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Yet the discussions at the event, and the decisions taken by the world and business leaders, will have far-reaching implications for South Africa, its Brics partners, and by extension sub-Saharan Africa.
The Bric concept was coined by Jim O’Neill of global investment bank Goldman Sachs in 2003 to identify countries that had the fastest growing economies, with bulging middle classes and promising markets, and that were likely to overtake the G7 (the US, the UK, France, Italy, Canada, Germany and Japan) as best performing economies by 2040.
Foreign ministers of the initial Bric states (Brazil, Russia, India, and China) met in New York City in September 2006; a full-scale diplomatic meeting was held in Yekaterinburg, Russia, on 16 May 2008.
Bric’s first formal summit in Yekaterinburg started on 16 June 2009. It focused on ways to improve the global economic situation and reform financial institutions. Involvement of developing countries in the running of the world and inter-country co-operation were also on the table.
In 2010, South Africa began efforts to join Bric, and it officially became a member nation on December 24 that year. With that, the group was renamed Brics. South Africa holds the chair at present.
What is Brics?
Brics is an association of emerging nation economies, all of which are developing or newly industrialised countries, except perhaps Russia. They are distinguished by their large, fast-growing economies and influence on regional and global affairs. By 2013, the five Brics countries contained almost three-billion people, with a combined nominal GDP of US$14.9-trillion, and an estimated $4-trillion in combined foreign reserves.
In 2012, Hu Jintao, as the president of China at the time, described the Brics countries as defenders and promoters of developing countries and a force for world peace. But there are tensions: India and China have territorial issues, growth rates are slowing generally, and the members have different views on reform in the UN Security Council.
Yet even with these tensions, the Brics Forum was created in 2011. It is an independent organisation set up to encourage commercial, political and cultural co-operation between the members. The global economy is at the heart of Brics, which has questioned the dominance of the West and has called for changes to the rules of international lending, among other issues. And in June 2012, Brics nations pledged $75-billion to the International Monetary Fund (IMF), on condition the fund reform its voting processes.
In the latest developments, at the fifth Brics Summit in Durban on 26 and 27 March, the members agreed to establish a global financial institution to rival the western-dominated IMF.
Other summit decisions
SouthAfrica.info reported that the Brics development bank would help to finance infrastructure programmes and sustainable development in Brics countries and other developing nations, President Jacob Zuma said at the conclusion of the summit.
“The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure,” Zuma said. Before the summit, officials had said Brics was considering injecting an initial $50-billion into the bank, with each nation contributing $10-billion.
While the bank has been agreed upon in principle, there are still issues to be cleared up. The bank’s location, initial start-up funds and voting rights have to be worked out. Russian President Vladimir Putin has also proposed the establishment of a permanent secretariat to lead the group’s day-to-day operations.
Also coming out of the fifth summit, the leaders endorsed the idea of creating a financial safety net in the form of a contingent reserve arrangement (CRA). Zuma said they had concluded that the establishment of a self-managed CRA would have a positive precautionary effect. It would help Brics countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability. In layman’s terms, it will help Brics countries stay afloat in times of economic trouble.
“It would also contribute to strengthening the global financial safety net and complement existing international arrangements as an additional line of defence,” Zuma said. The CRA would have an initial size of $100-billion.
The Brics Think Tanks Council was set up to help members with innovation, and the hosting of the fifth Brics Academic Forum aimed at helping to tackle skills shortages and unemployment, and promoting a knowledge economy. The Brics Business Council was formally established to act as a platform for the formation of more considered and coherent intra-Brics business linkages.
The full eThekwini Declaration signed at the end of the summit is available online.
The S in Brics
Economically, South Africa is the smallest player in Brics. Its nominal GDP, for example, is just $390-billion, compared to $2.4-trillion in Brazil, $1.9-trillion in Russia, $1.9-trillion in India and $8.2-trillion in China. Its population is also a fraction of its partners at just below 52-million, compared to about 1.3-billion in China and 1.2-billion in India, 143-million in Russia and 194-million in Brazil. Yet the country punches above its weight internationally.
