South Africa’s trade deficit dilemma with China
Balancing the scales: How trade imbalances, export trends and policy shifts shape South Africa’s economic future with China—and lessons for Africa.
Since 2000, South Africa's total bilateral trade with China has grown significantly, rising from US$1.34 billion to US$34.18 billion in 2023 (Chart 1). However, this growth has been accompanied by a persistent trade imbalance favouring China. South Africa primarily exports raw materials, including mineral products, metals and, to a lesser extent, agricultural goods such as edible fruits, nuts and wine (Chart 2), while importing manufactured items like machinery, electronics, apparel and vehicles (Chart 3).
This surge in trade was driven by complementary economic needs, strategic partnerships and proactive policy measures under the Forum on China-Africa Cooperation (FOCAC), launched in 2000, as well as the formation of the BRICS bloc in 2009. FOCAC, a platform for dialogue and collaboration between China and African countries, positions South Africa as a key player in fostering this relationship. By 2008, China had overtaken the United States (US) as South Africa’s largest trading partner, with South Africa becoming China's biggest market in Africa. The establishment of BRICS further strengthened economic ties between the two nations, offering a structured framework for high-level discussions and agreements to enhance trade.
Future trading relationships between China and South Africa look promising, as the former is poised to deepen its economic integration with the latter, capitalising on the prevailing tensions between South Africa and the US due to President Trump's negative stance towards South Africa’s genocide case against Israel, BRICS, now BRICS+, and the contentious South African land expropriation bill.
Future China-South Africa trade relations look promising, due to President Trump's negative stance towards South Africa’s genocide case against Israel, its land expropriation bill, and BRICS+
Insights from the data
South Africa’s trade deficit with China has seen a gradual worsening (Chart 1), which increased from less than a billion dollars in the period 1988-2000 to US$9.71 billion by 2023. Over the FOCAC era (2001-2023), this trade imbalance has resulted in an accumulated cash outflow of US$114.83 billion from South Africa to China. Since 2014, South Africa’s imports from China have nearly doubled the value of its exports to the country. Despite these alarming trends, it was not until the 9th FOCAC Ministerial Conference in Beijing in September 2024 that South African officials, specifically President Cyril Ramaphosa, raised concerns about the persistent trade deficit. Although it may seem overdue, addressing the issue now is better than ignoring it entirely. The critical question moving forward is how to correct this trade imbalance and achieve a mutually beneficial, win-win outcome.
Chart 1: South Africa’s bilateral trade with China. Note: This chart's analysis period (1988-2023) is constrained by data availability. Source: Author’s computation using QUANTEC dataset.
To address this question, it is essential to examine the composition of South Africa’s top traded commodities with China. South Africa’s exports to China have been heavily dominated by ores, slag and ash (Chart 2), which accounted for 39% of exports before FOCAC (1988-2000) and increased significantly to 64% during the FOCAC era (2001-2023). Before FOCAC, vehicles were South Africa’s second-largest export to China, contributing 15% of total exports. However, this category declined sharply to just 0.4% during the FOCAC period, being replaced by iron and steel, which nearly doubled from 7% to 12% over the same timeframe. In summary, South Africa’s top five exports to China during the FOCAC era primarily consisted of mineral products and metals.
Chart 2: Composition of South Africa's top ten merchandise exports to China. Note: Products are categorised according to South Africa Trade HST 6-digit World Bank Classification. Source: Author’s computation using QUANTEC dataset.
Electric machinery, equipment and electronics were South Africa’s leading imports from China (Chart 3), accounting for 13% before and 25% during the FOCAC era. These were followed by imports of nuclear reactors, boilers, machinery and mechanical appliances including their parts, which rose from 11% to 21% over the same period. The importation of apparel and organic chemicals declined during the FOCAC era compared to the pre-FOCAC period. Nevertheless, these products still rank among the top five South Africa’s imports from China. While South Africa’s vehicle exports to China saw a sharp decline during the FOCAC era (Chart 2), the Chinese vehicle market expanded in South Africa during the same period (Chart 3). The share of vehicles in South Africa’s imports from China more than doubled from 1.6% before FOCAC to 3.3% during the FOCAC era.
Chart 3: Composition of South Africa's top ten merchandise imports from China. Source: Author’s computation using QUANTEC dataset.
So what?
