South Africa’s trade deficit dilemma with China
South Africa needs to benefit more from its active, albeit highly unequal, trading partnership with China.
South Africa’s total bilateral trade with China soared from US$1.34 billion in 2000 to US$34.18 billion in 2023. But because South Africa exports primarily raw materials to China, and imports mainly manufactured items, the upswing has been overshadowed by a persistent trade imbalance that favours China.
The surge in trade was driven by complementary economic needs, strategic partnerships and policies under the Forum on China-Africa Cooperation (FOCAC), set up in 2000 and BRICS, launched in 2009.
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. BRICS strengthened economic ties between the two countries, offering a framework for high-level discussions and agreements to enhance trade.
Future trading relations look promising. China is poised to deepen its economic integration with South Africa, capitalising on prevailing tensions between South Africa and the US due to President Donald Trump’s negative stance towards South Africa and BRICS.
But South Africa’s trade deficit with China is worsening, rising from less than US$1 billion between 1988-2000 to US$9.71 billion by 2023 (Chart 1). Since FOCAC’s inception, 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.
South Africa only raised concerns about these alarming trends in 2024, at the ninth FOCAC meeting. Action to address the trade imbalance is long overdue – what can be done to ensure a mutually beneficial outcome?
Answering that question requires examining South Africa’s top traded commodities with China. South Africa’s exports have been heavily dominated by ores, slag, and ash, which have increased from 39% to 64% since FOCAC began (Chart 2).
Before FOCAC, vehicles were South Africa’s second-largest export to China. This category has however declined to just 0.4% between 2001-2023, replaced by iron and steel, which nearly doubled over the same period. That means South Africa’s top five exports to China during the FOCAC era comprised mostly mineral products and metals.
In terms of imports to South Africa from China, electric machinery, equipment and electronics were the leading items, accounting for 13% before and 25% since FOCAC began (Chart 3). These were followed by nuclear reactors, boilers, machinery and mechanical appliances, which rose from 11% to 21%.
Apparel and organic chemical imports declined during the FOCAC era. Nevertheless, these products still rank among South Africa’s top five imports from China.
While South Africa’s vehicle exports to China dropped since FOCAC started (Chart 2), the Chinese vehicle market expanded in South Africa over that period. The share of vehicles in South Africa’s imports from China more than doubled from 1.6% before FOCAC to 3.3% after.
This analysis highlights the economic dependencies and structural challenges contributing to the persistent trade imbalance between South Africa and China. Four critical aspects of the trade relationship stand out.
First is export composition and the role of Chinese investments. China primarily engages South Africa for mineral commodities and metals to feed its own manufacturing industry. That means South African export patterns are largely tied to the price volatility and production fluctuations of mining commodities, reflecting growth through intensive rather than extensive margins (diversification) or sophistication (value addition).
These commodities are capital-intensive and predominantly controlled by foreign investors, including China. Several Chinese companies have substantial stakes in South African mining operations, such as Wesizwe Platinum, Shanduka Group and various chromium and iron ore projects. Much of the country’s mineral exports to China probably originate from these Chinese mining investments. Similarly, other foreign mining investors likely export ores to their home countries or third-party nations for processing.
Mineral beneficiation – or processing raw materials domestically – is essential to achieve export growth through diversification and value addition. That would stimulate South Africa’s manufacturing sector and create job opportunities.
The trade imbalance has seen US$114.83 billion in cash flow from SA to China since 2000
The second notable aspect of the South Africa-China relationship is export diversification and agricultural products. In 2024, Presidents Cyril Ramaphosa and Xi Jinping acknowledged the need to diversify South Africa’s export basket to include more agricultural products to help mitigate the trade deficit. But the specifics of this diversification weren’t clearly outlined.
South Africa could exploit China's rising demand for fruits and nuts while exploring other emerging demand trends. This will require clear strategies, agricultural sector investments and the development of value-added agro-processing industries.
Third is the impact of China’s manufactured imports on South Africa’s industries. Importing manufactured goods, particularly clothing, electronics and other consumer products, crowds out South African industries. Many small and medium enterprises struggle to compete with relatively cheaper Chinese imports.
Protectionism measures such as tariffs and quotas on Chinese imports that directly compete with local products are needed, along with import substitution policies. These could include incentivising investors and supporting local entrepreneurs to develop industries that produce goods currently imported from China.
However, these initiatives – along with domestic mineral beneficiation – must be supported by strong anti-corruption measures. Such measures can guarantee that tariffed goods enter the South African market through legitimate channels and that raw mining products are not exported in their unprocessed form.
The fourth aspect is the structural imbalance in bilateral trade and pan-Africanism. South Africa-China trade relations, and China’s overall engagement with African countries, are primarily driven by its demand for raw materials and need to secure markets for its manufactured goods.
While this arrangement could be mutually beneficial, African countries are often disadvantaged by their uneven negotiating power and fragmented approach to trade and investment deals with China and other global players.
No single African country can effectively challenge structural trade imbalances alone
The African Continental Free Trade Area (AfCFTA) could foster unity in trade negotiations and strengthen intra-African value chains and trade in intermediates and finished goods. That would help African countries reduce their dependency on external economic and political relationships, while promoting economic diversification and sustainable growth.
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. Trade imbalances will persist without diversification and local value addition, limiting industrial growth and job creation.
Second, while 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.
Last, no single African country can effectively challenge structural trade imbalances alone. Strengthening regional cooperation through frameworks like AfCFTA offers collective bargaining power, better trade terms and more mutually beneficial relationships with global economic partners, including China.
This article was first published in Africa Tomorrow, the blog of the ISS’s African Futures programme.
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