Opinion
What BRICS can do for South Africa and Africa
By Thebe Mabanga
The 7th Summit of the BRICS (Brazil, Russia, India, China and South Africa) member states – the five major emerging national economies – taking place this week in Ufa, Russia, presents another opportunity for South Africa and Africa to help shape its new narrative as it awaits a new driver of growth following the commodity supercycle that fueled Africa’s growth over the past two decades.
The recent World Economic Forum (WEF) on Africa and African Union (AU) Summit pointed to a number of key steps that Africa could take to drive growth internally. Membership of BRICS can help Africa, with most, if not all, the initiatives.
The first thing that African countries need to do is to aggressively drive investment in infrastructure. Earlier this year, the commodity trading company Trafigura published a report which found that developing countries had to double spending on infrastructure to US$2 trillion a year by 2020, with the bulk of this money to be directed to sub-Saharan Africa.
The member states, through the new development bank – the BRICS bank – can help drive financing of that infrastructure. However, the initial funding pool for the new financial institution is US$100 billion – which is roughly the amount of Africa’s funding gap in a single year.
What this means is that the new BRICS Bank does not have the initial capacity to do it alone. It would need to be lead funder and attract sovereign wealth funds and global pension funds to help close the funding gap.
Apart from funding, BRICS can help infrastructure programs with skills and expertise.
The next big benefit that BRICS can deliver specifically for South Africa is to help the country export an increasing proportion of higher value and intermediate goods to the BRICS countries and their regions of Asia, South America and Eastern Europe.
An April 2014 study by the South African Institute of International Affairs (SAIIA) illustrates this point. The study, by Chukwuka Onyekwena, Olumide Taiwo and Eberechukwu Uneze of the Center for the Study of Economies of Africa (CSEA) in Abuja Nigeria, showed that between 1995 and 2011, trade between South Africa and BRICS countries, grew substantially.
Exports from South Africa to BRICS countries grew from less than US$5 billion in 1995, to almost US$25 billion by 2011. However, the underlying composition of that needs to change. China is the dominant partner in South African trade as it overtook India in 2003 as the leading destination of South African exports, followed by India, Brazil and a negligible portion to Russia, where trade consists of trucks and cars.
In 2011, crude materials, except fuels accounted for 34.5 percent, while commodities and their related transaction accounted for 25.5 percent.
