DIRCO on relationship with the People’s Republic of China; state-owned properties outside South Africa & status of Foreign Service Act Regulations

Meeting report

The Department of International Relations and Cooperation (DIRCO) was present to brief the Committee on matters of poverty, unemployment, and inequality relating to South Africa’s bilateral relations with the People’s Republic of China. The Committee would also be briefed on the condition of state-owned properties in other countries and the status of the Foreign Service Act Regulations.

Opening Remarks by DIRCO
Mr Clayson Monyela, Deputy Director-General (DDG); Public Diplomacy, DIRCO, said the bilateral relations between China and South Africa had been formally established in 1998 and were underpinned by a comprehensive strategic partnership agreement which was signed in 2010. A critical aspect of South Africa’s bilateral relations with the People's Republic of China had been the endorsement of the One China policy, which was a Chinese foreign policy principle aimed at addressing the question of China’s territorial sovereignty and articulating to the international community the regions of Tibet, Hong Kong, and Taiwan, were all part of mainland China.

Although the South African government recognised China's position regarding Taiwan as being an inalienable part of China according to the treaty with the People's Republic of China, South Africa had continued to maintain its own ties with Taiwan, which were limited to economic, scientific, educational, and cultural exchanges. This was why South Africa had a liaison office in Taiwan and Taiwan had one in Tshwane.

The bilateral relations with China were based on four pillars:
 
- Political bilateral relations and multilateral cooperation (Forum on China-Africa Cooperation (FOCAC) and Brazil, Russia, India, China, and South Africa (BRICS);
- Economic trade, investment, and tourism;
- Technical cooperation; and
- People-to-people relations.

The structure and mechanisms DIRCO wanted to encourage concerning the four pillars were to ensure alignment with the government's frameworks, such as the National Development Plan (NDP); the Economic Reconstruction and Recovery Plan (ERRP); and to contribute to the achievement of South Africa's domestic economic imperatives.

There had been some notable achievements, as well as challenges experienced with fully implementing the agreements and the memorandum of understanding concluded with the People's Republic of China. Evidently, more could be achieved and would be pursued in the relationship with China, as there were areas of potential growth as defined in the ten-year strategic programme on cooperation. These areas included defence, oceans economy, agriculture and energy technology innovation. The Department worked hard and in close cooperation with other government departments and business stakeholders to ensure it maximised the benefits to South Africa and its people at all levels.

Presentation on achievements made by addressing South Africa’s triple challenges of poverty, unemployment, and inequality through a structured bilateral mechanism with the People’s Republic of China
Ms Sindiswa Mququ, Chief Director: Central, South, and South-East Asia, DIRCO, said in line with the NDP, ERRP, and the comprehensive strategic partnership, the areas which had been prioritised in the South Africa-China bilateral relations had included economic transformation in science and technology, the ocean’s economy, agriculture, energy, mining, infrastructure, and industrial capacity development, and strengthening trade and investment relations.

Other priority areas included increased job creation, education, technology exchanges, health and skills development in more specialised sectors, and opportunities with a concerted effort to support small, medium, and micro enterprises (SMMEs), women, and the youth. The bilateral structured mechanisms served as a vehicle to facilitate the four pillars and strengthen relations with China at various levels. South Africa’s structured bilateral mechanisms with China included:

- Bi-National Commission (BNC at Deputy Presidential level);
- Strategic Dialogue Forum (SDF at Ministerial level);
- Joint Working Group (JWG at Deputy Ministerial level); and
- High-Level, People-to-People Exchange Mechanism (PPEM at the level of the Minister of the Department of Sport, Arts and Culture (DSAC).

Achievements on the structured bilateral relations with the Peoples Republic of China
Trade had increased from R367.3 billion in 2017 to R544.3 billion in 2021; however there was a trade deficit in favour of China because of South Africa’s exporting of commodities as opposed to value-added goods. The trade deficit was also affected by market access and trade barriers in China.

According to the foreign direct investment (FDI) markets, between January 2003 and January 2021, 68 Chinese companies had invested R124 billion in South Africa with 92 projects, leading to the creation of 5 694 jobs during this period. The challenges faced with the investments resulted from Chinese companies adhering to Broad-Based Black Economic Empowerment (BBBEE) and other local legislation, including labour law. There was also no full transfer of skills projects from the jobs created.