South Africa’s advantage, according to the Brics website, lies in its considerable non-energy in situ mineral wealth. In a report commissioned by the Citigroup bank, for example, South Africa was ranked as the world’s richest country in terms of its mineral reserves, worth an estimated $2.5-trillion. Along with the country’s mining-related professional services, this wealth contributes a whole lot to the Brics resource pool.
The country is also investing $35.6-billion into expanding and improving its railways, ports and fuel pipelines – which will help unlock its mineral wealth, and potential markets further north. The African continent, arguably one of the world’s largest unexplored resource basins, has an abundance of riches, including 10% of the world’s oil reserves, 40% of its gold ore and 95% of platinum. Together, this makes South Africa a key player in the Brics narrative, particular to the resource-hungry China.
Then there’s South Africa’s financial markets, which are highly sophisticated. The World Economic Forum’s 2011/12 Global Competitiveness Index ranked it in fourth place globally. The regulation of the Johannesburg Stock Exchange was ranked number one, as was the strength of South Africa’s auditing and reporting standards. And the country is ranked second for the soundness of banks and the efficacy of corporate boards.
“Our country, as a member of the Brics bloc, is playing an important role towards the shifting and distribution of power internationally. This shift is expected to give rise to a multi-polar world order, said Maite Nkoana-Mashabane, the minister of international relations and co-operation, reported SouthAfrica.info in January. “South Africa’s membership of Brics contributes to further leveraging economic opportunities for our own development agenda as well as that of the continent.”
The minister quoted Jim O’Neill of Goldman Sachs Asset Management. In his article “South Africa’s Brics score: not all doom and gloom” published in March 2012, O’Neill said that South Africa could more than justify its presence in Brics if it helped Africa to fulfill its remarkable potential by exploring cross-border expansion in trade and infrastructure, as well as improvements in domestic productivity.
Brics members now constitute Africa’s largest trading partners and the largest new – not total – investors. “In 2010, Standard Bank economists predicted that Brics-Africa trade would see an additional increase in the velocity of Bric-Africa engagements, with trade and investment spearheading the commercial charge. According to Standard Bank, Brics-Africa trade will increase threefold, from $150-billion in 2010 to $530-billion in 2015.”
The Brics economies, Nkoana-Mashabane said, which already constituted between 20% and 25% of global GDP, would link a large part of Africa with the fastest growing economies in the world.”
Facts and figures
- Brics collectively represents one-fifth of the global GDP, estimated at $13.7-trillion, as well as combined foreign reserves estimated at $4.4-trillion
- In 2012, emerging markets’ collective GDP increased by 7.4%, amounting to $29-trillion. Total G7 output was $33-trillion.
- By 2012, South Africa’s exports to emerging markets had grown by almost 50% over 10 years. South African trade with Brazil, Russia, India and China surged more than ten-fold from about $3.2-billion to $37-billion.
- South Africa’s trade with the rest of Africa was $35-billion in 2012, almost half of which comprised value-added capital goods such as machinery, vehicles and electronic equipment.
- South Africa’s export trade with Brics partners grew from 6.2% of the total in 2005 to 16.8% in 2011.
- Imports from Brics partners represented 13.6% of total imports in 2005 and 20% in 2011.
- In 2011 alone, trade between South Africa and Brics countries grew by 29%.
- In 2012, Brics accounted for about 11% of global annual foreign direct investment flows ($465-billion) and 17% of world trade.
- As of 2013, the five Brics countries represent almost three-billion people, or 43% of the world’s population.
As well as its Brics membership, South Africa has a constructive role in global governance structures, and is part of organisations of the political and geographical South, notably the African Union (AU), the Group of G77 (G77) and China, and NAM, the Non-Aligned Movement. South Africa is also the only African country represented in the Group of 20 (G20), which focuses on the reform of the financial and economic global governance architecture.