This week marks the spring meetings in Washington, one of the two major annual gatherings of the World Bank and IMF. The event draws central bankers, finance and development ministers, private sector leaders, civil society members and academics to engage on global economic trends, emerging risks and opportunities for co-operation.
On Sunday afternoon I received a call from an old friend — a veteran African diplomat — who was unexpectedly in town for the meetings. We took a long walk together through downtown DC, passing landmarks such as the White House, Lincoln Memorial and Jefferson Monument while he aired his frustrations over the state of US-Africa relations, just 12 hours after the New York Times had published a report that the US
was considering closing non-essential embassies across the continent.
“We’ll just send everything to China,” he said angrily. “That’s not economically viable,” I replied. “Sure it is,” he shot back. But it’s not that simple. Trade diversion won’t work — you can’t just redirect exports meant for the US to China. Here’s why.
SA exports about $29.5bn to China annually. Just more than a third of this ($10.1bn) is gold. Another $7.8bn is chrome and iron ore, $2.2bn is platinum, $2.1bn diamonds and $1.7bn each of manganese and ferro alloys. Altogether more than 90% of SA’s exports to China are raw minerals, metals and stones. China doesn’t import much in the way of labour-intensive goods such as manufactured products. It doesn’t need or want to; it produces them cost-effectively at home.
In contrast, SA’s export profile to the US is far more diverse. The US imports goods valued at about $13bn from SA annually, including $3.42bn in platinum — more than a quarter of the total. The US also buys $1.6bn in vehicles, $676m in chemicals and $627m in machinery and electrical equipment. In fact, nearly 40% of SA exports to the US fall outside the mineral sector.
China is in any event not in a position to absorb this broader mix of exports. Its economy is facing a structural slowdown, with growth having fallen from more than 14% in 2007 to below 6% by 2023. The slowdown stems from deep-seated issues such as a struggling property sector, soft consumer demand, rising debt, an ageing population and mounting trade tensions.
These challenges are compounded by high youth unemployment — officially 16.1% in late 2024, though some independent estimates suggest it may be even higher — a long-term constraint on economic capacity.
China will not save African economies if the US forcibly decouples. Everyone loses in that situation. A wiser approach would be to identify areas for collaboration to keep the bilateral economic relationship between the US-SA strong. Some examples:
- In the automotive sector there is room to increase the integration of American-made components into vehicles assembled in SA. These vehicles, which are produced for export, already generate meaningful socioeconomic benefits locally.
- In the mining sector there is an opportunity for new SA mineral projects to secure offtake agreements with US or other Western companies. Countries tend to show greater confidence and long-term commitment when substantial investments — often in the hundreds of millions of dollars — are already in place.
As crass, complicated and unrefined as this moment in the world's economic history may be, it is formational. It’s a strategic opportunity to advance mutual economic, geopolitical and development goals. It’s a time to find the strategic touch points and charge ahead.
My old diplomat friend is still unhappy with Washington, but at least he has learnt that he must use his time here productively.
• Dr Baskaran, a development economist, is founding director of the Project on Critical Minerals Security at the Centre for Strategic & International Studies in Washington, DC.
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