BRICS Bank and Africa

By Emmanuel Musaazi

When I heard about the formation of (Brazil, Russia, India, China and South Africa) BRICS bank with South Africa as one of the cofounders, I was intrigued and on deep reflection was not sure if this was a great idea.

At the risk of sounding like a pessimist I believe there is reason for cynicism when an African country joins an international economic grouping as the track record reveals that we have always ended up with the short end of the stick. From the International Monetary Fund (IMF) to the World Bank, the record has been abysmal for African countries. On the other hand I hope I am wrong for the sake of South Africa and by extension Africa.

My analysis of the BRICS bank concept is from an African perspective of “what is in it for us” and quite honestly, aside from a motive of mainly China, India, Brazil, and Russia wanting to assert their rising economic and military status in the international geopolitical sphere, I do not see any new ideas on the table. Once again an African country is a pawn in a bigger game.

I would rather have liked to see South Africa invest her political and economic capital in reinforcing regional integration initiatives through its participation in the African Development Bank (AfDB) for example. At the moment Nigeria is the biggest player in the AfDB in terms of contribution.

Having the second largest economy in Africa, South Africa’s role in the AfDB ought to be more robust than it is at the moment. Internal economic activity driven by intra-trade should be the foundation of economic growth and sustainable development in Africa. This is precisely what the AfDB was setup for, basing its core operational principles on the creation and funding of so called economic corridors a concept ironically started by South Africa with their Spatial Development Systems.

Supporters of the BRICS bank idea tout the fact that BRICS Foreign Direct Investment and trade with Africa is at an all-time high hence a BRICS bank should be a good idea too. However comparing moneys for investment and trade with moneys for development projects is like comparing apples and oranges. A BRICS bank will by and large operate like an IMF or World Bank as it will also be accountable to the tax payers of founding member countries. Hence conditions and terms of borrowing will have to be set and the same issues that bedevilled borrowers – that have not been adequately addressed – such as the lack of good governance, corruption, and the rule of law will still apply. Leading to the same outcomes as with the IMF and the World Bank.

The BRICS economic region will have the highest number of poor people given that Asia has the highest number of poor people in the world (over 500 million people) and Sub Saharan Africa has the highest percentage of poor people (over 46 percent) in addition to the poor in Brazil and Russia both of which have some of the highest poor rates in their respective regions, one then wonders how the needs of Africa as a region would be given higher priority to the other BRICS partners given their apparent dire needs. If anything it might be harder to obtain funding for African development projects from a BRICS bank. It is also worth noting that according to World Bank statistics, China, Brazil, and India are among the world’s top 10 borrowers.

Talk about the blind leading the blind.

Emmanuel Musaazi is a college professor based in Toronto, Canada