How South Africa Fits in the BRICS Puzzle

How South Africa Fits in the BRICS Puzzle

South African President Jacob Zuma during a media briefing ahead of the 5th BRICS Summit. South African President Jacob Zuma during a media briefing ahead of the 5th BRICS Summit – Creative Commons License LogoThis image is licensed under Creative Commons License.

BRICS: An emerging bloc

Since the 2013 5th BRICS summit in Durban, South African coverage of the 6th summit from Brazil has seen slim interest back home. It was as if BRICS itself did not exist, or simply, after South Africa’s hosting of the 2013 meeting, the Brazil meeting had an insubstantial dent on public opinion

The BRICS bloc, however, is arguably the most defining geo-political formation after Bretton Woods. The group, which includes Brazil, China, India, Russia and South Africa, could emerge as a strong power counteracting western hegemony. BRICS member countries have growing economies and have been playing an ever increasing role in global politics. BRICS countries are poised to represent almost half of the world’s GDP, more than three times the current 15-20% share they collectively hold now. Only time will tell the path the BRICS bloc will carve and the type of influence it will eventually exert.

For now the formation is the subject of a narrow debate by political, business and expert elites. Social activists, also aware of the bloc’s important role, seek to widen the BRICS engagement process and will certainly continue to advocate for social and environmental issues at every BRICS forum. For most people living in BRICS countries though, for whom having enough food is the daily priority, the existence of BRICS is neither here nor there. The bloc still has a long ways to go before it becomes part of the public imagination.

South Africa and BRICS

Given the size of BRICS country economies, South Africa is small fry. Its GDP is high only when compared to African standards, but is miniscule in relation to other BRICS. South African GDP figures are also accompanied by an embarrassingly high Gini coefficient, especially as compared to other BRICS. South Africa’s size and limited global political clout make people wonder how such a small country could be admitted to the BRIC club. Why not Indonesia with its 253 million people, or Mexico with its nearly $2 trillion GDP?

One way of explaining why South Africa sits at the BRICS table is through the lens of history. China, India and Russia share historical ties with both the South African liberation movement and the African National Congress (ANC), the party with majority political power today.

A second way to explain South African presence also has to do with something else, very strategic and of importance to trade and military.

If the Middle Eastern situation worsens and there is a possible threat to access to the Suez Canal, commodities like oil and gas will need to flow through an alternative route. This is where South Africa’s coastal waters and diversion of trade between Asia, the Atlantic and Europe will become pivotal, even if the route is long and costly. Its strategic geographic location serves as one of South Africa’s most important characteristics for the BRICS powers.

Newspaper reports acknowledge the US recognition of this strategic position, and a large US diplomatic complex is being built in Swaziland – an unusual step given the size of Swaziland’s economy and that it is a landlocked country highly dependent on South Africa.

Some experts speculate that this complex is being built to establish a military command or an intelligence gathering base. Moreover, the US hosted its first US-Africa summit in August, partly to compete with China’s own Forum on China-Africa Cooperation (FOCAC), already established a few years ago between China and the fifty odd states in Africa. Obama has pledged $100 billion dollars towards African programmes.

A third reason for BRIC interest in South Africa might be the need to have a partner in Africa with trade links, a good financial infrastructure and access to political players. The present chair of the African Union happens to be a South African. And while South Africa per se is not a tax-haven, its financial infrastructure and various competencies make it an attractive base and partner to support a wider gambit of trade and other deals. This African presence would be key for any future role the new BRICS bank will play in infrastructure development. Following South Africa’s 1994 ushering in of a new democracy, it hosts the largest Chinese diaspora in Africa, estimate to be around 500,000.

South Africa’s benefit being part of BRICS

Interest in Natural Resources

As a vast continent, Africa has generous mineral and other natural resources, including some of the most lucrative fertile agricultural land in the central regions of the continent. Over recent years Africa has become a major exporter of oil, gas and other important commodities to China and the US, and become very attractive to other new powers. Today, BRICS countries and other non-BRICS states such as Japan, Malaysia, South Korea and Turkey are seeking trade and investment in Africa in an attempt to oust older colonial powers like Britain and France for Africa’s rich natural resource endowment. Experts are calling it “a new scramble”: a new quest for resources, markets and fertile land.

This natural resource wealth has attracted China’s eye, and its presence has led to an exponential growth in terms of people, capital and exports. China is in Africa for the long-haul and has the capacity to sustain its presence compared to other rival powers, and over the next decade China is expected to become Africa’s leading trading partner.

South Africa in turn is looking to expand its own footprint and intra-regional trade. The country is aiming to position itself as a hub for the export of cheap Chinese goods and technologies, with many South African companies looking to create joint-ventures with Chinese firms. Many of its major corporations are spending a great deal in banking, retail and other business to capture a sizeable share of the African consumer market, and South Africa has increased its dependence on continental oil and gas given recent troubles in the Middle East.

