President Cyril Ramaphosa has provided an economic stimulus package for almost R370 billion of funding from the Chinese government.
The massive financial contribution is expected to largely finance the planned financial incentives of the government, accelerate the development of the infrastructure and rapidly increase the pace of industrialization in South Africa.
International Relations and Collaborative Minister Lindiwe Sisulu said that the government had initially been very cautious about accepting financial aid from China, but had come to the realization that "we can not let our economy grow independently in any way".
Sisulu was a member of the South African delegation at the Forum on China-Africa last week. The minister said South Africa needed access to finance that would help it to grow the economy faster and that China, whose interest rates are not exorbitant, was available.
Out of the $ 60 billion that China has dedicated to Africa to fund major development projects, $ 15 billion is destined for South Africa. Another $ 10 billion has been committed after Ramaphosa's visit to Beijing.
In response to the economic downturn, the economic cluster has been given the task of making a concrete plan for the conversion of the South African economy.
Insiders from the government told it Mail & Guardian Ramaphosa was not impressed by the presentation by ministers in the economic cluster this week, because he was not convinced that the proposed measures would be able to revitalize the economy.
Government leaders have been working to develop a model for stimulus packages since Ramaphosa announced their planned rollout in August. A clear plan on how the packages will be structured is expected to be announced during the medium-term budget speech in October.
South Africa needs more than R40 billion for the rollout and looked at a number of countries as a source for part of the financing.
This week the economic cluster presented its proposed model for stimulus packages to the political committee, led by Balros Mbete, national parliamentary speaker.
Ramaphosa, who is also a member of the committee, was present at the meeting and was not impressed by the proposed interventions, according to the insiders of the government.
& # 39; The President has rejected it [the proposed stimulus]. He said that there is still more work to be done. He was not convinced that those things [proposed solutions] would stimulate the economy, "said an insider M & G.
South Africa seemed to follow the example of China, once a developing country and now one of the largest economies in the world. Sisulu said this and did not want to be tied to a certain market because historically and geographically we were connected to Europe, which influenced the government's decision.
"The Chinese say it is about time that we get our independence … We want to use it," she said.
Sisulu said that South Africa had a huge infrastructure shortage and that it would be beneficial for the country to work with China, which could act better and faster than the state.
"The most infrastructure we have [Africa] with the support of the Chinese government and they have become very skilled and good at it, "said Sisulu.
She rejected concerns about the quality of goods from China and said that the government had been specific about the quality of the products she would buy.
"Most countries have a limited view of what China can offer, they think of China as the country that produces cheap goods, because their ability to produce is so big that some of them might not even be regulated," Sisulu said. .
"The regulated trade we deal with is of the quality we can rely on.
"If we want to industrialize, at a rate that we want to industrialize, we would like to do that on the back of someone we can trust and we need to industrialize to grow our economy," she explained.
However, there has been some skepticism about whether a stimulus package will deliver the kind of long-term intervention needed to boost the economy.
Iraj Abedian, chief executive of Pan-African Investment and Research Services, said the government should forget a stimulus package and talk about a strategy for reversal because the recession of the country was not cyclical.
"A stimulus package suggests that the recession environment of the economy is due to a cyclical downturn and therefore the stimulus package needs to respond." The problem with the South African economy at the moment is that it has a structural recession, "said Abedian.
He said that all major productive sectors, such as agriculture, mining, industry, energy and municipalities, were not suitable for investment and remediation, but that this would be the prerequisite for a successful strategy for reversal.
Lumkile Mondi, an associate professor at the Wits School of Economics and Business Science, said that the government had no room to maneuver in creating an economic stimulus package and the only solution to revive the economy would have to be a long-term solution that provides security offers.
But Mondi concluded tax incentives and interest subsidies in the reserve bank as options to stimulate the economy. "If we cut our revenues by offering tax benefits, we will not have much money to meet our social obligations, so we're really between a rock and a hard place," he said.
Mondi added that the only solution now would be a solution that provided policy certainty about the expropriation of land without compensation and certainty in mining policy, both issues that stifled business investment.
At the time of printing, the presidency was not available to comment on the proposed additional investment from China.
The Minister of Development Cooperation for small businesses, Lindiwe Zulu, said that she was aware of these plans to get more money from China, which she thought was a "good idea".
"I think it will be a good idea, we just have to use it [the money] optimal, "she said.
"South Africa is looking for friends to help it build its economy and help create jobs, so some of what you see with China has been going on for a long time." Our relationship with China is not yesterday We're just starting to step up to support where they can, "she added.
However, concern has been expressed about China's growing level of investment in South Africa. The manufacturing sector has put the import of cheap Chinese products that affect the viability of local industries, such as textile production.
Minister of Trade and Industry Rob Davies said, however, that China was not a threat to the survival of local industries and employment.
From accusations that China often insisted on using its own workers for China-funded projects, Davies said, "They can have that reputation in other countries, but they do not do it here, they do not bring skilled labor in South Africa, where people are able to do the job. "
He said that increasing investment and trade with China would be a positive step towards unlocking various aspects of South Africa's economic potential.
"Our biggest goal is to promote trade-driven trade, we have said against it [the] Chinese, if we want to increase our trade, there is a limit to how much it will grow, just by delivering our raw material and delivering goods produced by them to our market, "said Davies.
"So if they invest in developing our productive capacity, then we will create a base or a new type of trade that will be sustainable," he said.