BRICS Summit from South African perspective

By Bryonie Guthrie

The ninth BRICS (Brazil, Russia, India, China, South Africa) Summit will be held in Xiamen, Fujian Province in September 2017. China will be the chair at what marks the first Summit of the second decade of cooperation, which started off in 2006 originally known as the BRIC. South Africa was invited to join to group in 2010, whereupon it became BRICS. Africa, through South Africa, is able to benefit from the milestones achieved by BRICS , such as the establishment of the New Development Bank and Contingent Reserve Arrangement. Furthermore, BRICS is closely aligned with the Belt and Road Initiative, which aims to advance mutual development and prosperity of the African, Asian and European regions. The financial instruments of BRICS and the Asian Infrastructure Investment Bank (AIIB) will drive this agenda.

South African President Jacob Zuma arriving in Xiamen in southeast China, September 2, 2017. Zuma is in China to attend the 9th BRICS Summit in the coastal city between September 3 and 5. [Photo: vcg.com]

The BRICS nations together account for 30% of global land, 43% of global population, 21% of the world’s Gross Domestic Product (GDP), 17.3% of global merchandise trade, 12.7% of global commercial services and 45% of world's Agriculture Production¹ . BRICS is a symptom of a growing underlying move towards equalising the global economy, in recognition of the fact that, while it remains dominated by the Bretton Woods rules and institutions, BRICS play vital roles in this economy and thus a mechanism was required for these economies to cooperate to ensure their interests were advanced. This cooperation has evolved to encompass international relations, traditional and non-traditional security threats, good governance and other cross-border issues. It is not solely economic in its focus. 

The theme of the 2017 Summit is “BRICS: Stronger Partnership for a Brighter Future”. Specifically, in his letter to his BRICS counterparts, dated 1 January 2017, President Xi Jinping pointed out that the Xiamen Summit is expected to make progress in following four areas: 1) deepen BRICS cooperation for common development; 2) enhance global governance to jointly meet challenges; 3) carry out people-to-people exchanges to support BRICS cooperation; and 4) make institutional improvements and build broader partnerships².  These four broad areas are overlapping and lend themselves to an agenda pursued by each of the five nations but also by Africa as well, i.e. common development, levelling of the international political and economic playing field, peace and security, promoting multilateralism and fostering trade and investment 

In considering the role of South Africa in BRICS, it is essential to remember that it represents the entire continent in both BRICS and other organisations like the G20. In this regard, the BRICS Summit objective of ensuring common development, primarily through pursuit of the BRICS Economic Strategy, strikes a chord with Africa as a whole. The Strategy furthermore aims to address issues key to Africa, such as recognition of the need to enhance market access opportunities and facilitate market interlinkages – Africa is renowned for poor interconnectedness, most transport and infrastructure has been geared towards export and internal links to foster intra-African trade are underdeveloped or non-existent. BRICS, South Africa and Africa are keen supporters of each of the other objectives of the strategy: “to promote mutual trade and investment and create a business-friendly environment for investors and entrepreneurs” – developing regulations to facilitate ease of doing business is a priority for African government with some, such as Kenya and Rwanda, leading the charge. “To enhance and diversify trade and investment cooperation that support value addition among the BRICS countries”: a move away from reliance on commodities is key for African development. One of the main reasons South Africa continues to play a leadership role on behalf of the continent is the country’s diversified economy and sophisticated financial regulatory environment which has enabled the country to move beyond reliance on minerals such as gold and diamonds.  This said South Africa has suffered from a weakening currency, extremely low economic growth and political uncertainty which has resulted in the economy falling into a recession this year. There are however opportunities emerging for Chinese companies to make investments in large private South African companies in sectors such as: telecoms fibre optic infrastructure; technology; manufacturing and value added agribusiness processing. Such investments will allow long term growth into South Africa but also allow for a platform to grow into other African countries. Timing of when to make these investments will be important and working with local partners who understand the market environment is critical.

Trade between South Africa and China was in excess of US$20 Billion in 2016 and is unique among its African peers in that South African companies are also investing in China, for example Discovery’s investment in Chinese health insurer Pingan and Naspers investment in Tencent. Chinese investment in South Africa has been large-scale and often focuses on the sophisticated manufacturing and financial sectors, such as the stake bought in Standard Bank by ICBC (Industrial and Commercial Bank of China). 

As per the recent McKinsey report³  on China’s engagement with Africa, China views South Africa as a viable strategic partner on the continent – given South Africa’s carefully thought out economic strategy towards China and well-developed relationship with not only Beijing but multiple other provinces and cities. China has therefore increased its level of investment in South Africa by average 59% per year over the decade 2004-2014.  

BRICS each face their own unique set of development challenges however it is significant that BRICS are attempting to improve their position together across multiple areas of cooperation. South Africa should continue to benefit from its membership particularly through its close relationship with China. 

(Bryonie Guthrie is a former South African diplomat. Now she is an analyst with Acorus Capital, a Hong Kong-based consultancy with expertise in Africa.)

Reference:

1 Based on the article "THE STRATEGY FOR BRICS ECONOMIC PARTNERSHIP". The article could be downloaded from the official website of Russia's presidency in BRICS in 2015.

2 Based on the article "Theme and Cooperation Priorities of 2017 BRICS Summit". The article is available on the official website of 2017 BRICS official website.

3 Based on the article "The closest look yet at Chinese economic engagement in Africa". The article is available on the official website of McKinsey & Company.