The dragon's new terms

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00:00 – Introduction 

Jeremy:  China buys more South African goods than any other country in the world. It's also the source of a massive share of the products that South Africans use every single day, from infrastructure equipment and industrial inputs to your television and fridge. But as global trade becomes more fragmented, regulated, and politically sensitive, the relationship is evolving.

New compliance measures coming into effect in about four months' time will shift part of South Africa's import control process directly into China itself. Now, this new legislation introduces new operational realities for importers and raising broader questions about supply chain resilience, dependency, and trade risk. 

Then there's the landmark China trade scheme. So what does the modern China-South Africa trade relationship really look like? Where are the vulnerabilities, and are South African businesses prepared for a more complex import environment? Hello and welcome. This is No Ordinary Wednesday. It's our in-depth look at what is driving markets, shaping the economy, and changing the game.

I'm Jeremy Maggs. And in this episode, I'm joined by Investec's Tertia Jacobs, treasury economist, and Dylan Govender, who's head of supply chain.  

01:21 - The evolution of SA-Sino trade relations

Tertia, let's start this important conversation with you. China remains South Africa's single largest trading partner, but the relationship has evolved significantly over the past decade.

So how would you characterise the current economic relationship between the two countries today, and just how dependent is South Africa on China? 

Tertia: Hi, Jeremy. These are very important dynamics that are playing out, as you noted, China is South Africa's largest trading partner, with bilateral trade of about 640 billion rand in '25.

I would just like to add that South Africa's trade is quite diversified with the rest of the world as well. For example, with Germany, bilateral trade is nearly 300 billion rand, with the US 280 billion rand, and 140 with the UK and Japan respectively. 

But now the trade relationship with South Africa is highly asymmetric.

And what do we mean with that? South Africa primarily exports raw materials and mineral ores while importing high value-added goods, as you mentioned in your introduction. What's also been playing out is that this asymmetrical balance has actually contributed to a persistent and widening bilateral trade deficit of nearly 200 billion rand in 2025.

02:38 - Will the zero-tarrif trade deal change this asymmetry?

Jeremy: So Tertia, a follow-up. How will the new China trade scheme that came into effect last month shift that dynamic? 

Tertia: So this is actually quite important in the global context of changing trade dynamics. This scheme is a non-reciprocal zero tariff treatment for goods exported from not only South Africa but from Africa.

And remember, it's a temporary arrangement, and it will only be for two years, ending April 2028. Pending that will be the conclusion of the China-African Economic Partnership Agreement, right? So, we're watching that. Now the big question is, will it make a difference? There are two things I'd like to note.

Firstly, it's important to be aware that tariffs are subject to tariff rate quotas. So, whereas China has become one of the world's most open economies in terms of exports, foreign firms often face greater challenges accessing China's domestic market than Chinese firms accessing foreign markets.

However, the issue is quite nuanced and varies significantly by sector in terms of the geopolitical dynamics as well. China's growth model has also become increasingly reliant on exports as domestic demand has struggled to absorb the excess industrial capacity in the economy.

There's also been growing concerns among trading partners regarding unfair competition and the potential dumping of excess production into global markets at prices that domestic producers often struggle to match. Now, as a result, a growing number of countries, including South Africa have responded with anti-dumping measures and tariffs to protect strategic industries as well as domestic manufacturing capacity.

And the second point is, and this is actually got to do with South Africa itself, we have neglected our manufacturing sector in the context of power shortages, state corruption, policy uncertainty, and we've had an average growth rate of only 1% over the past decade. So, while South Africa's industrial base remains very large in the context of Africa, Morocco has now overtaken South Africa as the continent's most industrialized economy in 2025.

So, that is something that we must monitor because our industrial sector have become quite uncompetitive to the extent that we can take advantage of this, there are a number of headwinds, and I'd say over the short term, we'll continue to focus on raw material exports, but there is longer term opportunities if we increase investment in our manufacturing sector.

05:13 - New China export rules could impact SA exporters during busiest season

Jeremy: All right, Dylan, let me come to you now. And as we've heard, Tertia has outlined the evolving macro relationship, but you're seeing where these shifts become operational reality for businesses. I wonder if you can give us a high-level overview of what the new China import rules are, and from a supply chain perspective, what changes materially for South African importers.

Dylan: Yes, Jeremy from the 20th of September 2026, affected products from China will need a certificate of conformity before shipment. This ensures that the goods comply with SABS regulations in terms of how they've been manufactured. If you take toys, for example, they don't contain lead-based paints. The enforcement is there to protect the consumer at the end of the day and ensure that products are manufactured to a certain level of compliance.

The drastic shift is in terms of how this is going to be enforced, it's a fundamental change for how goods are brought into the country. Previously, these were based on random detentions. Remember, the SABS standards have always been there in terms of compliance. It's just how it's been enacted. It's been previously on a random basis where a container will be detained, and the quality will be checked.

