What promises does the BRICS hold for Africa’s economy?
South Africa, one of the BRICS member countries and indeed other BRICS nations, believe that the formation of the BRICS – an acronym for Brazil, Russia, India, China and South Africa into one grouping, have tremendous economic values for the African economy and it has impressive statistics to prove it.
A publication in South Africa government website, states that ‘the BRICS countries constitute the largest trading partners of Africa, and the largest new investors.’ It emphasized that there has been ‘a seismic acceleration of commercial and strategic engagements between BRICS and Africa in the past decade, emphasizing that the BRICS has nourished Africa’s economic emergence and elevated the continent’s contemporary global relevance.” In practical terms, BRICS’ share of Africa’s total trade, increased from one-fifth to one-third between 2010 and 2015, while BRICS FDI stock in Africa is estimated to have grown from around US$60 billion in 2009, to more than US$150 billion by 2015, the report says.
BRICS leaders are also invested in supporting Africa’s efforts, to accelerate the diversification and modernization of its economies via infrastructure development, knowledge exchange and support for increased access to technology, enhanced capacity-building and investment in human capital, including within the framework of NEPAD. A very important aspect of this initiative, the report further explains, is the possibility of setting up the BRICS bank, later renamed the New Development Bank, whose aim include mobilization of resources for infrastructure and other sustainable development projects, within the BRICS and other emerging economies and developing countries, with a view to ‘supplementing the existing efforts of multilateral and regional financial institutions, for global growth and development.’
The five BRICS nations now, have a combined gross domestic product (GDP) larger than that of the G7, in terms of purchasing power parity (PPP). The BRICS countries also are responsible for 26 percent of the global GDP.
A study by IMF revealed that the trade and investment from BRICS to low-income countries, was a critical factor in protecting them from the shock of the global recession.
CAIR International, reported that the BRICS nations ‘signaled their desire to be influential players in Africa’s development and to place trade and investment, at the heart of development’ at the Durban Summit, which points to the economic benefits and prospects for businesses in Africa. The report also highlighted more economic benefits the BRICS has for Africa, including, “An agreement signed between the China Development Bank and Transnet, to build and upgrade rail networks and ports in South Africa. Another deal was also struck between South Africa’s Reserve Bank, and the People’s Bank of China for the investment of $1.5 billion in the Chinese interbank bond market. Yet again, the pan-African Ecobank Transnational Incorporated, with headquarter in Lomé, Togo, also signed an MOU with India’s ICICI Bank, with a plan to strengthen Indo-African trade, while also increasing India’s investments in Africa. Ecobank also had previously signed a strategic partnership with South Africa’s Nedbank.”
The council, has consistently shown its readiness to promote development based more on trade and investment, as opposed to western ideology of offering developmental aid to Africa. In fact, the BRICS summit in South Africa, squarely placed integration and industrialization at the heart of development policies in Africa. And according to the final declaration at the recent summit, the BRICS it would appear, is focusing on boosting investment projects in Africa, with a view to stimulating industrial development, job creation, skills development, food and nutrition security, poverty eradication, and sustainable development, while also strengthening trade links among nations.
Another hot issue of economic importance for the BRICS, is de-dollarization and increase in the use of local currencies in international trade. The BRICS bank, a prototype of the World Bank, is aiming to reach 30 percent of lending in local currencies by 2026. Already, many African leaders view the dominance of the dollar over the global financial system, as negatively impactful to their nations’ economic growth, and this has led to BRICS nations attempting to reduce their dependency on the US dollars, both individually and collectively, while increasing bilateral trade in their own currencies. Although many have criticized the move, pointing out that it is a strategy for China to challenge the long standing use of the dollars for international trade and as a reserve currency. However, upturning the dollar dominance does not quite appear as the focus of the BRICS, as most member nations are more concerned about improving the relevance of their own currencies.
The BRICS nations, are also working on “BRICS pay”, which is a payment system for transactions among the BRICS. The idea behind BRICS Pay, is to setup a financial system of transactions that does not require conversion of local currency into dollars, for international trade. However, the New Development Bank, still depends on the dollars eight years after it was created.
The US dollar still retains 60 percent of central bank foreign exchange reserves. According to some analysts, the BRICS, is not looking to replace the dollar. It does however want alternative currency and trading options. This is definitely a legitimate demand, as over-dependence on the dollars have granted too much power on the dollar, sometimes at the economic detriment of growing economies, particularly the struggling economies of African nations.
The admission of six new members into BRICS notably, Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and UAE, will significantly increase the growing influence of the BRICS as an emerging global economic and political power block. The African position in particular is experiencing newfound strength, noted Prince Michael of Liechtenstein, in his article in GIS titled, “The Real Message from the BRICS Summit.” While noting that, “Historically, Africa was often viewed more as a geopolitical subject rather than an active participant. This is now changing.” He highlighted Africa’s rich mineral wealth, and the fact that Africa also holds two most crucial assets: a youthful populace and arable land for food production, as a strong bargaining chip. He also pointed that by 2060, Africa could account for around 30 percent of the global population.
According to the UN’s Food and Agriculture Organization, Africa possesses 45% of the world’s cultivable land for agriculture and 60% of untapped arable land. “With this immense south-after potential, African nations and indeed the global south are gaining the confidence to assertively claim their role in the global arena, Liechtenstein affirms.
One is bound to ask, why not?
