19 April 2011
The third BRICS Leaders Meeting in Sanya, China marked a “very successful entry” for South Africa into the grouping of powerful developing economies, says Trade and Industry Minister Rob Davies.
Speaking to journalists in Pretoria on Sunday following his return from last week’s BRICS summit, Davies said South Africa was well aware that in many ways it did not measure up to Brazil, China, India and Russia, but had been invited to join the grouping because it served as a gateway to Africa.
He described the meeting as highly successful for South Africa, adding that important bi-lateral trade issues were discussed, especially with China.
Chinese delegates were sympathetic to South Africa’s call for investment in beneficiation, which could have positive implications for the country’s export revenue, Davies said.
At the moment, South Africa exports mainly raw mineral materials to China while importing manufactured goods.
BRICS mull trade in local currencies
Davies told journalists that the five BRICS nations could benefit considerably by trading directly in their own currencies, cutting out unstable internationally convertible currencies.
Davies said such a system would take out the money lost to the “middle man” in conversion, and protect the BRICS partners from the volatility affecting internationally convertible currencies, notably the dollar.
“First of all the middle man always takes a cut, and we are also having to take into account the currency fluctuation that happens along the way.”
The proposal is considered one of the most interesting developments to come out of the BRICS summit and could have serious implications for the dollar, but it raises question about how the members would calculate conversion rates
Davies said the countries were not “remotely close” to picking the model for making their currencies inter-convertible.
He stressed that the proposal was part of the emerging market countries’ call for greater say in how the world’s financial system was run and the debate on which currencies should be in the emergency “basket” of drawing rights managed by the International Monetary Fund.
Davies said monetary policy in the developed world was wreaking havoc on developing economies like South Africa by inflating their currencies as investors went hunting for higher exchange rates.
Commenting on the Doha Round of tariff negotiations, Davies said it was imperative that the talks continued but addressed obstacles for developing nations, notably agriculture subsidies.
“There must be a next round, but it must be a development round,” he said.