Assessing Geopolitical Risk in South Africa's Market Amid China-Taiwan Tensions

The geopolitical landscape in South Africa's trade relationships has grown increasingly complex in 2025, with China and Taiwan emerging as both critical partners and sources of strategic risk. As South Africa navigates its economic ties with these two entities, the interplay of resource dependency, diplomatic leverage, and sector-specific vulnerabilities demands a nuanced analysis of diversification strategies and sector resilience.

China's Deepening Economic Influence and Structural Imbalances

South Africa's trade relationship with China has expanded dramatically, with bilateral trade reaching $34.18 billion in 2023-a 2,500% increase from $1.34 billion in 2000. However, this growth has been accompanied by a persistent trade deficit, as China exports manufactured goods and machinery to South Africa while importing primarily raw materials like platinum group metals and iron ore, according to a Futures report. According to a report by Reuters, this imbalance has spurred calls for South Africa to diversify its export basket, particularly into value-added agricultural products and processed minerals.

Chinese investments in South Africa have also surged, with $13.2 billion in foreign direct investment (FDI) as of Q3 2025, creating over 26,000 jobs. Projects like the Darmragt 123-megawatt solar farm, backed by the China-Africa Development Fund, underscore Beijing's focus on South Africa's energy transition, according to an Ars Technica article. Yet, this reliance on Chinese capital and technology raises concerns about overexposure to China's economic cycles and geopolitical priorities.

Taiwan's Semiconductor Leverage and Diplomatic Fractures

The recent diplomatic spat between South Africa and Taiwan has exposed vulnerabilities in the latter's semiconductor supply chain. In 2025, South Africa unilaterally relocated Taiwan's diplomatic mission from Pretoria to Johannesburg, prompting Taiwan to impose export restrictions on 47 products, including semiconductors, according to a People's Daily report. While these restrictions were later suspended, the incident highlighted Taiwan's strategic leverage in global tech manufacturing.

Taiwan's semiconductors are critical for South Africa's automotive and electronics sectors, which rely on advanced components for production. According to Ars Technica, the move also drew China's support, with Beijing pledging to increase semiconductor exports to South Africa while criticizing Taiwan's actions as destabilizing. This bifurcation of supply chains-between a technologically advanced but diplomatically fragile Taiwan and a resource-focused but politically aligned China-poses a dual-edged sword for South African policymakers.

Strategic Diversification: Agriculture and Energy as Countervailing Forces

To mitigate these risks, South Africa is pivoting toward diversifying its export portfolio. At the 2024 Forum on China-Africa Cooperation, President Cyril Ramaphosa emphasized expanding agricultural exports to China, including citrus, nuts, and wine. This shift aims to reduce dependency on raw material exports, which account for 93% of South Africa's shipments to China, as noted in the Futures report. However, success hinges on improving infrastructure, reducing bureaucratic bottlenecks, and ensuring competitive pricing in a market dominated by Chinese manufacturing.

In the energy sector, South Africa's partnership with China on renewable projects offers a buffer against fossil fuel volatility. The Darmragt solar project, for instance, aligns with South Africa's goal to decarbonize its grid while reducing reliance on coal imports. Yet, the country must balance this with investments in domestic energy storage and grid modernization to avoid becoming overly dependent on Chinese technology.

Sector Resilience and Policy Challenges

The most immediate risks lie in South Africa's small and medium enterprises (SMEs), which face stiff competition from low-cost Chinese imports in textiles and electronics, a concern highlighted in the Futures report. Protectionist measures, such as import tariffs or localized production incentives, could shield these firms but risk alienating Chinese investors. A more sustainable approach might involve public-private partnerships to boost local manufacturing capabilities, as seen in the AfriSam–China State Construction Engineering Corporation collaboration reported by People's Daily.

Meanwhile, the Democratic Alliance (DA) has criticized the Department of International Relations and Cooperation (DIRCO) for its handling of the Taiwan dispute, arguing that a non-aligned trade strategy is essential to preserving economic sovereignty. This underscores the need for a coherent foreign policy that prioritizes economic interests over geopolitical posturing.

Conclusion: Balancing Risk and Opportunity

South Africa's economic future hinges on its ability to navigate the China-Taiwan axis without sacrificing strategic autonomy. While Chinese investments provide critical capital and infrastructure, they also deepen structural imbalances. Conversely, Taiwan's semiconductor expertise offers technological advantages but comes with diplomatic fragility.

For investors, the key opportunities lie in sectors where South Africa can leverage its comparative advantages-such as platinum group metals in renewable energy or agricultural exports to China-while mitigating overreliance on any single partner. Policymakers must prioritize diversification, sector-specific resilience, and agile diplomacy to turn geopolitical risks into long-term gains.