12 April 2011

South Africa: Nation Makes Its Debut at Brics Summit

Photo: Graeme Williams/MediaClubSouthAfrica
Under construction.

Cape Town — The BRICS summit begins with a meeting of trade ministers on Wednesday on China's Hainan island, with South Africa participating in the gathering of leading emerging economies for the first time.

The country lobbied energetically to be invited to join what it perceives as an elite club of emerging markets, and officials will be anxious to make a confident debut amongst far stronger peers in the group.

The idea for what was initially BRIC - the initials standing for Brazil, Russia, India, and China - came from a concept paper by Goldman Sachs economist Jim O'Neill in 2003, identifying countries with the fastest-growing economies, rapidly expanding middle classes and promising domestic markets, giving them the potential to overtake the G7 as the world's best-performing economies by 2040.

The concept has taken on a life of its own, becoming a real forum for consultation and coordination amongst the initial four members. O'Neill's analysis didn't place South Africa as a member of even the second rank of emerging economies, but the country's government has bustled its way to a place at the table.

The country's Department of International Relations and Co-operation is adamant that membership will enhance the country's status as a leading economy in Africa.

According to a statement released by the department, President Jacob Zuma will use the summit "to articulate the strategic importance of the country, as well as to ensure synergy of the BRICS mechanism agenda with the development and economic priorities of Africa such as infrastructure development, minerals beneficiation and value-addition."

Opinion on how South Africa - and by extension Africa - will benefit from BRICS membership is divided.

Forum still evolving

"BRIC started as an economic countervailing bloc and now there is even talk it will develop key political and economic strategies," says Chris Landsberg, professor of international relations at the University of Johannesburg. But, he says, it is still early days to assess what the tangible benefits of membership will be for South Africa.

"We are the new cheerleader in the club and we need to be cautious about not getting too excited too quickly," says Lebohang Pheko, economist and policy specialist at the Gender and Trade Network for Africa. "I am in two minds. I am not sure how South Africa or Africa would be benefitting from entry to BRIC."

She says the country has had a "very insular and imperial approach in Africa" and she is not sure whether the BRICS relationship will alter this.

"In the sphere of trade and investment," counters Biswajit Dhar, director of the Delhi-based Research and Information System for Developing Countries, "the BRICS are making major contributions by increasing their links with low-income countries".

He says that BRICS members' investment has largely been responsible for the steady growth that low-income countries on the continent have seen in recent years, as China in particular gradually expanded its trade relations with Africa beyond an initial focus on raw materials extraction which is often of limited development benefit to the exporting countries.

"A sizeable proportion of the investment was initially made in the natural resource industries, but with time, money is now flowing into not only agriculture and manufacturing, but also into a number of service sectors, most noticeably telecommunications," says Dhar.

But Pheko says she does not see any benefits for the poor or the vulnerable in low-income trading partners of the BRICS members, or even in South Africa itself.

She points to the impact of trade with China on the country's textile industry to illustrate her point. "Look at our interaction with the Chinese market. They have managed to penetrate and dump their cheap, low quality textiles and goods not only in South Africa but the rest of Africa."

Changes for the better

The transfer of technologies in agriculture and manufacturing could benefit South Africa as it tries to move along a path of sustained growth in employment.

The Department of Trade and Industry (DTI) says it will seek direct foreign investment in value-added industries. The DTI sees collaboration in research as one key area that could be strengthened by BRICS membership.

Biswaijit Dhar: "A feature of their involvement has been firms from the BRICS [countries] partnering with small and medium-sized enterprises in least-developed countries, and they have also provided technologies."

Ahead of the summit, media reports contain a scattering of announcements of trade deals reached at bilateral meetings, such as a Chinese purchase of Brazilian aircraft that will be worth up to 1.5 billion dollars.

As he departed for China, Indian prime minister Manmohan Singh told Indian media he expected discussions on how BRICS countries can help sustain global economic recovery, and an exchange of views and positions on managing currency volatility and inflation.

"If we can coordinate our positions on some key areas such as sustainable development, balanced growth, energy and food security, reform of international financial institutions and balanced trade that will be to our advantage," Singh told journalists.

Also trailed in the Indian press is an agreement to be signed when heads of state meet on Thursday to permit BRICS members to extend grants or credits to each other in their own currencies rather than U.S. dollars.

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