Tourism from China to South Africa had reduced from 97 271 tourists in 2017 to 6 577 in 2021. The decline had been mainly because of COVID-19 restrictions, Visa processing challenges, and limited direct flights between China and South Africa.

In 2018, the Chinese government had offered 180 scholarships for non-degree Chinese language studies, Bachelor’s, Master’s, and Doctoral degrees in various fields. The Department of Higher Education and Training (DHET) was currently supporting 57 students on those Chinese government scholarships. From 2018 to present, approximately 2000 South African officials and technicians have been trained under the training seminars provided by the Chinese government to South Africa. Six Confucius Institutes and three Confucius Classrooms were operating in South Africa. The University of the Western Cape's Confucius Institute was the latest one to be established in September 2019 as part of the PPEM.

Way Forward
South Africa had to leverage its good friendship and comprehensive strategic partnership with China to reap the full potential benefits from the structured bilateral mechanisms, including gaining advantage from China’s growing international profile, political and economic prowess, and technological expertise across many sectors.

There was a need to improve inter-governmental coordination by implementing the Ten Years Strategic Programme on Cooperation and the “China Country Strategy”. DIRCO had to further facilitate market access into China for more South African manufactured/value-added goods and agricultural products. It also had to promote inward trade visits to South Africa post Covid-19 to close the trade gap.
Presentation on the condition of State-owned properties in foreign countries
Ms Hlengiwe Bengu, Chief Director: Financial Management, DIRCO, said the property portfolio used for the Foreign Service consisted of chanceries, otherwise called offices, official residences, and staff accommodation. The Department currently manages 625 rented properties and 163 state-owned properties. The Department’s policy was that the properties were only to be rented where no state-owned properties were available.

DIRCO’s Immovable Asset Register
The Department of Public Works (DPW) transferred the available files of the properties to DIRCO in July 2000. The transfer took place with the exclusion of the disposal mandate, and not all files pertaining to the properties could be received from DPW. As a result, in 2007/2008, DIRCO embarked on a project to obtain title deeds and valuations of all State-owned properties through its Missions abroad.

The valuation was done through the municipalities and professional valuators for places where the municipality reports could not be obtained. It resulted in the current Immovable Fixed Asset Register, audited by the South African Auditor-General annually. DIRCO maintained an accurate and reliable Immovable Asset Register of all state-owned properties used for the foreign service, supported by title deeds in the name of the South African government.

Property acquisitions, development, and maintenance
In March 2022, the Department completed 27 maintenance projects for state-owned properties abroad, identified in the 2021/22 financial year. In 2022/23, 34 maintenance works would be performed using the budget from the head office, and over the next three years, the focus would be mainly on major maintenance works of all the state-owned properties based on their current dilapidated state.

During 2022/23, the missions had been allocated a ring-fenced budget for the day-to-day maintenance of state-owned properties to ensure the missions continued with their day-to-day maintenance. Of the 123 properties, major works were planned based on the conditions assessments performed for Vienna (x2), Rome (x3), Copenhagen (x2), Ottawa (x1), Munich (x1), Mbabane (x1), Paris (x1), The Hague (x1), Windhoek (x3), London (x1), and Ottawa (x1).

Property disposals
A total of 18 superfluous properties had been identified for disposal. Those properties were vacant and unused due to the closing missions/representative offices and because those assets were located in areas which had deteriorated over time and posed a security risk. The Minister had approved the 18 identified superfluous properties which could be disposed of per the Foreign Service Act of 2019 (FSA). The Department was currently awaiting the process of approval of the regulations of the new Act, upon which the disposal process would continue with advertisement of sale bids.

Summary on the Presentation on the Foreign Service Act Regulations
Speaking on the Foreign Service Act, Mr Monyela said the date for it coming into full force and effect was when the President proclaimed it as law. Its regulations also had to be completed before it could come into operation. It had been decided the work on the various measures after the implementation of the Foreign Service Act would be done in phases, with the finalising of the regulations and the specific codes required for implementing the FSA, being under phase one.

The Foreign Service Act envisaged four measures to further elaborate provisions in the Act to strengthen its implementation: regulations, directives, codes and guidelines. The draft regulations were approved by the Executive and certified by the state law advisors at the Department of Justice and Constitutional Development. The regulations were sent to the government printers for publication and public comment, which was expected to happen during the week.

