Why South Africa Should Look East

Chinese President Xi Jinping (L) and his South African counterpart Cyril Ramaphosa hold talks in Pretoria, South Africa. Picture: Xinhua / Xie Huanchi

Chinese President Xi Jinping (L) and his South African counterpart Cyril Ramaphosa hold talks in Pretoria, South Africa. Picture: Xinhua / Xie Huanchi

Published Oct 4, 2024

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By Qhuba Gumbi-Dlamini

South Africa’s trade policies must reflect the changing dynamics of global economic development. We are transitioning from a US-dominated unipolar world to a rising multipolar order, including Russia, China, and India. In 2007, Goldman Sachs research accurately projected that China would surpass Germany by 2011, Japan by 2015, and the US by 2016. Russia was also forecast to dominate Germany, France, Italy, and the UK economically. With the formation of BRICS on 16 June 2009, it became clear that emerging nations, rather than wealthy Western ones, may now be leading the global economy.

For South Africa, this new multipolar world provides a timely opportunity for trade negotiations with the West and the broader international community. South Africa’s foreign policy on trade should support South-South cooperation and reject the Washington Consensus. This would make South Africa more approachable, with a focus on offering basic services, high-quality healthcare, and skills to support economic growth for the country’s impoverished communities.

In The New Silk Roads, Peter Frankopan makes the crucial point that today’s global decisions are no longer made in Paris, London, Berlin, or Rome as they were a century ago. Instead, these decisions are now taken in Beijing, Moscow, Tehran, Riyadh, Delhi, Islamabad, Kabul, areas of Afghanistan under Taliban control, Ankara, Damascus, and Jerusalem.

Frankopan illustrates a world that is essentially multipolar, with China and Russia at the forefront as geopolitical, economic, and military counterweights to US-led unipolarity. In the West, panic and confusion dominate the ruling elites in London, and particularly in Washington. These establishments, composed of men and women who cannot fathom a world that is changing beneath their feet, are causing tensions and animosities. The war in Ukraine, regrettably, is a direct outcome of this inability to acknowledge that the old world order is dying, and the assumptions it was built on are fading.

One thing is certain: Beijing has stepped up to fill the global leadership role vacated by Washington during the Trump administration’s chaotic tenure, and Joe Biden has struggled to contain the tide of a multipolar shift.

Frankopan further reveals that by the end of 2015, the Export-Import Bank of China had begun financing projects in 49 countries, as part of the Belt and Road Initiative (BRI), and expected the number to exceed 1,000. By 2022, the BRI encompassed more than 80 nations, spanning Central Asia, Africa, the Middle East, the Caribbean, Latin America, and Eastern Europe.

Africa’s economies, particularly South Africa’s, remain heavily reliant on the export of primary commodities, making them vulnerable to global commodity price fluctuations. Diversification into manufacturing and other sectors, a post-colonial objective, is even more critical today given the world’s inclination for crises. The COVID-19 pandemic, climate disruptions, and the Ukraine conflict have highlighted the necessity of building resilience.

Countries such as South Korea, Malaysia, and Singapore have used industrial policy to drive industrialisation, growth, investment in human capital, and poverty alleviation. These nations’ experiences offer alternative perspectives to the recommendations from prestigious international institutions.

First, it’s important to note that industrialisation is more than just building industries—it involves the formalisation of economic transactions and structural adjustments that elevate economies. Compared to South Africa’s fiscal and monetary policies, more informal economic systems—common in most of Africa—fall short. South Africa should learn from the Asian economic tigers. Ambition, focus, and alignment with national priorities were key factors driving their success. These three components are valuable lessons South Africa can take on board.

The integration of emerging economies into global value chains has shifted due to changing trade regulations, intellectual property laws, and technological advancements that have increased labour cost pressures. While the landscape has changed, institutional aspects of industrial policy remain relevant. This is one reason why I’ve written this opinion piece.

Technology offers an opportunity for South Africa—if targeted correctly. Research and development in the country may be lacking, but institutions can make targeted investments. For example, mobile banking has flourished in Africa, and the pandemic showed how many Asian countries implemented universal healthcare coverage digitally. These are models South Africa can follow as it navigates the Fourth Industrial Revolution.

It is vital that South Africa focuses on specific strengths, as an export-oriented strategy will likely be too costly for late entrants. Instead, the country should capitalise on its commodities and focus on commodity-based industrialisation, leveraging the opportunities offered by the African Continental Free Trade Area (AfCFTA). However, as the Asian economic tigers demonstrated, a country cannot spread its efforts too thin across many sectors. South Africa should concentrate on one or two value chains to maximise its impact.

The days of sector-specific policies propped up by a macroeconomic framework are largely over. In order to enter a priority value chain, South Africa will need support from all economic and governmental actors. As Asia has shown, alignment between these actors is key to success. To achieve this, a new approach to results-driven management is required, one that has proven effective in Asia and could be implemented in South Africa.

The war in Ukraine, as noted earlier, exemplifies how far the pendulum has swung. South Africans see this as a proxy conflict between the West and Russia, and they remain steadfast in their neutral stance. Their growing ties with the Asian tigers provide room for manoeuvre in terms of policy flexibility.

Although Western nations still hold the largest stock of foreign direct investment (FDI) in South Africa, their share is steadily declining, while other countries, such as China, are significantly increasing their investments. For example, during the pandemic, many promises were made to help Africa, but the only substantial assistance came from the International Monetary Fund (IMF), which provided $23 billion—less than 5% of its global assistance during the pandemic.

The climate change discourse must push for a new narrative, one that advocates for innovative financing models that can redefine risk. De-risking investments is crucial in the global conversation about energy transitions and renewables. This urgency is underscored by extreme weather events, such as the spring snowfall in parts of KwaZulu-Natal and the Free State.

Changing narratives is difficult, but necessary, and I believe that South Africa is well-positioned to lead this conversation. According to the International Energy Agency, green hydrogen holds great promise, and Africa could account for 60% of global hydrogen production in the future.

It’s time to ask: will Africa once again be exploited as a commodity exporter, or will we take advantage of this moment to reshape the continent? This can only happen through structural transformation driven by an effective industrial policy.

Finally, I’d like to cite British blogger John Wight, who aptly notes that the world is undergoing a drastic transition. The old order is fading away, and a new one is emerging. This period of change offers a real opportunity for South Africa to reposition itself in the global order—if it can align its policies with the realities of a multipolar world.

* Qhuba Gumbi-Dlamini is Treasurer-elect of Gezephi Foundation. He advocates for radical transformation and disability justice.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.