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As South Africa readies itself for the meeting of the leaders of Brazil, Russia, India and China this week (March 26-27), media interest has focused on the launch of a BRICS development bank and the potential for growing the already strong trade links between the BRICS and Africa. In fact, the Development Bank idea was backed by academics and experts from BRICS research institutions and universities at a two-day pre-summit academic forum last week (March 11 and 12).
An agreement to form a development bank would be symbolic of a desire to move forward in the important area of economic agreement, important because the political differences between BRIC countries are too great. Before the concept of BRICS was conceived, there was already an India, Brazil, South Africa forum, which runs in parallel to the BRICS. Asked about the difference, a delegate at the academic forum said, “IBSA is about democracy, BRICS is about economics.”
The BRIC idea, after all, was dreamt up by Jim O’Neill of Goldman Sachs, an investment bank, and was inspired by the high rates of economic growth of the four original countries, before South Africa joined. Its emergence as a political entity is all the more surprising.
Commentators in South Africa and abroad are hoping that details will surface about the development bank at the actual BRICS summit, but are not hopeful of rapid movement in the formation of such a bank. Senior analyst at South Africa’s Standard Bank, Simon Freemantle, believes that each country will contribute around $10 billion as seed capital, with the rest to be raised on world capital marketsAnother two potentially important recommendations from the academic forum are that the BRICS look at trade integration through preferential trade agreements, not a free trade area on the EU-SA model by any means. Perhaps more important is the idea of creating mechanisms to deal with volatility in global currency markets. This is a promising notion for South Africa, whose widely traded currency has moved so wildly that it defies attempts at being used to bolster industrial policy.
All these economic interventions were covered by the first of the five themes discussed at the academic forum, “BRICS and the global economy.”
The second theme was “Reform of Institutions of Global Governance.” A recommendation was that BRICS collaborate to reform global multilateral institutions to make them more democratic, representative and accountable. This highlights ambitions more modest than the anti-imperalist rhetoric of some supporters of the BRICS. The academic forum also reportedly agreed that the BRICS mechanism would achieve more in reforming the economic architecture of global financial institutions, such as the WTO, than having any impact on the political ones, such as the UN Security Council.
Freemantle believes the bank is not a “a counterweight to multilateral development banks—notably the World Bank”. Though the Bretton Woods institutions are a focal point for BRICS countries’ resentment at Western financial domination, Freemantle reckons a BRICS bank would be an “auxiliary funding institution —albeit more aligned to BRICS’ development agenda”.
The BRICS Fifth Summit website itself reports that alongside the development bank a mooted consortium of BRICS think tanks is being sought. Indeed, executive director of Russia’s National Committee for BRICS studies, Georgy Toloraya is reported as saying that in its first phase the bank would “serve as a centre of analysis,” and he seems to view the bank as a planning institution for directing funding for development. This suggests no big capital injections or finance raising at first.
On the third theme, “Co-Operation on Africa,” the academic forum recommendations include pursuing deeper co-operation with the continent’s overarching political body, the African Union, especially on Africa’s priorities, above all integration. Endorsement of this by the summit itself would go a long way towards mitigating African perceptions that South Africa’s joining BRICS merely strengthens its hand in a kind of new colonialism in other African countries.the image of Chinese investment as intent only on raw material extraction and exports is overdone
On the fourth theme, according to the Pambazuka website, Education, Research and Skills Development for Building Industrialising Economies, the academics and experts came up with the interesting recommendation to establish “an independent BRICS rating agency for educational institutions as well as a BRICS university”. Neither is really necessary. Each of the BRICS has universities, which are, or should be, by definition not nationally limited or limiting. Universality is central, after all. University rankings are controversial, and could be accused of trying to quantify the unquantifiable, as well as ensuring dominance of privilege. It might be better to campaign to ignore rankings altogether, though that is not the job of BRICS.
The fifth theme of the academic forum, Peace and Security, elicited fairly bland recommendations, according the Pambazuka descriptions of the recommendation. The BRICS club is expressly not militarily inclined, and though there is room for co-operation, there is even less reason to set up parallel organisations to multinational organisations in this area. What does unite the BRICS countries, despite their many differences, is a tendency to support the policy of non-intervention or non-interference in the affairs of other countries, This policy which has led to accusations that China is happy to help prop up repressive regimes in return for economic favours, even aiding in repression.
However, one recommendations stands out is the backing for continued “centrality” of the United Nations (UN). This is in line with comments by South Africa’s foreign minister Ms Maite Nkoana-Mashabane that the BRICS countries are catalysts for a global “shift from the old locus of political, economic and social power into a multipolar system”. In other words, the BRICS are not seen as a new version of the Non-Aligned Movement, but rather a grouping to get the multilateral institutions to live up to their description.
Finally, though the media has focused on trade, particularly the growth of the BRICS trade with Africa, and a trade balance massively in China’s favour, this is of lesser importance for South Africa than investment issues, which do not seem to have received much attention. A development bank does not tackle the important issue of the need for more cross-border investment in the real economy, nor does it lessen the hurt to companies and workers from intense competition in particular sectors among the BRICS. For instance, Brazil has been accused by South African poultry producers of dumping chicken on the local market.
Increased imports from China have been blamed for a loss of South African jobs, particularly in the clothing sector. While the image of Chinese investment as intent only on raw material extraction and exports is overdone, according to research which has more carefully tracked such investment, there is the question whether South Africa, with its focus on high-wage jobs and perceptions of low productivity, can capitalise on skills transfer from China for local manufacturing.
Ironically, South Africa’s President Jacob Zuma was able to boast recently as an example of South Africa’s healthy investment climate an R800 million ($89 million) investment by Anglo-Dutch multinational Unilever and one of R500 million ($54 million) by Swiss multinational Nestle. A newsletter by South African research company Who Owns Whom recently noted that the USA, India and Spain had put R4.5 billion ($483 million) into four new South African renewable energy plants. Only one of those investors resides in a BRICS country.