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South Africa's Participation in BRICS
The deepening relationships between the BRICS countries has re-cast the role of Africa and the world's emerging super powers.
At the recent BRICS summit in New Delhi, South Africa marked its first full year as a member of BRICS – the Brazil, Russia, India, China and South Africa group.
Why does South Africa believe this is important?
Firstly, we must acknowledge that we live in a multipolar world where economic and political influence is increasingly widely distributed. While the European financial crisis continues and the United States' economic recovery remains fragile, the world is looking to the developing world and particularly the BRICS markets for growth. The relative decline of the West's traditional political and economic power has coincided with the rising global stature of many emerging nations and is changing the way the world understands and relates to itself.
The BRICS grouping is perhaps the most concrete and rapidly evolving example of this phenomenon. In just four years, the formal agenda for co-operation and consultation between the countries has expanded quickly and now encompasses issues ranging from finance, agriculture, health, science and technology, academic exchanges, business links and developmental issues, to international terrorism, and sometimes even common policy positions.
Naturally while the BRICS countries will not agree on all issues, they can adopt common positions. So what started as an economist's category has evolved into a platform for collective action. For instance South Africa strongly supports the comprehensive reform of global governance, including the UN system and the Bretton Woods Institutions - the International Monetary Fund and the World Bank - to make them more effective, legitimate and responsive to the needs of the developing world and Africa. Our BRICS counterparts concur.
In February, at the G20 meeting in Mexico, the BRICS Finance Ministers agreed that leadership of global financial institutions should be open to candidates from all countries. We can see no good reason why a post-World War II consensus, which saw the presidency of the World Bank being filled by an American nominee while a European headed up the International Monetary Fund (IMF), should continue unquestioned in this day and age. The recent announcement that the United States had nominated the Korean born Jim Yong Kim, now a naturalised American, for the World Bank's top job suggests this view is gaining increasing traction.
South Africa believes that BRICS countries offer such opportunities to advance the strategic interests of developing nations and Africa, when considering issues such as the reform of global governance, the work of the G20, international trade, development, energy and climate change.
Just as global decision-making no longer simply flows outwards from the West, so too trade and investment patterns are broadening. The BRICS nations, while occasional competitors, also offer each other great opportunities. Russia is famous as a commodity exporter; Brazil exports commodities but also autos and aircraft; India exports services and textiles, whilst China exports electronics, textiles and garments and imports massive amounts of commodities. South Africa, as the newest member of the group, is well-known for its vast mineral deposits but actually has a highly diverse economy exporting, for instance, automobiles, while boasting an advanced financial and professional services capacity.
The nature of BRICS' interaction is becoming increasingly sophisticated and aims to make it easier to invest in one another's economies. Last year at the World Federation of Exchanges' annual meeting held at the Johannesburg Stock Exchange, the BRICS exchanges announced plans to cross-list their respective indices and jointly develop new products. By June 2012 investors worldwide will have easier access to benchmark equity index derivatives, which will be offered in local currency on these exchanges. The seven exchanges represent a combined listed market capitalisation of more than $9-trillion and
9 481 listed companies.
Joining BRICS has opened the door to enormous opportunities for trade and investment within and through all five member countries. Already China is South Africa's biggest single-nation export market while South Africa is China's biggest trade partner on the continent. Likewise, India-South Africa bilateral trade is expected to reach US$15bn by 2015 up from $11bn last year. This year's BRICS business forum committed to enhancing intra-BRICS trade from the present level of US$ 230 billion to at least US$ 500 billion by 2015.
In New Delhi, some significant initiatives to support trade were announced: a Master Agreement on Extending Credit Facility in Local Currency under the BRICS Interbank Co-operation Mechanism, and the Multilateral Letter of Credit Confirmation Facility Agreement between our EXIM/Development Banks. These agreements will become useful, enabling instruments for enhancing intra-BRICS trade. In another potentially ground-breaking development, the BRICS finance ministers will examine the feasibility and viability of setting up a new Development Bank to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries. The joint working group will report back at the next BRICS summit in South Africa.
As a member of BRICS, we do not regard ourselves as participating only in our own interest. South Africa recognises itself as an integral part of the African continent and works to increase its stability, unity, prosperity and international influence. The world is rapidly realising the rising importance and extraordinary opportunities in Africa. According to the IMF, between 2000 and 2010, six of the ten fastest growing economies in the world were from sub-saharan Africa.
Consequently we are at the forefront of driving Africa's regional integration efforts. We have taken responsibility for developing continental north-south rail and road links, and have been championing infrastructure investment, skills development and the enabling regulatory environment – a single free-trade zone.
In June last year, 26 African countries agreed to create a free-trade area for more than half of Africa. By June 2014, nearly 60% of the economy of Africa will be a single free trade area covering Southern, Eastern and Central Africa, and will enable an easier and more efficient flow of goods, people and investments. This pending $1-trillion free trade area and enabling infrastructure will effectively expand South Africa's market from 50 million to 600 million, placing it in the same ball park as its BRICS partners in terms of market size and access.
However, South Africa offers the BRICS countries much more than simply a convenient access point to its own and the region's raw materials and markets. In a turbulent world our macroeconomic fundamentals are sound and are based upon prudent fiscal policy and a credible monetary policy framework. While confidence in financial markets may have been eroded in many other parts of the world, South Africa's financial market development was ranked in 4th place globally in the 2011/12 World Economic Forum's (WEF) Global Competitiveness Index. Likewise, the WEF rates us number one in the world for both the regulation of securities exchanges and the strength of our auditing and reporting standards; and second for both the soundness of banks and the efficacy of corporate boards.
The list of excellent rankings in these areas goes on, but collectively they make one powerful statement: South Africa has a sophisticated and highly competitive financial and professional services industry which positions the country as a deal-making and professional services hub for the region. This capacity has been a source of increasing interaction with BRICS nations, which we expect to continue.
One year after joining BRICS we are glad to see the deepening of relationships between the nations. Trade and cultural interaction is increasing and common positions are being formed - where our interests and views coincide. BRICS is proving to be a relationship which can make our countries more competitive and more effective in the international arena. We would like to see this process continue during this year's summit in New Delhi and look forward to welcoming our partners to South Africa in 2013 when we host the 5th BRICS summit.
Author: Miller M Matola, Dip, MBA, MAP, MA, BA (Hons), BA Ed, is the CEO at Brand South Africa.
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Thanks for updates, i hope this will improve our designation in may ways.