There were ten working days given for public comments. Any comments received would be considered, and where relevant, the comments would be incorporated into finalisation of the Act. After finalisation and approval by the Executive, the state law advisors at the Department of Justice and Constitutional Development would be asked to certify the regulations and the President would be asked to proclaim a date for the Act to come into full force. DIRCO was currently prioritising the work on the mechanisms necessary to strengthen and enhance the implementation of the Foreign Service Act.

Presentation on Status of the Foreign Service Act Regulations
Adv Sandea de Wet, Chief State Law Adviser: International Law, DIRCO, said the Foreign Service Act (FSA) was assented to by the President on 26 May 2020 and published in the Government Gazette on 4 June 2020. The President still had to proclaim the date for entry into force. For the FSA to enter into force, regulations for it to be operational were still required. The development of the regulations and other measures under the FSA was being done in phases.
Under phase one, the matters essential for the FSA to come into operation were to be addressed. Under phase two, the matters which had been identified as matters which would enhance the administration and management of the Foreign Services but which did not need to be in place for the Act to be operational would be addressed. The Minister had finalised and approved the draft regulations and was pre-certified by the state law advisors at the Department of Justice and Constitutional Development (DOCJD). 

Types of Measures
The FSA envisaged four measures to further support and enhance the implementations in the FSA, namely regulations, directives, codes, and guidelines.

Regulations:  The FSA provided in Section 14: the Minister could issue regulations on matters in Section 14. The regulations would be binding on all.
Directives:  According to Section 11(2) of the FSA, the Minister could issue directives, the purpose of which would be to elucidate or supplement any regulations.
Codes:  Section 11(1) of the FSA gave the Minister authority to make codes necessary for the proper administration and management of the foreign services after consultation with any other relevant national department.
Guidelines:  Section 8(3) of the FSA specifically authorised the Minister, by notice in the Gazette, to issue guidelines regarding the coordination and alignment of activities relating to international relations between all spheres of government. Guidelines were also mentioned in Section 3(3)(b) of the FSA, however those differed from guidelines in Section 8(3) and did not need to be published in the Gazette.

Matters to be addressed in other measures
- Regarding the acquisition and disposal of immovable property: While the Portfolio Committee had previously noted a desire to address the matters related to the acquisition and disposal of immovable property in the regulations, the DOJCD had advised it was not possible to do so as the FSA did not directly empower the Minister to make regulations on this matter. The processes and procedures for acquiring and disposing immovable property would be addressed in the form of a code or policy.

- Coordination and alignment of activities relating to international relations between all spheres of government per Section 8(3) of the FSA provided for such guidelines to be published in the Government Gazette. The guidelines for publication in the Government Gazette were being prepared.

Way Forward
The steps which had to be followed for the FSA regulations to be finalised so the FSA could enter into operation were as follows:
1) The regulations had to be published for public comment within ten working days;
2) There had to be an incorporation of the comments, where appropriate;
3) There was a need for certification by the DOJCD of final text;
4) There would be a need for proclamation by the President in the Government Gazette of the entry into force of the FSA on a date determined; and
5) There would have to be a publication of the FSA regulations in the Government Gazette.

Discussion
The Chairperson lost his connection.

As Acting Chairperson, Mr T Mpanza (ANC) asked when the trade deficit issue between the two countries was going to be addressed to avoid a potential "David and Goliath” situation. The South African Labour Relations Act governed the Chinese companies in South Africa, but there had been employee complaints that those companies had, on numerous occasions, violated the Act. He asked if DIRCO could look into this issue in cooperation with the Department of Labour Relations.

He said South Africa’s ambassador to Iran, Mr Vika Khumalo, had advised the Committee of the difficulties encountered regarding acquiring title deeds in Tehran, Iran. The title deeds were supposed to be handed over within two months. However, the property was not in South Africa’s name. In its presentation, DIRCO said the title deeds had not been received, and Mr Mpanza asked if DIRCO could clarify this since the Committee had been under the impression the title deeds were received.

