The Brics Business Council made little progress regarding whether a Brics currency was possible or even desirable, Standard Bank group CEO Sim Tshabalala says.
He was giving feedback on discussions within the council during a session of the Brics summit in Johannesburg on Tuesday.
“The forum discussed the international payment system in some detail. From an African point of view, the highlight of this discussion was the pan-African payment system, which has immense potential to stimulate trade and growth ... [and] reduce costs of cross-border payments,” Tshabalala said.
“Participants also debated the question of whether a Brics currency is possible or even desirable. Strong views expressed were for and against, with little consensus being reached.”
Tshabalala said from a banker’s perspective the debate would have progressed more fruitfully if the discourse maintained “a sharper conceptual distinction between international payments on the one hand and the reserve currencies on the other”.
Business Day reported on Tuesday that SA was set to use the summit to push for Brics countries to use their own currencies when trading with one another, as a mechanism to push for the reform of global political and financial institutions.
This is not a new agenda, but rather a continuation of previous Brics declarations and initiatives. For example, the New Development Bank and the Contingent Reserve Arrangement were established in 2014 to provide alternative sources of financing and liquidity for Brics countries and other emerging economies.
But it is a call that has long been ignored by world powers, including the US, the UK, France and Germany, which play a dominant role in global governance institutions such as the UN Security Council, the World Bank and the IMF.
Writing in the Business Day on Monday, William Gumede, an associate professor at the Wits School of Governance and author of SA in Brics, said a common currency between countries is not “practical, feasible or implementable” in the short term given the bloc’s divergent monetary regimes, the poor convertibility of individual country currencies and that intratrade areas are still relatively small.
“A Brics currency will also require a Brics central bank, commonality in monetary policy, alignment of fiscal policies and synergy between political regimes across the trade bloc. Yet, as things stand, the Brics currencies have mismatched central banking regimes and are not easily convertible — unlike the EU when the euro was established,” Gumede notes.
“China’s and Russia’s central banks are also state controlled, whereas SA, India and Brazil have independent central banks. A big question is whether China or Russia would surrender sovereignty over their national currencies, which would be crucial to the success of a common currency.”
Tshabalala said the theme of entrepreneurship also featured strongly. “A vibrant SME sector is the most efficient way to create jobs, some SMEs become unicorns and even multinationals ... open market access presents exciting opportunity to entrepreneurs to foster trade and job creation. Participants pointed out, correctly, that start-ups are vulnerable to sudden and sharp increases in interest rates,” the Standard Bank group CEO said.
Other topics discussed pertained to the just energy transition and agriculture, among others, with Tshabalala describing the discussions as a useful step in “unlocking potential for trade and investment for Brics member countries”.
The Brics economies accounted for about 21.3% of SA’s total trade with the world in 2022, of which China accounted for 67.6%, India 26.5%, Brazil 4.2% and Russia 1.7%, according to data from the Industrial Development Corporation (IDC).
SA’s total imports from Brics economies rose 7.3% on average from 2016 to 2022 to reach $32bn, but SA recorded a deficit of $14.9bn in its collective balance of trade with the Brics economies in 2022, about four times larger than the deficit of $3.7bn reported in 2010.
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