The Saudis will add heft to Brics
The influential Muslim country presents immense opportunities for SA and Africa
When the Brics group met for its 15th summit in Sandton in August last year, the admission of new members was high on the agenda. Eventually, five nations — Egypt, Ethiopia, Iran, the United Arab Emirates (UAE) and Saudi Arabia — were invited to join the bloc from more than 20 countries that had submitted applications for consideration.
While the suitability of each aspiring member may have been intensely debated in Brics, I can imagine there was universal consensus on the value that Saudi Arabia would bring to the bloc. The Middle Eastern powerhouse’s presence in Brics will add geopolitical heft to the group.
The kingdom’s single biggest advantage is the immense influence it exercises on the global energy markets. The country possesses about 17% of the world’s known crude oil reserves and it is the biggest oil producer, pumping out 12.44million barrels a day, or 13% of global oil supply.
That will give Brics more influence on the global energy markets. The addition of Saudi Arabia means the group will collectively control more than 39% of world oil production, which is vital for the group’s energy independence. Moreover, with five of the group’s members — China, Russia, Brazil, India and Saudi Arabia — being among the largest consumers of oil, responsible for 31% of global oil consumption, Brics has a starting point in its de-dollarisation agenda. The use of members’ currencies could be encouraged in oil trade as is already happening among China, India and Russia.
Saudi Arabia has used its oil reserves to build one of the world’s biggest economies. The kingdom’s GDP is estimated at $1.1-trillion (R20trillion) — about 40% of the total GDP of new members — with a GDP per capita of more than $30,400, which is way above the Brics average.
With its huge oil revenues, the country’s leadership has managed to create a sovereign wealth fund, the Public Investment Fund (PIF), with assets north of $700bn. The PIF is under the management of Crown Prince Mohammed bin Salman who effectively runs the government as the prime minister and who has used the fund to invest in various sectors around the world.
As Brics members have been making efforts to promote intra-bloc investment, Saudi Arabia’s large war chest will play a critical role in promoting investment flows. Further, Saudi Arabia sits along the Red Sea, which carries 12%-15% of world trade and 20% of global container shipping. Also, it is the most powerful country in the Red Sea basin. As such, having Saudi Arabia as a member means Brics will be able to exercise its influence on one of the world’s busiest shipping routes.
Besides its considerable economic muscle, Saudi Arabia is also an influential Muslim country. It is home to Mecca, the Islamic holy city which hosts hundreds of millions of Muslim pilgrims from around the world. The 1.8-billion Muslims in the world will be able to associate with Brics.
Before the addition of new members, Brics did not have a Muslim-majority country. Saudi Arabia and other new members such as the UAE, Iran and Egypt, which are also majority-Muslim countries, will bring a different dimension to the group, promising handsome geopolitical dividends.
Most importantly, Saudi Arabia’s Brics membership coincides with its reform mission being vigorously pushed by the young Mohammed bin Salman (MBS). Since his appointment as crown prince in 2017, MBS has embarked on reforms in political, economic and social domains with a view to transforming Saudi Arabia’s image from that of an oil-dependent, reclusive and ultraconservative Islamic kingdom to a modern, open and progressive Islamic kingdom.
Some of the significant social reforms which are part of the government’s Vision 2030 include the abolition of the notorious religious police, allowing women to drive, revoking the requirement for a male guardian to escort females in public, and banning extreme punishments for criminal offences.
Recently, through the PIF, the government has invested heavily in sports to improve the country’s image. Major boxing matches, premier golf tournaments and Formula One Grands Prix have been hosted in Saudi Arabia. The government has also splashed billions of dollars on bringing some of the world’s finest footballers, such as Cristiano Ronaldo of Portugal and Sadio Mane of Senegal, to play in the country’s top-flight domestic league.
All this is part of the government’s economic transformation plan through which it is making efforts to diversify its economy. MBS has mastered the art of using newly found soft power, such as sport, to showcase mega projects. Under Vision 2030 the government has embarked on several major projects, such as Neom City, 170km long and 200m wide, set to house about 9-million people. The city will be run on 100% renewable energy and connected by a high-speed railway line instead of a road network.
Other ambitious projects that are part of the government’s economic transformation plan include the Jeddah economic city, the Diriyah
Gate, Red Sea Global, the Qiddiya, and the Mohammed bin Salman Non-Profit City. These mega construction projects present new opportunities for investors and contractors in Brics countries such as South Africa.
The government has also stated its intention to create a manufacturing capacity of 500,000 electric vehicles by 2030. For that it has committed to invest up to $15bn in the extraction of critical minerals in African countries such as South Africa, Namibia, Guinea and the Democratic Republic of Congo, which boast significant reserves of socalled transition minerals.
At the Saudi Arabia-Africa Summit in
November 2023, the PIF pledged to make investments in transport, energy and health sectors across the continent with $50bn to be made available by 2030. About $15bn in investment deals were signed with South Africa, including lifting the ban on the importation of South African red meat.
Saudi Arabia’s entry into the Brics fold presents immense economic opportunities for South Africa and the continent at large. South Africa and other countries should also watch and learn how Saudi Arabia has used revenues from its natural resources to create a modern and sophisticated economy. This is something that has eluded many African countries, including South Africa.
South Africa wastes lots of time and energy explaining its Brics Plus membership to the US and the Western world rather than taking bold moves to transform its economy.
South Africa and other countries should learn how Saudi Arabia has used revenues from its natural resources to create a modern and sophisticated economy