Emerging market economies demand a “new deal” that allows countries of the global south to develop on their own terms. However, the newly expanded Brics bloc does not seek to be an opponent of Western superpowers, says trade, industry & competition minister Ebrahim Patel.
“What we’re seeking to do is not find a world divided into two halves, where we are in one half and others are in the other half. We see that prosperity over hundreds of years, but particularly in the last number of decades, has come from countries collaborating.”
Patel was speaking to Business Times on the sidelines of the 15th annual Brics summit, where a decision was taken to add Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE) as full members of the bloc from January 1 2024.
He said Africa’s position as a supplier of raw materials to the rest of the world and a market for finished products from the developed world needed to change. The continent was striving for a “new global deal” that enabled it to industrialise.
“We’ve got two agendas with this. The one agenda is to protect an open world, a world that doesn’t divide into two halves. We still reach out to the United States. We took a team of cabinet members to spend a few days in the US. We have an economic partnership agreement with the European Union and the UK, and we value those. So this is not about building an alternative world.
“But the second thing is southern countries, particularly African countries, have not had a good deal after the end of World War 2. Yes, we achieved political independence. The decolonisation period meant that formal political decisions were no longer taken in the capital cities of the colonial powers. But many of the economic relationships remain unchanged.”
Patel said if Africa could create balanced and sophisticated economies so it was no longer completely beholden to the commodities cycles of the global economy, the continent would become more resilient.
“Building this new deal globally is about saying people in the south also have the right to develop. And we have the right to develop on our terms, and countries must choose that, but they must work with each other,” Patel added, confirming South Africa's central role in the expansion of Brics.
Many delegates at the summit wanted Brics to announce an alternative currency for the bloc, but the meeting ultimately settled on asking finance ministers and central bank governors to look into a peer-to-peer trade system in which member countries pay for goods in local currency.
New Development Bank (NDB) vice-president and CFO Leslie Maasdorp said his corporation was committed to raising local currency in its member countries, developing its own capital markets and deepening the capital markets of Brics. He said locally the NDB raised R1.5bn in rand-denominated bonds last week.
“You’ve got the South African National Roads Agency loan of R7bn, so that project will be funded fully in rands. We’ve got the Transnet new loan that is under consideration and will also probably be funded in rands. So there’s huge appetite. We will probably increase the size of our programme here to raise those necessary finances,” he said.
In his opening remarks on Wednesday, President Cyril Ramaphosa said the world was changing and new political, social and technological realities call for greater co-operation between nations.
“These realities call for a fundamental reform of the institutions of global governance so that they may be more representative and better able to respond to the challenges that confront humanity. While firmly committed to advancing the interests of the global south, Brics stands ready to collaborate with all countries that aspire to create a more inclusive international order,” he said.
Chinese minister of commerce Wang Wentao, delivering opening remarks on behalf of President Xi Jinping on Tuesday, said in reference to the US that “everything we do is to deliver better lives to our people. But some country obsessed with maintaining its hegemony has gone out of its way to cripple the emerging markets and developing countries. Whoever is developing fast becomes its target of containment, whoever is catching up becomes its target of obstruction. But this is futile. Every country has the right to development and the people in every country have the freedom to pursue a happy life.”
Efficient Group economist Dawie Roodt said a major strategic challenge for the bloc was that Brics was not yet a formal grouping or club.
“It’s an absolutely loose grouping of countries with rough guidelines on what they should do, like trade, global warming, exchange of technology and speaking with one voice, but it’s actually a very loose grouping of countries.”
Until the bloc defines itself better, it will continue to be regarded as a loose outfit, Roodt said.
There is no attack on America which could topple the economy or the dollar as a reserve currency. But the Brics countries want to look at currencies and payment systems for the purposes of trade, and that is positive
— Dawie Roodt, economist, Efficient Group
“We are talking about close to half of the population and close to 30% of the world’s GDP, so we see a lot of potential. But it’s not there yet. What I do think is the expansion of Brics, especially [the inclusion of] Saudi Arabia, is huge because they are wealthy and can contribute to the Brics bank, and that is one of their success stories.”
Roodt added that Brics countries could achieve a lot with their multiple trade and co-operation programmes, but maintained there was not much progress to speak of other than the formation and operationalisation of the New Development Bank. He also questioned the inclusion of Argentina, Iran and Ethiopia in Brics.
“I’m quite surprised to hear they have invited Argentina, as they are in big trouble financially. I don’t understand approving Ethiopia either. You don’t want to have members with all sorts of issues, and Ethiopia is one of those. Egypt, Saudi Arabia and the UAE make sense,” he said.
Adding Iran, in the context of its tensions with the US, was troubling. Roodt said antagonising the US at this point in the world’s economic history was akin to “scratching where one does not itch”.
“There is no attack on America which could topple the economy or the dollar as a reserve currency. But the Brics countries want to look at currencies and payment systems for the purposes of trade, and that is positive,” he added.
Miyelani Mkhabela, the founding director and CEO of Antswisa Management Group, said the growth of Brics's significance over the past decade and its quest to reshape the global economy's architecture were compelling.
The bloc was starting to challenge the G7 and, while Argentina may have major debt problems, securing it helped Brics get a foothold in South America, he said.
The World Trade Organisation should take notice in the long term as the global south’s hard-product economies consolidated, while the West comprises largely service economies, a dynamic that was upended by the pandemic.
Mkhabela said at a continental level, Morocco will be an interesting country to watch. It has not joined Brics and is seen as a European proxy on the continent.
“That [Morocco's proximity to Europe] would need to be weakened as it is the second-largest investor in Africa after South Africa. For Morocco to join Brics, they would have to let go of the Western Sahara.”
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