's presence, resulting in an
ad hoc approach, such as implementation of the January
2007-December 2008 textile quota (reftel). Center for
Chinese Studies Research Manager Hannah Edinger told Trade
and Investment Officer South Africa's reticence most likely
arises from China's insistence on controlling the entire
supply chain via Chinese-owned companies and its failure to
localize, i.e., employ South Africans and tap into
locally-owned suppliers.

8. On a broader scale, Davies stated that China's emergence
on the African continent has called into question the
relevance of the Anglo-Saxon capitalist model. China was
able to lift 300 million people from poverty to middle class
in 30 years. Africa is taking a closer look at whether China
is a better role model than the traditional IMF-World
Bank-Brettonwoods system.

--------------------------------
SOUTH AFRICA AS CHINA'S GATEWAY?
--------------------------------

9. Davies moderated a separate lecture one month earlier on
January 29, entitled: China's Game: The Emerging Super
Dragon" by Anglo American Advisor Clem Sunter. Placing
China's formidable economy and growth in perspective, Sunter
noted that China brings on line 100 Gigawatts of new
electricity capacity per year (2.5 times South Africa's total
capacity), eliciting inevitable jokes about state electricity
supplier Eskom's supply woes. Davies and Sunter
characterized South Africa as China's gateway to Africa and
its rich resources, noting the acquisition of a 20 percent
share in South African Standard Bank by the Industrial and
Commercial Bank of China earlier this year. However, they
noted that South Africa could lose this special relationship
with China if it cannot assure infrastructure, power,
services, etc. They questioned how good China's investment
ultimately was for Africa given the likelihood that
undeveloped countries would lack capacity and skill to
negotiate good deals with China.

10. These observers stress that China is changing the rules
and considers Africa its continent of choice. China does not
ask about human rights and democracy; it just asks are if
there are resources and locks up an advantageous deal.

-------
COMMENT
-------

11. China's relations with South Africa differ from China's
relations with the rest of Africa. China is not attempting
to invest in the mining and resource sector here. Instead,
China is pairing up with large South African companies, such
as Standard Bank, to gain better access to the rest of
Africa. Otherwise, it is just a source of cheap imports that
threaten local manufacturers.
BOST

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC