Business / Business News

Mamokgethi Molopyane
4 minute read
14 Jan 2016
1:06 pm

South Africa’s love affair with China…

Mamokgethi Molopyane

... might just end in tears for its workers.

President Jacob Zuma with President of China Xi Jinping during the signing of bilateral agreements at the Great Hall of the People in the People's Republic of China. (Photo: DOC)

When I first started talking about South Africa’s need to be cautious when embarking on a serious business relationship with China, it was just among my friends. However, events towards the end of 2015 compel me to say something in a broader forum. We need to be careful of friends that come bearing gifts but more so, of leaders who believe that their loving embrace of the East is better for the country and will sit well with the masses, because it has shunned the ‘counter revolutionary imperialist West’.

I’m among the first to commend our government for doing things right. Equally, I will caution when the State goes too deep without first checking the reality of the matter. We need not have exposed the economy to China to such an extent. Sadly, those leading us accepted the gifts from the East without asking what strings were attached. And, why now and not at the height of its growth?

Nowhere in the last eight years has the South African economy become as exposed and at risk to China’s own meltdown than now. If the various agreements signed at the recent FOCAC summit are to be our compass, then we are in ‘moerse kak’!Especially when looked at from the scale and structure of trade.

And we’re only in the first quarter of the year. I’m no economist but I do understand that a more pronounced slowdown in China and a further decline of the rand could pose downside risks to both growth and inflation in the South African economy, posing additional challenges for ongoing deleveraging.

Direct and indirect trade impacts from a sharper than anticipated slowdown in China will harm the already struggling mining sector. In the South African context, that has a direct impact on labour in that industry.

By September last year, we had already seen how China’s waning appetite for commodities was affecting prices and leaving most companies restructuring their businesses for survival.

Stripped of its complex details, the essence of China’s economic meltdown is that in South Africa, it will speed up retrenchments in mining. It takes little economic literacy to see that not even a moratorium on retrenchments will stop the job-shedding from happening.

All this will have a profound knock-on effect on how various trade unions will position themselves moving forward.

The call by trade union Cosatu for the forward march driven by ‘bold and visionary action’ from the government to enforce a moratorium on retrenchments has already given us an indication on how they’ll respond to job cuts in any sector of the economy.

It will be interesting to watch how organised labour movements, Cosatu included will position themselves over the next two to three months. When looked at through an individual union, Amcu will be affected by the 6 000 job cuts that Lonmin spoke of last year. The NUM will also be affected by Anglo’s announced 85 000 job cuts worldwide. South Africa accounts for more than 30 000 of those jobs.

To use Twitter lingo, if I was to be ‘spicy’ this is also the year of the possible rise of Zwelinzima Vavi to the arena of organised labour, be it on the shoulders of Numsa or under the shiny armour of a new trade union federation or workers’ party. But that’s not all, you’ll recall that Numsa is no longer bound by Cosatu’s principle of one industry one union, therefore expect them to start making inroads in the mining sector.

Oh! Did I mention it’s an election year, and therefore it makes for even more interesting times because I don’t see how we can shield the economy from China’s bleeding?

Whether by fate or deliberate action, the tightening bond South Africa shares with China has been negatively impacted sooner and faster than it would have been due to the past two weeks’ hammering of China’s stocks in the global markets.

The future historians of current events will very likely use Bastiat’s pioneering essays on What Is Seen and What Is Not Seen when reflecting on South Africa’s key economic stumbles, where he stated, “There is only one difference between a bad leader and a good one: the bad leader confines himself to the visible effects; the good leader takes into account both the effect that can be seen and the effects that must be foreseen.”

See, to these future historians it will be interesting to understand the logic of the South Africa that accepted gifts from China (and by that I mean the R90bn the country has committed to SA), especially at a time when it’s become clear that the Chinese economy is slowing down. In so doing SA confined itself to the visible effects.

I’m therefore left wondering whether, in our geopolitical turn towards China, we have ignored the economic realities of accepting gifts that come with such burdens that they might leave the very workers standing without clothes?