‘Mature strategy’: Looking back at the Brics summit

Looking back at the Brics summit last week, analysts say it delivered more than expected and they are thankful that it did not descend into anti-West bashing. We can also be proud that South Africa pulled it off without a glitch.

Prof Jannie Rossouw, visiting professor at the Wits Business School, says if anything, South Africa can be proud of the successful hosting of the summit.

“South Africa showed the world that we can still organise a summit of this magnitude and that is the most important takeaway from the summit for South Africa.”

Brics ‘bonus’ outcomes: China’s nuclear promise; GDP boost

Bureau of Economic Research at Stellenbosch University chief economist Hugo Pienaar says, on balance, the summit delivered more than was generally expected, with six new members invited to join the group.

“One of the major stories that emerged from the Chinese delegation was a lofty promise that, with Chinese assistance, nuclear power held the key to solving South Africa’s power woes.”

The addition of six new members now means that the combined gross domestic product (GDP) of the bloc will now be between 35 and 40% of global GDP.

Hugo says it is interesting that Indonesia, which has the world’s biggest Muslim population and is a producer of key metals such as nickel, declined membership.

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New Brics members

“Looking at the new members, it is clear that the bloc is keen to expand its influence in the Middle East, a major source of global oil supplies. Indeed, it is worth noting that three, or half, of the new members are also part of the Opec oil cartel.

“While Saudi Arabia traditionally had good relations with the US, this is not the case for Iran. Besides potentially more favourable access to oil and gas supplies, the inclusion of Saudi Arabia may also be because of Brics’ desire for alternative, cheaper sources of global capital than is available from traditional Western-led institutions.”

Pienaar says the Saudis have a huge sovereign wealth fund with estimated assets of almost $800 billion, more than double the size of South Africa’s nominal GDP in dollar terms.

“The choice of Egypt is also interesting and is likely for strategic reasons. The country operates and maintains the Suez Canal, a key global shipping route.”

While there is probably also a clear oil link to adding Iran and the UAE, the benefit of including Argentina, a serial sovereign defaulter with bouts of hyperinflation, is less obvious, he says.

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Thankfully, no anti-West rhetoric – BLSA

Business Leadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter that she was pleased to see the that the summit last week did not become an open season of anti-West rhetoric and found that it was much more positive and productive, with member nations focused on how they can support each other’s development and a rules-based multilateral system. 

She says the striking feature of the sessions she attended was the common challenges that the Brics nations face, with ministers from Brazil, India and China speaking about the importance of the energy transition and the need to build the infrastructure to support the growth of their economies and adaptation to climate change.

African Continental Free Trade Agreement

In addition, she liked it that Trade, Industry and Competition Minister Ebrahim Patel spoke of the importance of the African Continental Free Trade Agreement and entrepreneurship on the continent, positioning South Africa as an enabler and gateway to the growth of Africa.

“These themes are exactly the right ones to focus on. The fast-growing economies of Brics, leaving aside Russia whose fate is bound up in its own geopolitical issues, do have a great deal to gain from trade with each other.

“We also have a lot to learn from each other, particularly on how to transition our energy systems and create the infrastructure we need.”

Mavuso points out that it is important for South Africa that the benefit of cooperation is focused on enabling its capacity to grow.

“That is certainly not a threat to the West – a thriving South African economy is something the West would welcome, as a place for investment, trade, tourism and much else.

“Indeed, the West is important in enabling this – our manufactured goods, in particular, are sold mostly to Western markets. In order for us to build scale, those markets are an important anchor. We need to leverage that to become competitive in ultimately serving fast-growing markets like India and China.”

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No escaping geopolitical issues at Brics

She says there was no escaping geopolitical issues, but those are for the politicians to sort out and business can only hope that sensible choices are made in the interests of South Africa. 

One clear theme was the importance of appropriate trade rules that ensures an expanded Brics is not a mechanism for unbalanced trading relationships between the partners.

“As Brics develops and expands, countries need to be held to a set of rules on how they interact with one another.” 

Mavuso also noted that President Cyril Ramaphosa did well in his closing remarks to reinforce his commitment to multilateralism and the rule of law, including the United Nations Charter and encouraging multilateral institutions and international organisations to be constructive in building global consensus on economic policies.

“This framing was a careful balance of Brics aspirations and engagement with the West. The politics will need to continue to be managed carefully – the expanded list of 11 members all have their own features and finding common ground will not be straightforward.” 

Business opportunities

However, she says business can do much to support and facilitate the opportunities that Brics presents.

“The expanded Brics will cover 47% of the world’s population and 37% of its gross domestic product on a purchasing power parity basis.

“Given the respective rates of growth, member countries will account for the majority of the world’s population soon and likely the majority of economic activity in the medium run. That shows its importance as a trade opportunity for South African business.”

Mavuso says the South African government should be applauded for presenting the economic opportunities and objectives of championing the needs of the people of the “Global South” in its hosting of the summit.

“It was a mature strategy that did serve the interests of South Africa. Business can actively support this approach, working for positive outcomes of Brics, ones that do not risk critical existing economic relationships.”