South Africa’s persistent trade deficit dilemma with China, and how to fix it

South Africa’s total bilateral trade with China soared from $1.34-billion in 2000 to $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 (Brazil, Russia, India, China, South Africa), which was 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 $1-billion between 1988-2000 to $9.71-billion by 2023 (Chart 1). Since Focac’s inception, this trade imbalance has resulted in an accumulated cash outflow of $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 and 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 probably 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.

Diversification

Structural imbalance

Regional development priorities