Political Power

South Africa’s membership in BRICS is a strategy to hedge its political bets within the international architecture. While the friction between China and the US continues on one hand, and between Ukraine and Russia on the other, the emerging and imperfect BRICS bloc is seen as new sphere of influence that could become a counter-weight to dominant western hegemony. In this sense, South Africa is following Chinese and Russian footsteps, playing a more visible role in global politics and seeking to create new regional and global institutions while exerting influence through soft-power measures. By getting close with the new powers, South Africa perhaps even wants to influence them too, though whether it can punch above its weight remains to be seen.

However, South Africa’s foreign policy has not turned against Europe or the US. Last year for instance, South Africa hosted joint military exercises with the US, but because this happened at the height of the Egyptian crises, the public and global media failed to take notice. Commercial and diplomatic relationships are still strong, but are undergoing a period of reconfiguration after the BRICS formation.

Trade and Investment

Growth in South Africa’s economy is partly due to Foreign Direct Investment (FDI) and partly due to the commodity booms from Chinese demands for strengthened exports and reduced dependence on traditional trading partners in Europe and North America.

Facing the facts, being part of BRICS could give South Africa exclusive and lucrative trade agreements with the emerging economies of the future. South Africa’s trade with BRICS countries in 2013 was $38 billion – a 27.5% increase compared to 2012. South African trade with China, its largest trading partner, increased from $20 billion to $27 billion between 2012 and 2013. China could also become an exporter of affordable green technologies for South Africa as China positions itself as a leading global manufacturer and exporter of clean technology in the future. This could have benefits for South Africa as it seeks to build its own low-carbon economy.

Finally, the newly formed New Development Bank (NDB), unofficially known as the BRICS Bank, will offer new sources of finance. Following the official July announcement in Fortaleza, Brazil, and to be headquartered in Shanghai, China, South Africa has been tasked with establishing a regional banking center. To the extent that the NDB will offer cheaper credit, it could help initiate large-scale South African infrastructure if it helps bring down the long-term cost of capital. The concern that the bank will make dirty infrastructure cheaper is also looming large. While western development institutions are turning away from financing dirty energy sources as a result of civil society pressure, the NDB may or may not choose to embrace higher environmental and social standards.

There is therefore a need for more thinking – especially from experts in the BRICS countries – on how to ensure that ideas and criteria shifting investments toward low-carbon technologies and clean infrastructure projects can be embedded in NDB funding allocation. The good news is that there is no need to start from scratch, given the progress of the past years in the field of green infrastructure and safeguards.

Challenges and Opportunities

The BRICS bloc proclaimed to have put “inclusive growth” at the center of its 2014 summit, insisting on the concept of “sustainable solutions”. These concepts need to be assessed in practice. One key challenge in South Africa is the perception and concern that large infrastructure only benefits politicians and insiders with lucrative deals. Some projects involve not only significant environmental damage, but also displacement of people, as was the case recently with large-scale hydro-projects. In essence, corruption is growing in size, complexity and sophistication.

For that reason, South Africans must involve themselves in the BRICS idea and insist on good governance and strong safe-guards against corruption, human rights abuse and environmental damage. These ideals must also be demanded from the inception of the NDB as central tenets of its operational model and financing schemes.

South Africans must involve themselves in the BRICS idea and insist on good governance and strong safe-guards against corruption, human rights abuse and environmental damage.

In truly sustainable development, focus cannot only be on giving cheap credit for any type of infrastructure. The NDB should use its cheaper credit to incentivize investment in local low-carbon solutions while making credit availability or loans more difficult and costly for less cleaner technologies or infrastructure projects.

The BRICS puzzle is not solved, and South Africans need to continue engaging with it. The bloc brings together odd friends – a rare mix of democratic governments and centralized ‘beneficent’ authoritarianism. The BRICS bloc could, however, open a new chasm of opportunity for the reconfiguration of international relations, and South Africa should seize the opportunity to make it work for the people and for development in the long term.

Despite the emerging geopolitical competition over Africa, South Africa will continue to sit at the BRICS table. The critical question is: What influence can South Africa exert over the direction of the BRICS countries?

Even for keen observers of foreign policy, South Africa’s own sense of priorities within the BRICS bloc seems to be unclear. It could be influential by taking on an enlightened leadership role, or it could also take the narrow road of geo-political self-interest and use participation in BRICS as a status symbol, doing little for the rest of Africa. Or it may just want to ensure the lucky receipt of BRICS trade-relations.

Indeed, the country has reached a cross-roads now that it sits at the BRICS table: South Africa can either truly be a part of Africa, or it can fall in danger of being part of the scramble for Africa.

This article was first published here:
http://www.nivela.org/articles/how-south-africa-fits-in-the-brics-puzzle-1/en

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