RPP is our code for the weekly blog post, op-ed by the School’s celebrity economist / pundit / opinionista, but he will probably only start writing in August, so in the meantime we are filling in with some guest posts.
This week Danielle le Clus reports on the TIPS workshop on the impact of China on South Africa:
The Trade and Industrial Policy Secretariat (TIPS) presented a workshop on the impact of China on South Africa on Friday the 27thof July 2012 in Pretoria. The broad focus of the discussions was the influence that China has on the South African manufacturing industry and employment.
The day kicked off with the DTI discussing trade between South Africa and China. The DTI’s model indicated that an additional R1 million of public support of manufacturing in South Africa would lead to an increase in imports (of inputs) and an increase in exports. Their key result was that it would lead to an increase in employment from both the demand and supply side with approximately the same amounts. This created much debate, as an increase in manufacturing imports from China, according to the paper presented by Lawrence Edwards from the University of Cape Town, has had a -0.3 per cent growth impact on the South African manufacturing sector. The employment impact has been even bigger with more jobs being lost in the South African manufacturing sector due to imports, than jobs being created due to Chinese demand.
After the lunch break, Stephen Gelb from the University of Johannesburg presented his paper on FDI links between SA and China. He indicated that within the South African content, South Africa should focus on attracting FDI in the labour intensive manufacturing industries, since South Africa has large numbers of low-skilled unemployed workers. Alexandre Barbosa from the University of Sao Paulo however disagreed and indicated with his paper on the Brazilian manufacturing industries, that Brazil needs to focus on attracting FDI in the ‘white collar’ sectors. He believes that South Africa ought to do the same. Brazil, like South Africa has high levels of unemployment and he suggest that the way to address the problem is by creating high-skilled jobs, which could subsequently lead to jobs being created for the low-skilled employees.
The Brazilian situation with China however differs from the South African picture. Rhys Jenkins from the University of East Anglia highlighted this in one area; the ‘crowding out’ effect. China has not yet ‘crowded’ out Brazilian exports in their region, where the ‘crowding out’ effect is being seen by South African exporters in the Southern African countries, however the impact not being seen in the Southern African Customs Union. The overall impact may be that South Africa will be less likely to export to markets that China enters in the future, in effect leading to more job losses in local manufacturing.
It should however be highlighted that China does not only represent challenges to South Africa (or Brazil), but also gives South Africa the opportunity to excel. South Africa does not have trade agreements with China but there is trade facilitation, where they are trying to expand and improve the trade in major sectors (with the help of the DMS-model) which include; Agro processing, chemicals, plastics, stainless steel, automotives, manufactured goods (Chapter 4 of the HS-codes) and paper and pulp. Brazil has excelled, and China has in that way had a positive impact in Brazil. The challenge is for South Africa to take advantage of these trade facilitation opportunities presented by China in order to assist with employment and the manufacturing sector, and to put the necessary policies in place.
At the same event Prof Wilma Viviers also launched the book: Export promotion: A Decision Support Model Approach. The book, edited by Prof Ludo Cuyvers and Prof Wilma Viviers draws together research on the DSM model and some of its applications and makes it accessible to a wider audience. You can buy the e-book here.