Africa’s miners and winemakers toast China’s row with Australia By Reuters

© Reuters. Bottles of South African wine are displayed amongst others at a grocery store in Beijing


By Joe Bavier, Tanisha Heiberg and Emma Rumney

CAPE TOWN (Reuters) – For South African winemaker Vergenoegd Löw, the pandemic may have been a catastrophe however a bitter commerce struggle between China and Australia has thrown the 325-year-old property a lifeline.

Bottles of its reds, whites and roses piled up when South Africa banned alcohol gross sales below a strict lockdown and guests who as soon as flocked to the winery close to Cape Town to sip wine and snap images of its famed Indian Runner geese vanished.

That modified when Beijing slapped tariffs of as much as 212% on Australian wine in November after Canberra led requires an inquiry into the origins of the COVID-19 outbreak in Wuhan.

It wasn’t simply wine. Beijing hit a spread of Australian items with punitive duties, created new layers of purple tape and banned some Australian imports outright, giving African suppliers of something from coal to beef to a lift.

“We can now get much greater volumes of sales,” mentioned Shaun McVey, advertising and marketing supervisor at Vergenoegd Löw, which has signed a brand new Chinese deal. “Instead of sending maybe three or four containers in a year, we’ve upped that to 15 to 20 containers.”

Chinese drinkers purchased almost 40% of Australia’s wine exports earlier than the long-simmering tensions between Beijing and Canberra boiled over and introduced the commerce to an abrupt halt.

Over the previous three months, exports of South African wine to China jumped 50%, in line with the Wines of South Africa commerce physique, and hopes are excessive for much more gross sales as soon as Australian shares are polished off throughout China’s Lunar New Year vacation.

Martyn Davies, Deloitte’s managing director for rising markets and Africa, mentioned a protracted commerce struggle would create a large window of alternative for miners and different sectors comparable to agribusiness, although seizing the potential would take work.

The Chinese market presents a spread of obstacles, from language boundaries and inscrutable forms to tailoring advertising and marketing to its distinctive social media ecosystem, analysts mentioned.

“Many African companies are significantly behind the curve,” mentioned Deloitte’s Davies. “Australian companies have been engaging China for 35 years.”


The lack of commerce offers between China and nations in sub-Saharan Africa additionally means exporters might face an uphill battle.

Despite its more and more vital position as an investor on the continent, China solely signed its first free commerce settlement with an African nation, the Indian Ocean island nation of Mauritius, in January.

So whereas some African merchandise might leapfrog Australian items within the pecking order, they continue to be at a drawback when competing in opposition to exports from nations with preferential Chinese buying and selling phrases comparable to Chile, Peru or New Zealand.

In the mining sector although, China has spent the previous decade ramping up initiatives in Africa to safeguard the circulation of uncooked supplies to the manufacturing juggernaut.

Those investments are actually paying off and African producer nations are pocketing the royalties as exports to the world’s second largest economic system get a lift at Australia’s expense.

Last yr, state-owned Aluminum Corp of China Ltd, referred to as Chalco, shipped the primary bauxite cargo from its Guinea challenge, and a protracted commerce struggle between China and Australia is simply seemingly to assist the West African nation’s economic system.

Australian shipments to China of the rock used to make aluminium dropped 22% within the closing quarter of 2020 whereas imports from Guinea leapt 70%, in line with Chinese customs knowledge.

That’s after Guinea tripled its bauxite output between 2015 and 2019 as mining initiatives got here on-line, with most of it going to China. Over the identical interval, Guinea’s gross home product jumped 40%.

Graphic – China switches to Guinea bauxite because it shuns Australia:

Chinese copper focus imports from Australia, in the meantime plummeted to zero in December 2020. At the identical time, exports rose 17% from Democratic Republic of Congo, one other nation the place Chinese corporations comparable to China Molybdenum have invested closely to safe key mineral provides.

South Africa’s coal business has additionally obtained a much-needed increase. Australian gross sales to China of thermal coal, which is especially utilized in energy vegetation, and metallurgical coal for steelmaking, slumped to zero in December.

The first cargo of South African thermal coal to China in 5 years landed final month and exporters are hopeful gross sales will improve additional in 2021.

Graphic – China’s copper imports from DRC surge:


To overcome the shortage of commerce offers with China, South Africa’s Standard Bank, which is partly owned by Industrial and Commercial Bank of China, has sought to stage the taking part in discipline.

Africa’s largest financial institution measured by belongings is utilizing on-line platforms and occasions to match its prospects with Chinese consumers in a bid to spice up exports.

Those efforts, nonetheless, now face challenges distinctive to the coronavirus pandemic, comparable to a transport squeeze on account of international commerce distortions which have sparked a bidding struggle for container house and pushed costs to file highs.

“You get a lot of interest. And then when people see the cost of logistics at this point in time, they end up not concluding on the transaction,” mentioned Philip Myburgh, Standard Bank’s head of Africa-China banking.

Still, wine is one African export Standard Bank considers a great guess. So does Edouard Duval, chief government of East Meets West Fine Wines, considered one of China’s largest wine importers.

If South Africa can seize simply 1% of the 38% market share Australian imports are quickly vacating, it might double its exports to China, he mentioned. “The potential is there … it’s a very dynamic and fast-moving market.”

South Africa sometimes exports lower than half of its wine and earned 9.1 billion rand ($616 million) from abroad gross sales final yr, with Britain shopping for by far probably the most. Sales to China got here to simply $19 million.

Even although Chinese tariffs worn out Australian wine gross sales in November and December, its exports to China alone nonetheless got here to A$1.01 billion ($779 million) final yr.

At his “Cheers” wine retailer in Beijing, Lin Lulu just isn’t too involved in regards to the influence of the commerce struggle with Australia.

“South African wine now has great advantages over Australian wine because of the new tariff situation,” he mentioned as he stocked his cabinets with South African reds. “South African wines are more innovative and beautiful.”

($1 = 1.2962 Australian {dollars})

($1 = 14.7621 rand)

Source Link –

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

two × 5 =

Back to top button