Now it's been linked to the South African Revenue Services in terms of the tariff heading that's declared. If you're bringing toys in, for example, it's going be read cleared by SARS, and SARS is going call for the query documents. Once the query documents are provided, if you do not have the certificate of conformity, it's going lead to detention of goods, and it's going lead to massive storage costs.

And obviously, you've got that working capital that's tied up there because you can't resell those goods until you get final release of it 

06:40 - How SA is walking the tightrope of politics and trade

Jeremy: So Tertia, we're operating in a far more fragmented global trade environment right now with tariff tensions and geopolitical competition all reshaping global commerce.

So how exposed is South Africa to that changing global trade order through its relationship with China? 

Tertia: That's very interesting dynamic, and I think there's two issues here. The first is South Africa's export basket, and the second one, the emergence of new trade relationships. So with regards to our own trade relationships, we remain quite vulnerable to the extent that trade with the United States has become less favorable because of the tariffs, and export performance is not as strong as it previously was.

However, very interesting is that there has not been a material collapse in export revenues, and that's largely because South Africa's export market basket remains heavily concentrated in commodities rather than manufactured goods. So key exports such as gold, platinum group metals, and other mineral ores, which we touched on earlier, are generally less affected by bilateral trade disputes and tariff negotiations, and that provides a degree of insulation from the current wave of trade fragmentation.

And then the second issue here is, and I think this is more indirect, but it may become more pertinent over the medium to longer term, and that is there's an emergence of new trade relationships and preferential trade arrangements as countries increasingly seek to diversify away from traditional trading partners and build more resilient chains.

You know, as geopolitical fragmentation intensifies, countries are actively pursuing new alliances and trade agreements aimed at securing trusted and mutually beneficial market access. South Africa then risks being sidelined if we do not actively search for new trading partners or to deepen trade relationships as these trade networks are evolving.

I'd say the greatest risk from trade fragmentation, industrial policy, and strategic competition tend to arise in sectors characterised by high value-added manufacturing and advanced technological production. So that is where South Africa is not a top performer, but it's very important that we start strengthening trade relationships with more countries.

09:08 - The added complexity of BRICS

Jeremy: So Tertia, what role then does BRICS have to play in all of this? 

Tertia: That's also a very interesting dynamic. One of the challenges facing BRICS is its expansion, remember more members were added on top of the existing five members, which has made the grouping more economically and politically diverse, making it increasingly difficult to establish a coherent strategic direction.

For example, the recent Middle East conflict highlighted these tensions with the latest BRICS meeting unable to issue a unified communique because members could not reach a consensus. So, it reinforces an important point, BRICS is not a homogenous anti-Western or anti-dollar bloc. Its members have very different economic interests, security relationships, and geopolitical priorities.

For example, some of the newer members, including India, Egypt, and Saudi Arabia, maintains very close relationships with America. 

10:36 - South Africa must diversify imports of finished goods

Jeremy: Dylan Govender, back to you then. There's often a perception that South Africa benefits enormously from its relationship with China. But I guess dependency can cut both ways.

So where do you see the biggest shifts in the relationship from a South African perspective? 

Dylan: Jeremy, from South Africa's perspective, the relationship with China remains hugely important. But the conversation is increasingly shifting from cost and efficiency to resilience, compliance, and strategic risk management.

If you take the Pre-Verification of Conformity, PVOC program, South African businesses are heavily dependent on China for finished goods. Like Tertia touched on, South Africa still exports predominantly raw materials while importing higher valued manufactured goods. So, Jeremy, the new trade compliance highlights the risk of relying too heavily on a single sourcing market.

Businesses are increasingly evaluating alternative suppliers, secondary sourcing locations, and inventory strategies to reduce disruptions, risk, and logistics bottlenecks. The major risk here is, is China and South Africa ready for this partnership in terms of the compliance program? 

There's one authority in China that's been nominated to handle all these inspections and issue all these certificates.

Now, if you look at the volume that's moving from China to South Africa and a go live readiness date of the 20th of September, is there enough capacity resources to cater for the date that's around the corner? And that's what we at Investec are trying to lobby with the industry to apply for the extension.

We 1are 00% for the compliance and agree that products should be manufactured to a certain standard, and we want to protect the consumer. We want to be compliant, but we don't want to have to deal with these bottlenecks and the level of non-compliance and the additional charges that's going to be faced by our clients just because of a readiness date around the corner.

12:16 - Investec wants the deadline of compliance to be extended

Jeremy: And Dylan, do you think there's a high likelihood this date is going to be shifted out? 

Dylan: We are lobbying as Investec together with the industry to have this date moved out simply because we do not see our importers being ready to be 100% compliant. There's massive factors to be considered. The first thing is the Chinese authority, do they have enough capacity to process?

The secondary thing is the South African Revenue Services, they're going to be enforcing this. Do they have the capacity to process all these manual queries that's going to be coming about?

Remember, any delays in supply chain is going to cost us fundamentally. Also, the rollout date is towards a peak time in the year.

