BRICS to reform the global political and financial architecture

Minister of International Relations and Co-operation, Maite Nkoana-Mashabane

Next week will see the leaders of China, India, Brazil, Russia and South Africa gather in Fortaleza, Brazil, for the 6th BRICS Summit. South Africans are entitled to ask why this matters or what difference it stands to make in the lives of themselves and their children.

It does matter and it will make a difference. Decisions taken at the summit will, we are confident, ultimately contribute to improved living standards and greater life chances not only in our own country but throughout our continent and in the so-called “South” generally.

At the last summit, which South Africa hosted and chaired in Durban in March, 2013, leaders agreed to establish what they called the New Development Bank (NDB)and the Contingent Reserve Arrangement – equivalent in many respects to the Washington-based World Bank and International Monetary Fund, respectively – and directed their finance ministers and central banks governors to negotiate the necessary agreements.

We expect those agreements to be finalized in Fortaleza, leading to an historic rebalancing of the global financial architecture that has been in place since the end of the Second World War, stubbornly failing to catch up with changing realities.

The postwar order, named after Bretton Woods, the resort in the American state of New Hampshire where it was negotiated, gave the US and the soon-to-be former colonial powers of Europe a disproportionate say over how developing countries managed their economies and the terms on which they might access the finance and markets they needed for development.

The old South Africa played a not insignificant part in the creation of the old global hierarchy. It is only fitting that on the twentieth anniversary of our democracy, we and our partners should today be laying the foundations of a new, more truly representative international order — one in which all nations, including the “North”, stand to benefit from greater inclusion and shared prosperity.

By some calculations, the NDB could, within 20 years, be helping leverage infrastructure investments in countires like ours totaling $68 billion annually. “This would be far bigger than World Bank loans,” Columbia University financial markets expert Stephanie Griffith-Jones recently wrote in the Financial Times’ beyondbrics blog.

Over the same timeframe, the South African government expects to invest $300 billion on infrastructure. The new bank should make it significantly easier and less costly for us to secure the finance we will need for specific projects.

The NDB “will not only be a driver for sustainable growth in the developing and emerging world, but would also foster reform in the existing multilateral financial institutions – changes from which all of us, in the developed and developing world alike, will benefit,” Joseph Stiglitz, the Nobel prize-winning American economist, and Nicholas Stern, former chief economist at the World Bank, argued in a May 2013 oped.

This is a view we share and strongly reflects the spirit in which South Africa participates in BRICS. While we are not so naïve as to believe that nations do not place their own interests above all others, we strive to see that the ethos of ubuntu is never lost in our diplomacy. We favour win-win over zero-sum or antagonistic approaches.

As we head to Fortaleza, we are obviously looking for outcomes that help us achieve the objectives of the National Development Plan and the priorities laid out by the president in his recent State of the Nation address.

To reach our growth and employment targets, we need outside investment, complementing our own resources, to expand our productive capacity and competitiveness; we need to grow and diversify our exports with greater value added locally; we need a conducive global trade environment in which to do that; we need to ensure our people are well educated and appropriatetly skilled. All of these and more are areas in which we can achieve (and already are) synergies with our BRICS partners.

We participate in BRICS not only on our own behalf but to advance the interests of our region which are inseparable from our own.

President Zuma hosted a retreat for African and BRICS leaders on the margins of last year’s summit. The summit’s final communique pledged to “stimulate infrastructure investment” and “support African countries in their industrialisation process through stimulating foreign direct investment, knowledge exchange, capacity-building and diversification of imports from Africa”. This year we will be emphasising the need for our partners to help promote regional integration.

The BRICS countries currently hold between them the largest foreign reserves base in the world estimated at over $4 trillion dollars. BRICS trade with Africa is estimated to have reached $340 billion in 2012, a tenfold increase over the course of a decade. An IMF research paper published in February found that sub-Saharan Africa’s business cycle, once closely synchronized with that of the G7 industrialized nations, was now more closely aligned with that of the BRICS, one reason the region weathered the post-2008 global recession relatively well. The rising economic might of our BRICS partners is a significant driver of the Africa Rising story.

So, yes, next week’s summit does matter. History is being made and the results will make a difference in the lives of all of us.

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