Introduction

China became South Africa's biggest trading partner in 2009, when total trade between the two countries amounted to US$14.1 billion (ZAR119.5 billion). China's appearance at the top of the rankings was partly due to the global recession, which affected trade levels of the industrialised countries far more than those of emerging markets. Germany had been South Africa's biggest trading partner up to 2008, when Germany-South Africa trade totalled US$17.9 billion (ZAR148.3 billion), compared with US$ 14.2 billion (ZAR 116.8 billion) between South Africa and China. But in 2009, South Africa's trade with Germany dropped 35.5 percent in US dollar terms, while trade with China rose marginally by 1.8 percent and China moved to the top of the rankings. But total trade between South Africa and China had grown by 26.5 percent per annum (in US dollar terms) between 2000 and 2009, so that it was only a matter of time before China became the country's largest trading partner.1
The importance to South Africa of its trade relationship with China raises the question as to whether the foreign direct investment (FDI) relationship between the two countries is equally significant. While much has been written about China's growing investment presence in South Africa and in many other African economies, very Little of this discussion has been based on detailed empirical analysis or been located explicitly within the theory of foreign direct investment. It is important to examine the FDI linkages not only quantitatively, but also qualitatively, in terms of their impact on
economic growth and on the internationalisation of business in the two countries. This paper investigates these issues looking at the FDI links in both directions between China and South Africa.

The paper has two parts. Part A examines the size and structure of the bilateral FDI relationship between South Africa and China. Section I reviews the estimates provided in the literature regarding the size of the relationship. Section II reviews the FDI policies of the two countries, on both inward and outward FDI. Section III examines official data from both countries on the value of FDI stocks and flows between them, and Section IV assesses the importance of the bilateral relationship to
each partner by contextualising it within the two countries' overall FDI stocks and flows, also using official data. Sections V through VII turn to firm-level data from The EDGE Institute FDI Database, a living database with verified data on firms' cross-border operations. Section V reports on the number of firms and their sectoral distribution, while Sections VI and VII discuss firms' dates of entry and mode of entry respectively. Section VIII concludes Part A of the paper.

Part B presents case studies of two sectors in which the China-South Africa FDI relationship is prominent: assembly of home electronic appliances ('brown goods') by Chinese firms in South Africa, and financial services in both countries. The case studies use firm interviews and extensive documentary analysis to examine both the internationalisation process of firms from the two countries as well as the broader economic impact within the two economies of their FDI relationship. The discussion is framed by the analytical questions and policy challenges raised by the growing importance of 'South-South' FDI, of which the China-South Africa link is an example.

Dr Lederman will present his recent research piece prepared with William F. Maloney, Lead Economist from the Development Economics Research Group of the World Bank.  Dr Maloney has published extensively on issues related to international trade and finance, informality, developing country labour markets, innovation and growth. Dr Lederman will be accompanied by his colleague, Alberto Behar. Alberto studied at the University of Cape Town and attained his
doctorate in Economics from the University of Oxford. Prior to joining the World Bank, he was a post-doctoral research fellow in the Centre for the Study of African Economies in Oxford and he has published in the fields of Labour Economics and International Trade.

Please note that a draft of the manuscript can be found at:

Does What You Export Matter? In Search of Empirical Guidance for Industrial Policies

The discussion will draw on information gathered on a face to face basis by Stephen Timm from
entrepreneurs and government agencies in Brazil, India and South Africa in 2010. The discussion
will focus on the following issues:

1. How can business support, a culture of entrepreneurship, market support (set-asides) and finance in be improved in South Africa?
2. How can Seda and Khula function better using learnings from India, Brazil?
3. What role can incubation play in South Africa hinging on Brazil's experience?
4. What can South Africa learn from Brazil and India on using clusters to boost SME development?
    

The report, which contains some key learnings on Brazil and India in the area of business support, market access and access to finance for small businesses is available on TIPS' home page
(www.tips.org.za) together with an executive summary.
 

William Mbuta was the Science and Technology Development Officer at the National Science and Technology Council of Zambia before becoming assistant general manager in the area of policy research at a Chamber of Mines; he them worked at the SADC Secretariat where he was Programme Officer – Industrial Policy at the between 2007 and 2010. William is now an independent consultant based in Lusaka.
Willam has prepared a working paper for TIPS on the theme which he will discuss at the seminar. William's working paper can be found on web-site home page (www.tips.org.za)

Trudi Hartzenberg is the Executive Director of the Trade Law Centre for Southern Africa (tralac). She is an economist specialised in trade, industrial and competition policy, regional integration and industrial organisation. She has taught at a number of Universities in South Africa as well as abroad, in Denmark. She has worked on assignment for a number of international institutions including the IMF, African Development Bank and the Commonwealth Secretariat.

Paul Kruger is a tralac researcher with special interests in trade negotiations, behind the border trade issues, industry competitiveness and sustainable development. He is a qualified lawyer and has been involved in a wide range of regional and international trade and trade related projects.

Tralac's research report and related policy brief on which the presentation will be based can also be found on our web-site home page (www.tips.org.za).

Jennifer Widner is Professor of Politics and International Affairs at Woodrow Wilson School of Public and
International Affairs and Director of the Mamdouha S. Bobst Center for International Peace Justice at Princeton
University. Before joining Princeton in 2004, she was Professor of Political Science at the University of Michigan
and Associate Professor of Government at Harvard until 1994.  
Professor Widner's specialization is on Democratic Institutions and on Constitutions in developing countries,
particular in Africa. Her current research focuses on constitution writing and constitutional design, as well as
institutions and service delivery in developing countries, especially Africa.  Her interests are however across a
range of areas, in constitution writing and conflict resolution, in institutional performance, in the development of
judicial institutions, and in African politics. 
 
She has published extensively and across a variety of journals (Democratization, Journal of Development
Studies, Daedalus, the American Journal of International Law, etc.) on a range of topics.  She is author or editor
of several books, including Building the Rule of Law (W. W. Norton), a study of courts and law in Africa and
Economic Change and Political Liberalization in sub-Saharan Africa (John Hopkins University Press).

Brent Cloete from DNA Economics will discuss the motivation for a carbon tax, its history around the world, its likely economic, social and environmental impacts and the considerations for an optimal tax design.
Peet du Plooy from TIPS will then consider the role that a carbon tax could potentially play as an instrument of macro-economic policy and its role in terms of the international climate negotiations.

About Brent Cloete:

Brent Cloete is an Economist at DNA Economics (http://www.dnaeconomics.com). Brent has provided strategy and advisory services to a number of public and private sector clients in South Africa and has worked on issues in a number of African countries including manufacturing diversification in Mozambique, trade facilitation in East Africa, prospects for economic recovery in Zimbabwe, and an organisational review of priority ministries in Rwanda. His current focus is on climate change economics. Brent led a team working on a study for the National Economic Development and Labour Council (NEDLAC) on the potential use of economic instruments to mitigate climate change in South Africa. He is currently part of a team assisting the WWF with its strategy to guide South Africa towards a low-carbon economy, and is involved in a project to evaluate and manage the impact of climate change on the South African fruit and wine industry. Brent holds an M.Comm in Economics from the University of Stellenbosch.

About Peet du Plooy:

Peet is the manager of the Sustainable Development project at TIPS. He has a degree in Mechanical Engineering from the University of Pretoria. After working in energy R&D at the national utility Eskom, he joined the global environmental NGO, WWF, as Trade & Investment Advisor for South Africa. He was elected in 2009 as chair of the South African green industries association, the Environmental Goods and Services Forum. His areas of expertise are networked infrastructure (including energy, transport and ICT) and the economics of sustainability.