Mr W Faber (DA) referred to bilateral agreements and asked what DIRCO and the Minister of Trade, Industry and Competition, Minister Ebrahim Patel’s, stance was on the issue raised by the Committee, noting South Africa should consider processing raw materials and export finished products, as opposed to exporting raw materials and importing finished products.

Secondly, he asked if DIRCO could provide clarity regarding if South Africa’s non-movable assets, such as embassies in other countries, were now under DIRCO’s control or not.
 
Rev K Meshoe (ACDP) referred to the high-speed rail project noted in the presentation under pillar three and asked if a study had been made regarding how many people would benefit from the project. It was known the majority of the people from Gauteng, particularly workers, were not benefiting from the Gautrain. Most people who made use of the Gautrain were people who had cars. He asked if there was any information on where the rail project would be implemented.

On the trade deficit, he asked if the reason for South Africa selling less and buying more from China could be poor marketing. He asked if South Africa was marketing its products well or not.

South Africa had the problem of copper and steel being stolen to be sold in Zimbabwe and China. He asked if there was an agreement with China to confirm that the copper or steel sold to China had not been stolen in South Africa.
He also asked why DIRCO could utilise only 57 out of the 180 scholarships it had been offered.

Mr M Chetty (DA) said the escalation cost of refurbishing South Africa’s properties was mainly because of negligence and vandalism. Burglars had entered, destroyed fittings, and stolen gate motors despite security companies being employed to look after the properties. He asked if DIRCO could insert a condition saying any company rendering services to the Department would be held accountable to compensate the Department for any loss of the goods incurred during the particular company’s watch.

Speaking on the R796 million which the Department would roll over for the next three years, only to request more funding, he asked if DIRCO had taken into account the income from the 18 properties which were to be disposed of, as the income from those properties could help the Department increase its profits for refurbishments.

In Namibia, the Department was disposing of its properties in Walvis Bay. Walvis Bay was becoming a continental economic hub because of the discovery of oil in the area. The Department should consider not selling the properties in Walvis Bay because once the economic hub materialised, the Department would have to go there and purchase properties at an inflated price. He asked if the Department could assure the Committee that properties would be disposed of at a market-related value, not a municipal value.

Mr D Bergman (DA) said many democratic governments in Africa believed a loss in their party membership had been because of its support or openness to accept "bilateral trade with China”. However, in Continental Shift, a book by Richard Poplak, some would say “charity from China”. South Africa had an important relationship with China in many aspects but had to look at quality and quantity as two dynamics in equilibrium; one should not be negated over the other. Much of the bilateral trade with China (BRC projects), as exemplified by Zimbabwe and Botswana, had not been out of love and goodwill as some people thought. These were monetary transactions because there was money involved. If a country defaulted in payments, China would become a partner or an owner of the associated resources.

There was a “silk road” aimed at getting resources from Africa to China as quickly as possible. The Department had to be wary it was not flirting the country into a colonised future. BRICS was spoken of romantically as if South Africa was an equal partner in it; however, South Africa was the one taking money from the Development Bank. South Africa was the one being told what to do. When it came to the Ukraine-Russia war, Russia was the one who told South Africa what South Africa’s position should be. The Department had to acknowledge that the loans from the Development Bank were not free and had to be paid back with interest. It was important to look at trade and not aid.

On the properties, he said where there were high amounts of rentals. The Department should be either buying the properties or looking at why there were so many rentals in the area. Some areas had superstars living there and high rentals, which the Department could not afford. There was a need to ensure the Department was not paying rentals for people trying to be celebrities.

He asked why the Department was paying rentals for ambassadors and some of the ambassadors’ children who were well over 20 years of age. Those children could be in universities or there were other ways these children could be accommodated without the Department having to foot the bill for it. The Department needed to honestly assess and ask itself if it really needed to have a presence in the prime areas of certain cities or if it could get residency out of town.

Mr B Nkosi (ANC), speaking on the trade imbalance in South Africa’s bilateral relations with China, asked if anything was being done to encourage the Department of Trade, Industry and Competition, which specifically related departments ramping up manufacturing to ensure South Africa was able to produce its own goods. The current reality of South Africa was the country was an assembly point. Since the sixties, it faced the challenge of developing manufacturing capabilities not based on the mining and minerals sector. When the Department was negotiating with China on bilateral relations, the Department had not emphasised the issues of local labour intensity and effective recruitment programmes enough. There were several instances where China had insisted on bringing its own labour to execute tasks where local labour could have been used. China also insisted on bringing its own specified materials, which created a situation where for post-construction maintenance, one would have to look to Chinese markets.

