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Wednesday, June 29, 2016
- South Africa needs to stop agonising over whether it deserves to be in BRICS and start focusing on making the most of its membership to leverage better trade deals.
That is the message from business leaders and academics following last week’s BRICS summit in New Delhi, which brought together the heads of state and government of Brazil, Russia, India, China and South Africa.
From the moment South Africa was asked to join the group there has been much discussion on whether the country really qualifies, and even the inventor of the BRIC acronym, Jim O’Neill, has made no secret of his doubts around the African country’s membership.
In a recent interview with South Africa’s Mail & Guardian newspaper, the global chairman of Goldman Sachs Asset Management said: “It’s just wrong. South Africa doesn’t belong in BRICS. South Africa has too small an economy… and in fact, South Africa’s inclusion has somewhat weakened the group’s power.”
But Gus Mandigora, executive director for Trade Policy at Business Unity South Africa (BUSA), said the question over whether South Africa merited membership of BRICS was getting old, and what was important now was making the most of that membership.
“Our view is that we are members, so let’s get over that question of whether we deserve to be there or not,” he said.
Mandigora, whose organisation led a delegation of more than 50 South African businesses to New Delhi – among them Africa Rainbow Minerals, the Development Bank South Africa and Standard Chartered – said he agreed that more needed to be done to “institutionalise” the role of business within BRICS.
“One criticism that is often made is that between summits nothing happens, so we need to ensure more work is done in between the summits to follow up on discussions,” he said.
“These are still early days and we are still refining how we do things, but we are confident that we can get advantage for South African businesses out of the country being in BRICS.”
Abdullah Verachia, a partner at South African emerging markets consultancy Frontier Advisory and the head of the India-Africa Business Network at the Gordon Institute of Business Science (GIBS) in Johannesburg, agrees the question of South Africa’s eligibility is no longer relevant.
He told IPS: “We cannot keep lamenting whether we should be there or not, we know our economic profile pales in comparison with the other members and even with countries outside like Turkey and Mexico.
“I think we should focus more on how we can benefit by being at the table and engaging within this dynamic economic grouping, which by 2015 will make up 50 percent of global market capitalisation.”
Verachia said more engagement between business and government was crucial, in order to capitalise on South Africa’s membership of BRICS. He welcomed the announcement of a plan to create a BRICS development bank, which could open the door for more engagement among the five countries and reduce dependency on the dollar.
The idea for the bank, which would offer an alternative to the World Bank and the Asian Development Bank, has been largely supported by global analysts, although some say there is not enough political cohesion and there are too many conflicting interests among the member countries to make it work.
On a South African level Verachia said: “There may only be 56 kilometres between Johannesburg and Pretoria, but you’d think it was several thousand, seeing how little business and government seem to talk.”
South Africa’s parliament is located in Pretoria and its unofficial financial capital is Johannesburg.
“In India, there is a much closer engagement between government and private sector and I think that is something we can learn from. But I do feel this needs to come from business, it can’t be government that drives that side of the process,” he said.
Some sort of BRICS-CEO grouping, like the one India and South African already share, could, Verachia said, be a way of creating more tangible and measurable benefits for business within BRICS countries, which he felt were lacking now.
Lyal White, director of the Centre for Dynamic Markets at GIBS, agreed BRICS still lacked firm direction and targets and said more needed to be done to take the discussions out of the summit and turn them into relevant policy.
“I think the development bank is a good idea and there is a lot of potential for this,” he said. “But the idea needs to be backed up with functioning institutions like a secretariat at least to support it going forward.”
White believes that with South Africa due to host next year’s summit, the ball is in their court, to take the initiative and establish the working groups immediately in preparation for 2013.
He said: “If we get the ball rolling now it will make for a stronger summit next year, and it should prevent the agenda being hijacked by either the larger members or geopolitical developments, which to some extent it was this year.”
And he added: “BRICS was created on economic lines, not political, but since South Africa has joined, and perhaps it is just coincidence due to the changes in the global context, it seems the last few summits have been dominated by politics.
“I think we need to get the focus back to the economics and to go beyond the talk about united economic fronts and really start making it easier for businesses and companies in the member countries to engage.”
The BRIC bloc was formed in 2009 and last week’s summit was its fourth. The group became BRICS when South Africa joined in 2010.
The five members account for roughly 18 percent of the world’s GDP, 43 percent of its population and 15 percent of global trade, and hold 40 percent of global currency reserves.