Patrick Bond
In spite of being fellow members of the BRICS – Brazil, Russia, India, China, South Africa – bloc, Beijing’s trade, investment and financing activities in the post-apartheid economy, society and natural environment have been mainly characterised by severe disputes, corruption, Odious Debt, deindustrialisation and infrastructural underdevelopment. The South African government’s attempt to mimic Chinese Special Economic Zones (with low corporate taxes and regulations), especially near the Zimbabwe border and at one of the deepest ports (Coega, next to Port Elizabeth), provides several examples of the negative features of BRICS, as do major transport and energy infrastructure deals and neo-colonial trade relations.
To begin at the country’s far northeast corner, the Musina-Makhado Special Economic Zone (MMSEZ) has been hyped since the mid-2010s, including in the 2018 Beijing Forum on China-Africa Cooperation, co-chaired that year by Xi Jinping and the new South African president, Cyril Ramaphosa. The year before, the MMSEZ operating license was granted to Ning Yat Hoi’s Shenzhen Hoi Mor investment firm even though he was on the Interpol red list for recent mining fraud in Harare and London. The MMSEZ’s main industrial ambitions are in an ecologically-sensitive zone in the close vicinity of Ramaphosa’s home village. But the $10 billion project requires not only vast water supplies (unavailable) but also an energy source which, until September 2021, was meant to be a 4600 MegaWatt coal-fired power plant. Xi’s speech to the United Nations General Assembly that month, in advance of the Glasgow UN climate summit, promised an end to such plants along Beijing’s Belt & Road Initiative, which soon compelled MMSEZ organisers to claim (dubiously) that the vast industrial facility could operate on local solar power supplies.
The challenge of supplying energy to the MMSEZ is, in the 2020s, formidable given not only overconsumption by electricity-guzzling smelters elsewhere in South Africa, but the desperate need to meet the power needs of labour-intensive industry, small businesses and households, especially where (patriarchy-determined) cooking chores based upon hot plates are necessarily being replaced by dirty coal, wood and paraffin. And even without the thermal coal plant, Ning’s other proposed MMSEZ industrial emitters (at 34 megatonnes annually, 8% of South Africa’s projected 2030 total) and their extensive local pollution were irrational. MMSEZ officials repeatedly denied the urgent need to decarbonise industry, the (China-driven) overproduction of most of the industrial metals proposed resulting in global gluts, and the ongoing closures of other South African (especially Indian-owned Arecelor-Mittal) steel mills, which by the 2020s had halved the local economy’s annual output from its 2005 peak of 8 million tonnes. Moreover, instead of replacing imports with MMSEZ-produced metals, displacement within the South African economy would result, since as one analyst remarked, “The idea was that that instead of machinery and equipment being built in, say, Durban and shipped to a Southern African Development Community country, it could far more advantageously be done in the MMSEZ.”
At the Coega Special Economic Zone, two dysfunctional Chinese car factories built during the 2010s – First Auto Works and Beijing Auto Industrial Corporation – have attracted widespread criticism for labour conflicts, for drawing down large South African state subsidies (and electricity supply), for their capital-intensive semi-knockdown kit status (instead of the anticipated integrated factories), for failing to produce electric vehicles, and for an exceptionally slow start up (seven years in BAIC’s case). Also, when it comes to trade-catalysed deindustrialisation, South Africa’s imports from China and other East Asian economies – mainly through the Durban port – have, since the early 1990s, been the main contributor to the closure of South Africa’s labour-intensive clothing, textile, footwear, appliance and electronic sectors.
The danger of corruption – e.g. due to the MMSEZ’s chosen management – is also recognised in part due to the way financial and mercantile forms of underdevelopment are visible, especially in Beijing’s relationship with the transport parastatal Transnet. The Durban port’s seven new container cranes, purchased in 2011, were considered the world’s most expensive because Shanghai Zhenhua Heavy Industries (along with German-Swiss firm Liebherr) added millions of dollars in bribes to the notorious Gupta family empire when winning a $92 million tender.
In the other main infrastructure supply controversy, a 2013 order for Transnet’s rail fleet relied upon hundreds of new locomotives from Beijing-based CRRC but three problems arose: first, what Pretoria tax authorities in 2022 termed “evidence of large scale corruption” by CRRC as part of the Gupta ‘state capture’ of Transnet; second, “tax fraud in excess of $200 million” due to the world’s largest rolling stock manufacturer “substantially having understated its tax liability” and having “misrepresented the interest it was earning”; and third, a CRRC response to not only deny the evidence and refuse to pay its tax debt, but to also withhold vital locomotive parts during the early 2020s. CRRC thus left more than 100 locomotives disabled, in the process crippling Transnet’s bulk exports and compelling a rail-to-road transition by mining houses, using trucks that caused severe ecological damage and dramatically lowered productivity. And to pay CRRC for the locomotives, a high-profile $5 billion China Development Bank loan was granted to South Africa by Xi in 2013 at the time Durban was the BRICS summit host city, and although not all was used and corruption was evident again via the Guptas, Beijing insisted on full repayment.
The financing of South African maldevelopment is also obvious in the continent’s worst case of parastatal debt: energy generator Eskom’s two new coal-fired power plants, Kusile and Medupi. Eskom received credits for Kusile from the China Development Bank ($2.5 billion in 2018) and for Medupi from the Shanghai-headquartered BRICS New Development Bank ($480 million in 2019), even amidst charges that the World Bank and Western financiers had over the prior decade loaded South Africa with tens of billions of dollars’ worth of Odious Debt because Hitachi bribed the ruling African National Congress to get the plants’ main construction contracts in 2007. The Tokyo firm was successfully prosecuted in 2015 in Washington (but not yet in Pretoria) under the U.S. Foreign Corrupt Practices Act. But that did not stop Chinese lenders from adding to what at the time had reached more than $180 billion in South African foreign debt, just as Pretoria state debt was declared ‘junk’ by two credit rating agencies in 2017, and as taxpayers were told to take over the burden of repaying half of Eskom’s loans. To repay the other half, Eskom residential customers have faced a 435% rise in after-inflation prices for electricity from 2007-24.
Meanwhile, neither Kusile nor Medupi were built to specifications, e.g. resulting in seven years of delays in construction, and with 7000 cases of welding failure. Not only was the resulting inability to supply the grid with 4800 MW each responsible for extreme electricity shortages. The 35 million tonnes of CO2 emissions from each plant made this the worst-ever case of mega-project mismanagement in Africa. Just like their Western counterparts, the two China-based banks never forgave the repayment burden, so South African taxpayers and Eskom customers have continued to repay loans at what is the world’s fourth-highest interest rate (among the leading 40 countries issuing state bonds). And the worst damage, as leading South African environmentalist Makoma Lekalakala explained when organising several protests against the BRICS New Development Bank, is that “The projects they are funding are climate-destroying projects.”
What lessons are to be drawn? Very simply, the kinds of super-exploitative relations between the South African people and environment, on the one hand, and settler-colonial plus Western corporate consumers of cheap labour on the other, are being amplified by the kinds of neo-colonial trade, investment and financing controversies so evident in China-South African economic ties since the end of apartheid.
Can these ties be reformed? Or is it more appropriate to break the chains?