BRICS and Africa: insight from Martyn DaviesPosted on Thursday, March 7th, 2013 by Douglas, Kate (How we made it in Africa) in News
The fifth BRICS Summit – to be held in South Africa’s Durban later this month – will be based on the theme “BRICS and Africa – partnership for development, integration and industrialisation”.
South Africa, which accounts for around 11% of the BRICS total trade in Africa, was included in the grouping at the end of 2010, forming the ‘S’ in the acronym. In a recent article, How we made it in Africa reported that while South Africa is the smallest economy in the BRICS group – making up around 2.8% of total BRICS trade and 2.6% of the group’s GDP according to research by Standard Bank – it is the third largest BRICS trading partner in Africa, behind China and India. South Africa’s trade in Africa last year was 35% greater than Brazil’s trade with the continent and 200% greater than Russia’s.
Yet with China firmly established as Africa’s largest trading partner, accounting for almost 60% of total BRICS trade on the continent, and a notable increase in BRICS-Africa trade generally in recent years, the topic for this fifth BRICS Summit seems to hold relevance. However, according to Dr Martyn Davies, CEO of Frontier Advisory, this Africa focus could have more to do with South Africa’s political positioning than a geo-economic reality at this stage.
“In most of these cases, in particularly the Indian case, Indian companies are far ahead of the Indian government when it comes to foreign commercial policy into Africa,” said Davies. “So [this Africa focus] is largely irrelevant from an Indian government perspective as the Indian government is trying to catch up to its own businesses. Chinese government has clearly enabled Chinese corporates to come into Africa – that’s a different story.”
Davies added that the Brazilian government has, to a certain extent, enabled Brazilian business in Africa, while the Russian government is largely disinterested in the continent. “So it’s wrong to characterise the BRICS countries’ involvement in Africa purely as the governments somehow driving this process. Beyond the Chinese, they actually don’t. It’s the business sector that does. So this is largely geo-political posturing for the club at the moment. It’s not an organisation where business can really benefit beyond the networking opportunity…”
So why the Africa focus at the first South African-hosted BRICS Summit? “Whether it is appreciated or merited is another story, but South Africa seeks to act in a sort of regionally responsible inclusive fashion,” said Davies. “So President Zuma has been seeking to get or invite upper African heads of state to meet around this BRICS [Summit] and trying to extend BRICS beyond just South Africa.”
“The challenge is that BRICS is still very much a nascent type of organisation… It has no membership criteria, has no constitution. So what exactly is it? It’s a very loose grouping of so-called big emerging market economies.”
South Africa with a population of almost 51,000 people is roughly the size of a mid-sized Indian state or Chinese province and Davies suggested that perhaps the ‘S’ in BRICS could potentially stand for the Southern African Development Community (SADC). “So having a SADC of 250-260 odd million people certainly would be a greater counterweight geo-strategically, vis-à-vis the other BRICS members,” explained Davies.
What to expect at the fifth BRICS Summit
Davies believes that the following four topics will most likely be discussed by political heads at the BRICS Summit at the end of this month:
1) The emergence of a BRICS development bank
Davies said that not all the BRICS countries are as supportive of establishing a BRICS development bank as South Africa is, and he stressed that a number of issues surrounding this proposal need to be ironed out, such as how to minimise bureaucracy when you have five countries involved in a single financial institution.
2) Moving away from third currencies for trade
“This was proposed two years ago by the Chinese over the [BRICS] Summit in 2011… which is looking at moving away from trading in so-called third country currencies,” explained Davies. “Why are we using the US dollar to trade when we could be using the Renminbi, or whatever it may be?”
3) Infrastructure spending of the BRICS countries in Africa
While Davies said that BRICS investment in infrastructure is usually exaggerated by the media, it will be a topic at this month’s summit.
4) BRICS investing in stock exchanges
Davies said that a topic that was previously discussed at last year’s BRICS Summit, but has been disappointing so far, is the notion of the BRICS countries investing in each other’s stock exchanges. “It hasn’t really taken off, and its proof that it remains largely a geo-political initiative, rather than a geo-economic one which is, at this stage, what the BRICS is.”