During the course of the end of September, October is your peak season where majority of your imports are coming in, and that's for your Black Friday and your Christmas sales. We don't want our clients, our importers, to be affected by this and have lack of visibility of goods on the shelf 

13:01 - Impact of China’s slowing economy on South Africa

Jeremy: Tertia, back to you. China's own economy is slowing down structurally, particularly in property and industrial activity. What then does a weaker Chinese growth environment mean for South Africa's economy, its fiscal position, and its currency outlook? 

Tertia: That's also very interesting and very important dynamic, Jeremy. I think the way that we look at it is not necessarily a sharp slowdown in the Chinese economy, it's more a question of the transformation of the Chinese economy.

You know, as countries become wealthier, they typically transition from manufacturing-led growth, and that is why we said earlier on that China is a massive exporter because it's got a lot of excess production capacity and not enough domestic demand to absorb it. So, it's very important for them to boost consumer spending, but also transition to more a services-orientated economy.

For example, the UK, the US, and Japan all followed this path, right? So, China's likely to face similar pressures as labor cost rise and also as demographics deteriorate. This demographic challenge of China is going to reinforce this longer-term trend. It's an aging population, it's a shrinking workforce, and that translates into a weaker property sector that impacts the growth over time.

And what we've also seen in China is that they're not pro-immigration, right? China appears to be responding through automation, robotics, and technological upgrading, which may support productivity but is unlikely to offset these demographic headwinds. So that's one of the big dynamics that's unfolding.

Now, for South Africa, this matters less because a less industrial and infrastructure-intensive Chinese economy would likely generate slower growth and demand for commodities, such as iron ore and manganese and chrome. But these changes, very importantly, tend to unfold very gradually rather than abruptly.

So, it's something that we need to monitor, and I think it brings us back to the earlier point. It's very important that South Africa re-industrialises. 

15:13 - Businesses need sufficient working capital to get through the delays

Jeremy: Dylan, we often talk about supply chain resilience in abstract terms, but practically, what happens to a business when goods are delayed at origin or arrive without the correct certification?

Dylan: Jeremy, the biggest risk here is any delay is going to cause a corruption in your working capital cycle. Whether it be at origin or at destination, your goods could be tied up for additional 7 to 10 days. That's less time for you to get the goods on the shelf and convert that into a cash cycle for your business.

It's imperative that you are walking the journey with the right trade financier to ensure that your working capital cycle is met and matched correctly. 

15:50 - The nature of Sino-SA relations over the next 5 years

Jeremy: All right, as we come to the end of this episode of No Ordinary Wednesday, I'm going to ask you both to do some forecasting, maybe over the next five years.

Do you think that the China-South Africa trade relationship becomes deeper and more strategic, or maybe more cautious and fragmented? 

Tertia: Jeremy, good question, but I'd like to make it a little bit nuanced, if it's okay. I think firstly with regards to China and South Africa, I think the path is to set us up for a stronger relationship.

South Africa sees China as an ally, politically and economically, so we would be looking for opportunities to strengthen that. 

But the next important dynamic is we must also ask what is in the interest of South Africa, and I think that point has to do with many of South Africa's future growth opportunities which are likely to be found within Africa itself.

That's a key reason why South Africa has been a strong supporter of the African Continental Free Trade Area. Many advanced economies also face aging populations and slower growth, and Africa remains one of the fewer regimes with strong population growth, urbanisation, and rising consumer demand. So unlike trade with China, which is heavily commodity-based, African markets offer greater opportunities for higher value-added exports, including manufactured goods, food products, financial services, and telecommunications.

Jeremy: And Dylan, any thoughts on this? 

Dylan: Yeah, good question, Jeremy, and you know, Tertia touched on a lot already, but it's a very exciting relationship. I mean, right now with the free trade agreement between China and South Africa, China has opened the doors to duty-free trade in terms of goods being imported.

You can imagine what that's gonna do for our agricultural sector, for example, in terms of fresh produce that's moving into China. It could be a massive opportunity, and I think the two-year trial could lead to much bigger things in the future. 

17:40 - Closing

Jeremy: And that brings this episode of No Ordinary Wednesday to a close. My thanks to both Tertia Jacobs, treasury economist, and Dylan Govender, who's head of supply chain at Investec.

And remember, a new episode of the series drops every two weeks. To ensure that you don't miss out, all you need to do is search for Investec Focus Radio SA wherever you get your podcasts and hit the follow button. Until next time, goodbye from me, Jeremy Maggs, and the entire Focus Radio team.

Disclaimer: The views expressed are those of the contributors at the time of publication and do not necessarily represent the views of the firm and should not be taken as advice or recommendations. Investec Limited and subsidiaries, authorized financial service providers, registered credit providers, and long-term insurer.

Disclaimer

The views expressed are those of the contributors at the time of publication and do not necessarily represent the views of the firm. Past performance is not indicative of, and should not be relied upon as, a guide to future performance. This publication is for information purposes only and should not be taken as advice or recommendations. Investec Limited and subsidiaries, authorized financial service providers, registered credit providers, and long-term insurer.

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