Regarding the Forum on China-Africa Cooperation (FOCAC), it was said China announced certain initiatives in various fields or competencies of government, and there was no sense in South African Members of Parliament being taken to FOCAC to table matters such as "trade in locally finished goods”. Looking across departments, there seemed to be no central coordinating point where investments could be registered with the goals contained in the National Development Plan (NDP).

On property development, he asked what the relationship was between the property acquisition strategy for 2017 and the property management strategy for 2021. He wanted to know if it was not addressing the same issue. There was a need to avoid overlap and being entangled in strategies and frameworks that did not speak to each other.

On the issue of colonialism brought up by Mr Bergman, he said if colonialism and imperialism were to be discussed, they had to be discussed honestly and openly, reflecting the reality of history. Without holding grudges against China, the United States of America (USA), the United Kingdom (UK), and France, the lived reality of the African continent was the devastation caused in the continent, which was the result of colonialism and imperialism. Raw materials on the continent were being pillaged illegally, sometimes through very structured economic dependency mechanisms.

The Acting Chairperson said the issue of colonialism and imperialism would create a very long debate because China had also been a victim of the same issue. He asked Adv de Wet when the regulations of the Foreign Service Act were going to be expedited. Since it had been said to be a long process, he asked what the Department’s plans were for implementing the Foreign Service Act while waiting for the signature from the President. 

Responses from the Department
Ms Mququ, answering on how long it would take the Department to correct the trade deficit, said the work needed an intergovernmental approach and an all of government approach. DIRCO needed to work closely with the Department of Trade, Industry and Competition (DTIC). There was no set timeframe to reduce the trade deficit but over the past three years, DIRCO had observed a reduction in the trade deficit.

On the engagements with the DTIC and the view of Minister Patel, she said the key issue had been related to what South Africa was doing to improve its manufacturing capabilities, and if such a capability did not exist, if South Africa would be forced to sell raw materials. When the country sells raw materials, it earns less because the trade balance will favour the country selling finished products. DIRCO had been working on a lot of policy frameworks to help improve South Africa’s manufacturing capabilities.

On the issue of compliance with South African labour laws, DIRCO said the Department of Employment and Labour had compliance officers or inspectors to inspect if companies complied with labour laws. When issues of non-compliance were found, the issues were reported to the law enforcement agencies and the Commission for Conciliation, Mediation, and Arbitration (CCMA).

On the Chinese labour sent to South Africa, DIRCO had responded to the issue and highlighted some of the conditions set by South Africa during negotiations. DIRCO was working on ensuring no work visas were granted to people who were bringing skills which already existed in the country from outside the country. This was done to ensure South African jobs were protected.  

There was a need for DIRCO to do more marketing of the products South Africa was offering. Pre-1994, the country had not engaged with Asia as it was now, business between Asia and South Africa was relatively new and DIRCO was working to promote South African products to Asia. The other challenge had been Asians were trading among themselves and had a huge market.

On “romanticising” the BRICS relationship, South Africa was an equal partner in the BRICS relationship, despite not having the population numbers or despite not having an equal Gross Domestic Product (GDP). South Africa pursued an independent foreign policy which the BRICS partners did not dictate.

On the loans South Africa took from the Development Bank, South Africa had considered an interest rate offered by similar institutions and took the option which made economic sense. South Africa was pursuing trade and not aid.

On the “conditionality” of agreements; DIRCO had mentioned in its negotiations, it could not agree on some of the financial modalities with the Chinese government because DIRCO took the South African national interests seriously. South Africa was not forced to take whatever the partners were giving out, but it always negotiated based on its national interests.

On the scholarships; the reason why DIRCO had only been able to take 57 scholarships out of 180, was because the Department of Higher Education and Training (DHET) had to consider what it could afford as far as topping up the scholarships went, and also ensuring the students who would be sent to China were financially stable during their stay there.

