SA, which is hosting the 15th Brics summit in Johannesburg this week, will use the gathering 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 superpowers, 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.
“The engagement is on reforming global financial architecture. What is being discussed is modes of using our own currencies when trading with each other,” a senior diplomatic source told Business Day on Monday.
Reliance
The source added that “there is no talk of a common currency” with regard to the dedollarisation debate.
Business Day reported in July that sanctions imposed on Russia by the US, the EU, the UK and Canada due to the war in Ukraine had accelerated talks among Brics member states to lessen their reliance on the dollar for trade.
“You would have to have a significant amount of that currency from that country and they would have to have your currency in stock and then it becomes easy,” a source close to President Cyril Ramaphosa explained. “The onus would be on the central banks in the respective countries to keep the currencies in hand. That is the only complication.”
He explained that the push is for Brics countries to have a louder voice “than, say, Italy” in the UN and Group of Seven “based simply” on economic contribution.
“If the call by Brics countries [for reform] continues to be ignored, the success of such a resolution would be the impact on the dollar if, say, China and Russia start trading in their own currencies. If it is successful and there is no reform of at least the UN Security Council, the next phase would be for Brics currencies to trade in a single currency. If countries like Saudi Arabia are included in Brics, the impact would be earth shattering,” the source added.
However, another senior official in the National Treasury said no resolution on Brics countries trading in their own currencies is expected at this year’s summit.
“The finance group in Brics has not even discussed this issue. Precisely because it is not feasible,” the source said. The question of whether Russia and China would want rand would need to be answered by now, the source said.
Other sources in the presidency and department of trade, industry & competition declined to weigh in because they said it is a “big move” and Ramaphosa “will speak to it during the main event [at the] Brics summit”.
India’s foreign secretary, Vinay Mohan Kwatra, reportedly said on Monday that the Brics deliberations focused on boosting trade in national currencies instead of developing a common currency.
“The discussion framework in Brics and the substance of that discussion framework ... [has] focused principally on trade within national currencies,” he was quoted as saying.
While that comment confirms SA’s proposal at the summit, the vice-president of the New Development Bank, Vladimir Kazbekov, confirmed at a media briefing on Monday that a resolution for Brazil, India, China, Russia and SA to immediately start trading in their own currencies may not be immediately feasible.
“Definitely we going to develop national currency transactions. At the moment we borrow a lot of Chinese yuan ... then we going to check Indian market rupees maybe by October, then we can consider other member countries,” Kazbekov said.
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