The preceding analysis highlights four critical aspects that define the dynamics of South Africa’s trade relationship with China, shedding light on the underlying patterns, economic dependencies and structural challenges that contribute to the persistent trade imbalance:
1. Export composition and the role of Chinese investments
South Africa’s export portfolio reveals that China primarily engages the country for mineral commodities and metals to feed its own manufacturing industry. The pattern of South African exports to China is therefore largely tied to the price volatility and production fluctuations of mining commodities, reflecting growth through intensive margins rather than extensive margins (diversification) or sophistication (value addition). These commodities are capital-intensive and are predominantly controlled by foreign investors, including China. For example, Chinese companies like the Jinchuan Group, the China-Africa Development Fund and the China Investment Corporation (CIC) have substantial stakes in South African mining operations, such as Wesizwe Platinum, Shanduka Group and various chromium and iron ore projects. It is likely that a significant portion of South Africa’s mineral exports to China originates from these Chinese mining investments. Similarly, other foreign mining investors likely export ores to their home countries or third-party nations for processing. To address this, mineral beneficiation, that is, processing raw materials domestically is essential to achieve export growth through diversification and value addition. This would stimulate South Africa’s manufacturing sector and create job opportunities.
2. Export diversification and agricultural products
At the 9th Ministerial Conference of FOCAC in September 2024, Presidents Cyril Ramaphosa and Xi Jinping acknowledged the need to diversify South Africa’s export basket to include more agricultural products as a strategy to mitigate the trade deficit. However, the specifics of this diversification were not clearly outlined. There is a rising demand for edible fruits and nuts in China (Chart 2), which South Africa could strategically exploit while also exploring other emerging demand trends. This effort requires clear strategies, investments in the agricultural sector and the development of value-added agro-processing industries.
3. Impact of manufactured imports on domestic industries
The importation of manufactured goods, particularly apparel, electronics and other consumer products has crowded out South Africa’s domestic industries, with devastating effects on Small and Medium Enterprises (SMEs). Many firms in these sectors are struggling to survive or operate at minimal capacity due to competition from relatively cheaper Chinese imports. This underscores the need for protectionism measures such as tariffs and quotas on Chinese imports that directly compete with local products and the implementation of import substitution policies. Such policies could include incentivising investors and supporting local entrepreneurs to develop industries that produce goods currently imported from China. However, these initiatives, including beneficiation, must be supported by strong anti-corruption measures to guarantee that tariffed goods enter the South African market through legitimate channels and that raw mining products are not exported in their unprocessed form.
4. Structural imbalances in bilateral trade and pan-Africanism
South Africa-China trade relations and, more broadly, China's overall engagement with African countries is primarily driven by China’s demand for raw materials and its need to secure markets for its manufactured goods. While this arrangement has the potential to be mutually beneficial, the uneven negotiating power often disadvantages African countries. A significant concern is the fragmented approach of individual African countries when negotiating trade and investment deals with China and other global players. This underscores the importance of adopting a pan-African approach to negotiations. The African Continental Free Trade Area (AfCFTA) offers a platform to strengthen pan-Africanism, intra-African value chains and trade in both intermediates and finished goods, enabling African countries to reduce their dependency on external economic and political relationships. By leveraging AfCFTA, African countries can foster unity in trade negotiations and work toward reducing the trade deficit with extra-African partners, including China, while promoting economic diversification and sustainable growth.
By leveraging AfCFTA, African countries can foster unity in trade negotiations and work toward reducing the trade deficit with external partners
South Africa’s trade deficit with China is not just a bilateral issue—it reflects broader lessons for Africa’s engagement in global trade. First, economic partnerships must go beyond raw material exports to ensure long-term benefits. Without diversification and local value addition, trade imbalances will persist, limiting industrial growth and job creation. Second, while attracting foreign investment is essential, African nations must negotiate from a position of strength, ensuring that such investments align with national and regional development priorities rather than reinforcing dependency. Third, resilience in global trade requires adaptive strategies—countries must anticipate shifts in demand, develop high-value sectors and build competitive industries that can withstand external shocks. Lastly, no single African country can effectively challenge structural trade imbalances alone. Strengthening regional cooperation through frameworks like the AfCFTA offers a pathway to collective bargaining power, better trade terms and a more sustainable, mutually beneficial relationship with global economic partners, including China.
Image: AbsolutVision/Pixabay