Ms Yoliswa Mvebe, Deputy Chief of Mission, DIRCO, said addressing the trade deficit was very complicated. It was difficult to put a timeframe on it because of many factors. The trade figures for 2021 showed a significant decrease of about R4 billion in the trade gap between South Africa and China. The trade deficit was also affected by COVID-19 regulations. Currently, China has a zero COVID-19 policy which does not allow the movement of people and goods within China. DIRCO was putting a lot of emphasis on exporting high-value products to China and China had committed to support South Africa’s industrialisation, manufacturing, and skills transfer.

DIRCO developed a "China-country Strategy” in which all the departments discussed how South Africa could engage China in a very coordinated approach, so DTIC would not deal with China without engaging the other departments such as Agriculture, Science, and so forth. DIRCO was responsible for ensuring coordination between the departments was well facilitated to ensure South Africa took advantage of the possibilities and opportunities in China, but in a more intentional and coordinated way, from the government’s point of view.

On the high-speed rail project, the MOU signed for the project was nullified. DIRCO was looking to engage the Department of Transport with the Chinese authorities to initiate a new feasibility study which would look at the geographical and socio-economic factors around a new high-speed rail project.

On the 57 scholarships taken out of 180, apart from the Department of Higher Education and Training’s financial constraints already mentioned, some students had no interest in taking up the scholarships because of language and cultural issues. The new zero COVID-19 policy in China meant some South African students could not return to China to complete their studies. The delegation of China was engaged around the matter so borders could be opened and students could return to school.

The projects around FOCAC had to be around South Africa and focus on addressing the triple challenges. There had to be no compromise on job creation, transfer of skills, and technology transfer. DIRCO had to improve on the issue of central coordination and would be engaging the different departments and stakeholders on this.

Ms Bengu answered on the title deeds issues and said that DIRCO did not have title deeds from Tehran, Iran, but there were positive developments. The Mission confirmed it was contacted by the Ministry of Foreign Affairs in Iran, who said there were plans for a ceremony to be held at the end of June 2022, in which the title deeds from Tehran would be handed over.

On the issue of immovable property under the control of DIRCO and based on the function shift of the Department of Public Services and Administration (DPSA) in 1999, DIRCO had control of the properties but excluded control for disposing of properties abroad. DIRCO was therefore trying to get the Foreign Service Act operational by all means, as it would change this.

On the income from the property disposal, DIRCO had applied to the National Treasury for a self-financing mechanism, but National Treasury said no blanket approval would be given to DIRCO. DIRCO had to apply for the self-financing mechanism as and when it disposed of a property, and the funds would only be granted to DIRCO through an adjusted estimate process. There was no guarantee the Department would get the money or part of it back when DIRCO disposed of a property. 

Speaking on cost-saving measures and properties disposed of in 2018, those properties were disposed of under the care of the Department of Public Works and Infrastructure, which had remained the custodian of disposal of properties. DIRCO was pushing for the Foreign Services Act to come into place, as this would allow DIRCO to take over the function of disposing of properties.

On municipal value versus market value; DIRCO had been clear it would like to dispose of its properties at market value, however in places where it could be proven the municipal value was the same as the market value, or the laws governing the area dictated so, this was the value DIRCO was going to use, as was the case in Namibia.

On selling properties in prime areas, DIRCO disposed of the properties in phases.

Phase one was the disposal of properties no longer being used.

Phase two would look at the disposal of properties in prime areas where it was difficult for DIRCO to maintain the properties. Phase two would work well only after DIRCO dealt with National Treasury on the self-financing mechanism.

On the differences between the strategic acquisition and the strategic framework, there was a relationship between the two documents. The strategic acquisition, maintenance, refurbishment, renovation, the leases, and the funding mechanism, was a chapter in the strategic framework.

Adv de Wet said the government printer had advised DIRCO that the Foreign Service Act would be published on Friday, 10 June 2022 or the following Monday. There would then be ten days for comments before getting approval from the Minister of DIRCO, sending the letter to the President, and then final publication.

On the issue of bilateral trade, Mr Nkosi suggested the Committee convene a meeting with the Portfolio Committee on Trade, Industry and Competition to discuss trade in Asia and East-Asia, to get an idea of the work done by DIRCO and the DTIC across departments.

The Acting Chairperson lost his connection.

Mr Nkosi, acting on behalf of the Acting Chairperson, adjourned the meeting.