The fifth BRICS summit brought political and business leaders from Brazil, Russia, India, China and South Africa together for the fist time in Africa. South Africa is the latest, and perhaps the smallest in terms of economic size, to join the powerful emerging amarkets club. Tom Nevin reports on how the summit unfolded.
Not since the soccer World Cup has a single event commanded as much media attention as the 5th BRICS summit conference in Durban, South Africa’s seaside holiday capital. It is BRICS’ first conference on African soil and celebrates South Africa’s becoming the economic bloc’s fifth member with Brazil, Russia, India and China and for adding the “s” to the organisation’s acronym.
Security for the visiting BRICS heads of state and 5,000 delegates also approached World Cup dimensions with 3,000 policemen and soldiers imposing a tight blanket of security on the city.
“South Africa has a reputation for hosting events of such a magnitude,” says national police commissioner, General Riah Phiyega. “We are not newcomers to this game.”
Not everything was quite as smooth as the security arrangements, as South Africa host-debuted on the BRICS big annual event. An absence of signposts had arriving delegates searching the city for the venue in pouring tropical rain, programmes ran out before all delegates had received their copy, inevitably the IT gremlins ran amok, temporary staff seemed unfamiliar with accreditation processes and the translation equipment appeared to have a mind of its own.
“These massive conferences have their glitches,” said one administrator, “luckily they’re quite easily sorted out and the event ran smoothly in the main.”
South Africa, as the minnow in a pond of big fish, used the occasion to learn, to build stouter bridges, to tackle troublesome trade issues – especially those involving dumping and imbalance – and to muster support for a BRICS development bank “to lessen dependence on the World Bank and the IMF”.
Probably top of President Jacob Zuma’s “to do” list at the BRICS jamboree was to explore ways to a more equitable balance of trade between South Africa and other BRICS members, especially China. China is South Africa’s biggest trading partner and at $20bn in the last six years, a significant investor in the economy.
According to Nomaxabiso Majokweni, chief executive of Business Unity SA, exports last year from South Africa to China were close to $11bn while imports from China totalled $14bn.
To a lesser extent, South Africa’s trade with the other BRICS members were also skewed unfavourably for South Africa. “If South Africa is to be an able competitor it needs to improve its basket of exports to the BRICS countries,” she asserts.
And that is at the heart of South Africa’s interplay with its BRICS counterparts. It tussles with the conundrum of whether it is a partner of its fellow BRICS partners, or a competitor, especially for its own markets.
Two cases in point are a flood of poultry from Brazil at unit prices local producers can’t compete with and consumer goods from China, especially apparel and electrical electronic appliances, that are sinking South African manufacturing sectors.
Chinese clothing and Indian electronics manufacturers are also targeting South Africa’s African markets. For Majokweni, the debate at the BRICS conference should have been be centred on the dangers of free trade among the bloc’s members. “South Africa should think hard and carefully on who free trade will benefit in this regard,” she says.
Pooling of foreign reserves
Such undercurrents of unease did little to quell the appetite for greater economic and financial cooperation amongst BRICS members, and new deals and agreements were signed aplenty, especially with China. Innovation also flowed, one significant example being a novel way to tackle currency volatility, an irksome and ever-present issue especially for emerging markets. Serious consideration was given to the pooling of foreign currency reserves as a means of warding off balance of payments or currency crises. Emerging market research company, Frontier Advisory, says a shift in power from the traditional to the emerging world is under way, and that “is a cause for a lot of geopolitical concern in the Western world”.
The BRICS nations have combined foreign currency reserves of $4.4 trillion and account for 43% of the world’s population and they want more say in global finance to match their rising economic power. In particular they are calling for an overhaul of the way the World Bank and IMF are managed.
“We need to change the way business is conducted in the international financial institutions,” says South Africa’s International Relations and Cooperation Minister Maite Nkoana-Mashabane. “They need to be reformed.”
A few hiccups aside, South Africa ran “a highly successful and slick conference” and showed that even though it walked amongst giants (it makes up just 2.5% of the combined GDP of the BRICS), it more than held its own. And one important mission was achieved: to showcase its role as a trade and investment gateway to Africa. The South African delegation made it their business to push Africa’s economic cause at the summit and were rewarded when the bloc’s leaders gave President Jacob Zuma the diplomatic support he was seeking as continental representative. A special declaration widened the scope of BRICS’ influence by backing calls for infrastructure investment in Africa, supported continental development agencies and endorsed such regional integration plans as the African Free Trade Area, the continent’s commonwealth in waiting.
What was the summit all about?
The theme for the Summit was BRICS and Africa Partnership for Development, Integration and Industrialisation. Ambassador Jerry Matjila, the Director-General of the South African Department of International Relations and Cooperation, offers some elucidation.
“First,” he says, “development, integration and industrialisation are challenges for all BRICS countries, especially in terms of inequality and poverty issues faced by them. And second, in order to address all three challenges, the BRICS summit needs address the following questions: How can development address poverty and inequality in each BRICS country? Given the need for deepening intra-BRICS cooperation, how can this be achieved given the fact that the five BRICS countries are based in various regions involved in their own regional configurations?
How can sustainable industrialisation be created to improve inequality and poverty in the long-term our countries?” BRICS has decided that the most effective response is through the formation of a business council and a development bank.
The BRICS Business Council comprises a team of business executives from each country mandated to drive privatesector partnerships in BRICS countries. The aim is to strengthen business and trade relations, promote cooperation and technology transfer in skills development, banking, the green economy, manufacturing and industrialisation. South African mining entrepreneur Patrice Motsepe will chair the council. An initial project under discussion is the laying of a submarine cable linking the BRICS member countries.
The BRICS Development Bank was discussed but not formally launched at the Durban meeting. According to the Russian finance minister Anton Silaunov member countries have agreed to go ahead with the bank once outstanding issues have been ironed out.
These include the modalities of the bank, the financial contribution required from each BRICS country, how voting rights will be allocated and the bank’s physical location. Further planning will take place alongside the G20 Summit in Russia in September this year.
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