Brics bloc aims for new joint structures at summit
Development bank on cards
AN ECONOMIC development bank, a business council and a joint think tank are among the possible outcomes of the 5th Brics summit, which starts in Durban on March 26, according to Jeremy Stevens, a Beijingbased research analyst at Standard Bank.
The Brics grouping is made up of Brazil, Russia, India, China and South Africa, which together represent about 25 percent of global gross domestic product (GDP), measured in terms of the purchasing power of the local currency. The summits are intended to find common ground between the members.
Stevens said next month’s summit could also consider an institution to provide support to countries whose export income fell well short of import costs; and a reinsurer to absorb some of the risk carried by insurers in large-value transactions. He noted that currently reinsurers were based in mature economies.
The theme of the summit is: “Brics and Africa – partnerships for integration and industrialisation”. Robert Appelbaum, the head of Webber Wentzel’s south Asia department, said South Africa’s role in the Brics was increasingly seen as the representative of Africa.
Top of the agenda will be the creation of a Brics development bank. Catherine Grant, the economic diplomacy programme head at the SA Institute of International Affairs (SAIIA), said the bank would be the first Brics institution – and therefore a milestone in relations between the members.
Stevens said “a host of pragmatic issues” relating to the bank would have to be resolved. Among others, these included the source of funding; potential borrowers – sovereigns only or also the private sector; types of projects; geographical reach; and headquarters.
He said it was likely each of the members would initially contribute $10 billion (R88.5bn) in seed capital to the bank. “The bank would then borrow from global capital markets, becoming a non-resident borrower in the US, Europe, Hong Kong and elsewhere.”
Appelbaum said another issue under consideration could be a common currency. However, Standard Bank chief economist Goolam Ballim said this would be impractical as the countries were too disparate: geographically, economically and politically.
However, he noted that China’s renminbi was being used increasingly in trade and other transactions globally.
While the summits aim to find areas of agreement, the process does not always take the grouping forward because of inherent conflicts of interest: all are commodity producers competing in the same markets. One example is last year’s dispute when South Africa imposed punitive tariffs on imports of Brazilian chickens.
Peter Draper, an SAIIA senior research fellow, identified philosophical differences among Brics members. “For instance Russia sees the Brics as an anti-West caucus group. But Brazil doesn’t see it that way at all. Though Russia’s is a minority view, it plays to some constituencies in South Africa.”
The first formal summit took place in Yekaterinburg, Russia, in 2009. South Africa, which was accepted into the grouping the following year, is very much a junior member.
China, the world’s secondlargest economy, is the most influential, with nominal GDP worth $8.3 trillion last year. It is followed by Brazil at $2.4 trillion; India and Russia both about $1.9 trillion; while South Africa lags at $391bn.
Only two of the four other members provide significant markets for South Africa’s exports, according to figures from SA Revenue Service. Out of R664bn in total exports between January and November last year, China bought R77.8bn worth and India R27bn. Exports to Brazil were worth only R6bn and to Russia R3.2bn.