South Africa

Details

  • Industry: Business Desk, China
  • Type: Business and industry issue
  • Date: 2011/05/06

The KPMG Global China Practice Network

KPMG's China Desk was established to assist clients from South Africa with establishing business relationships in China and vice-versa.

What’s next for China – the implications for Africa 

Over the past 30 years, China lifted over 300 million people out of poverty, became the world’s second largest economy and now holds the largest foreign reserves. This was achieved initially by selling natural resources for foreign exchange and technology. China became the ‘factory of the world’ and a well-known producer of textiles, clothing, shoes and toys.

However, during the past decade, it has become apparent that China can produce not only toys and clothing, but high-end products as well – last year building the world’s fastest supercomputer.

 

South Africa has recently been invited to join the Brazil, Russia, India and China (BRIC) group.

 

Future infrastructure growth

 

Growing first-tier Chinese cities such as Shanghai, Beijing, Guangzhou and Shenzhen have driven demand for African and Australian resources. The development of China’s second- and third-tier cities should continue to support the demand for natural resources as urbanisation continues.

 

There are probably areas where so-called property bubbles will arise but these may be isolated by the size and complexity of China.

 

Growth in consumer demand

 

Average GDP per capita in China is approaching US$4 000. This presents an important opportunity for luxury goods manufacturers, including wine producers. Richemont reported increased sales in the Asia Pacific region, led by China. General Motors’ biggest market is now China and no longer its home country, the United States.

 

Moving up the value chain

 

Chinese industry is moving up the value chain and a large young workforce will be needed to replace the millions in the ‘factory of the world’. The next manufacturing hub seems to be Africa, with a population now close to one billion.

 

However, physical and telecommunications infrastructure needs to be upgraded. Already, Chinese telecommunication companies play a major role in this regard.

 

Chinese advances in green technology bode well for the development of solar power farms within sub-Saharan Africa. The China Africa Development Fund and major banks have financed major infrastructure projects on the continent.

 

South Africa and the BRICs

 

Cynics feel that nothing will come of South Africa’s entry to the BRIC group. However, BRIC membership will highlight partnership opportunities with the world’s fastest growing major economies. South Africa can ‘export’ its leading governance frameworks such as King III to this bloc, and develop a framework for Africa-bound investment from these emerging and developed economies. This should allow for joint and sustainable growth for Africa and the rest of the world.

 

Contact

Contact
Glenn Ho
Director
Head of the KPMG China Desk for Africa
Cape Town
Tel: +27 (0)21 408 7332
glenn.ho@kpmg.co.za
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