How Do Chinese Companies Affect South Africa?

Written by Angela

Translated by Carol

South African environmental advocacy group protested against the investment of Chinese companies in the Musina Makadu Special Economic Zone in Limpopo because it may bring serious destruction to the surrounding environment.

To understand why we need to start with Chinese investment in South Africa.

South Africa

Since the establishment of diplomatic ties between China and South Africa in 1997, Chinese enterprises have invested more than $10 billion in South Africa.

Why do Chinese companies come to South Africa?

South Africa and China enjoy good relations as they are both members of BRICS. Along with the Belt and Road Initiative, the two countries have further cooperated in trade, investment, infrastructure, and environmental protection.

All these have laid the foundation for Chinese enterprises to enter South Africa. Besides, South African has abundant mineral resources, good infrastructure, and an abundance of cheap labor in the most industrialized country on the African continent.

Of course, the main reason why South Africa is eager to open its arms to Chinese companies is to promote its economy. “Chinese companies are bringing us the technology in product manufacturing, design, and so on, which is necessary to the economic development of South Africa.” Said Anil Sklar, Deputy Director of the Department of Asian and Middle East Affairs at South Africa’s Ministry of International Relations and Cooperation.

Unknown Environmental Challenges

However, in addition to the economic development opportunities, Chinese companies face complex and intractable environmental issues in Africa.

Energy extraction and energy-intensive industries are the most important part of the investment by Chinese companies in Africa, accounting for 30 percent. These industries, and the infrastructure that goes with them, are often built in large, undeveloped areas — remote, ecologically fragile, and environmentally vulnerable.

As economic activity in Africa increases, the environmental footprint of Chinese companies also spreads. Environmental footprint refers to the impact of human beings on the ecosystem. The larger the environmental footprint is, the more serious the ecological damage caused by human beings.

Therefore, although Chinese companies have stimulated South Africa’s economy, it has also brought environmental damage.

However, South Africa was facing environmental and development challenges even before the arrival of Chinese companies.

 According to NASA’s land use program, South Africa has suffered from soil degradation and water shortages for a long time. In the former case, 80% of the land area is for agriculture, but only 11% is suitable for farming. When it comes to water shortages, South Africa’s capital, Cape Town, became the first modern city in the world to lose its water supply in 2018. The government can do little about the drought that has lasted three years: outdoor faucets, toilet flushers, and other public equipment have been removed, leaving residents to collect water at designated distribution stations, often waiting in lines for hours.

Based on the background information, it is easy to understand why the local and international community concern about the environmental issues of Chinese companies in Africa.

People in Cape Town line up to get water at the water distribution station
Source: Sohu News

Environmental Impact of the Musina-Makadu Special Economic Zone

In September 2017, a Chinese company was awarded the right to operate the Musina- Makhado SEZ in Limpopo Province, South Africa, for 90 years.

In 2017, the Mussina Makadu region in Limpopo province in northern South Africa was designated as a Special Economic Zone for Energy Metallurgy. It not only has a high-quality infrastructure but also enjoys several preferential treatments, providing a good prerequisite for enterprises to invest and operate.

The establishment of special economic zones has brought good economic development opportunities to the local area. Demon market research shows that SEZ is expected to create 160,000 jobs during construction and can potentially create as many as 225,000 jobs during the operational phase.

But that’s not the whole story.

In addition to promoting economic development, SEZ also brings environmental problems. Local environmental groups and news media have pointed out that the construction of SEZ will harm the surrounding water resources.

30 kilometers away from the SEZ, the Limpopo River flows through the borders of four countries (South Africa, Pozwar, Zimbabwe, Mozambique). It is also the “mother river” for about 18 million people. The surrounding area is semi-arid, and water resources are scarce with precipitation of fewer than 500 millimeters per year in most areas. Therefore, the Limpopo River’s water resources are especially important to the people living around it.

Meanwhile, the Limpopo River is also the main source of water for the SEZ. The zone will be home to many Chinese-invested steel mills, coal mines, and mines. Studies have shown that its construction will require 30 million cubic meters of water per year; After its completion, the annual water consumption will reach more than 100 million cubic meters.

In the short term, the SEZ will seriously threaten the irrigation and plantation of small farmers nearby. In the long run, the ecology may be irreparably damaged and eventually leading to long-term water shortages in surrounding areas.

Environmental groups are also concerned about water damage to the surrounding Vhembebiosphere Reserve, which is the sixth-largest UN-certified conservation area in South Africa and currently relies on revenue from tourism to protect wildlife. However, water pollution is likely to damage wildlife health and habitat, which will affect the development of local tourism, and ultimately make the reserve “empty of animal wealth”.

Vhembebiosphere Reserve Source:UNESCO

“My family and I have been protecting this land for 40 years,” said a local resident. Imagine what it would be like if all these natural resources were destroyed.”

“This used to be the place where you could take your family for a weekend drive,” said the local environmental group. Now you can only take a minecart trip to the mines!”

Local NGO show a comparison of the environment before and after the expected completion of the SEZ
Source: facebook

So, can water be diverted from other sources to solve the water problem around the zone?

In fact, people have considered this solution in 2014 before the construction of this SEZ and hoped that water could be transferred from Zimbabwe. But the results are not encouraging. The diversion of water from Zimbabwe would not only face international water rights issues but would also affect local water resources and aquifers in Zimbabwe. If the aquifer is damaged, it will affect the lives of more than 120,000 people living in the surrounding area.

How to Balance?

The effect of SEZ on local development is undoubtedly desirable, but their impact on the natural environment also needs to be considered. Chinese companies entering South Africa must consider the impact on the surrounding environment since it can determine whether the economy can achieve sustainable development.

To  make China become a world leader in environmental governance and sustainable development, we need not only to honor the commitments of the Paris Agreement and implement the “Green BRI”, but also be more responsible on investment and development practices of Chinese enterprises overseas.

In South Africa and other countries, Chinese enterprises should pay more attention to the surrounding environment and community development. Only in this way can we achieve the goal of mutually beneficial and sustainable development.

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