BRICS – A New Order Arises
BRICS is currently the magic word, particularly since a successful Summit of the Heads of State of Brazil, Russia, India, China and South Africa in Durban recently.
It was the fifth BRICS Summit.
In the seaport city of Durban, South Africa signed deals with Russia, China, Brazil and India. South Africa’s parastatal road-, rail- and port transport company, Transnet, signed a loan agreement with China to the value of US$5 billion.
According to South Africa’s Transnet CEO, Brian Molefe, “A series of country-to-country collaboration agreements have been undertaken to strengthen economic and trade relations between the BRICS members.”
But, the biggest project growing from this fifth BRICS summit is the formation of a BRICS Bank to be hosted by South Africa. The BRICS Bank will have a capital base of US$280b. This new bank would compete with the Breton Woods Institutes, the World Bank-IMF structures.
South Africa’s media mentions the name of Jaco Maree, retired head of Standard Bank South Africa Limited, as a possible first CEO of the BRICS Bank. Maree is currently the consultant to the new head of Standard Bank South Africa.
South Africa’ biggest trading partner, China, expressed the hope that the trade between the five major emerging economies would increase dramatically, particularly with its focus on the African continent.
Of the five BRICS members, Russia has the smallest market share in Africa.
South Africa’s member of the country’s Broad Based Black Economic Empowerment (BBBEE) structure, Patrice Motsepe, who is the chairman of the huge mining company, African Rainbow Minerals (ARM), became chairman of the BRICS Business Council. Old established mining magnate, Rick Menell, from his mining house, Teal Mining, helped with the creation of ARM. During Former President Thabo Mbeki’s reign, Motsepe was known as Mbeki’s mining magnate.
However, South Africa is no match for China in its investment drive into Africa. China has long overtaken South Africa.
A senior economist has remarked, “BRICS heralds a change of guard in Africa’s economy. This new formation represents 43 percent of the global population and up to 40 percent of the world’s economy.”
The question arises, how can BRICS change the economy in terms of ownership, given that South African multinational companies own and operate most mineral categories in Africa directly and/or indirectly through banking finance and/or ownership of shares on the stock markets?
It would be basic logic to assume that it would be right and therefore also earnestly implemented to trade with and invest into companies that are indigenous black owned and controlled. If not, there would be no difference in South Africa’s economy. Africa would then not benefit from the formation of BRICS, as it would be excluded.
The senior economist advised, “Fifty percent of all trade should be done with small to medium sized black owned and controlled companies. The big, multinational black companies are well empowered and very much part of the old oligarchs.”
The only way to bring about the above-mentioned change of the economic landscape is for BRICS to establish a pro-active Trade Protocol with trade fines, if the protocol is overlooked and disrespected. BRICS is therefore left with no choice, but to bring about a change in ownership patterns in South Africa’s economy. Only then the levels of inequality would be addressed. This is essential.
If analysed, the total international trade emanating from BRICS members amounts to only 2.5 percent of the full global trade.
The absolute majority of trade and trade finance goes to the US, UK and EU.
BRICS’ investment in, development of and trade with South Africa would only trickle into the rest of Africa through the big corporates.
According to Bloomberg News, it is part of the BRICS discussion to endeavour trading with their own member state currencies, away from the US dollar.
If BRICS addresses the ownership of the economy in South Africa as outlined above, it will be a trade alliance of real change. Time will tell soon.
* Udo W Froese is a political and socio-economic analyst and columnist based in Johannesburg, South Africa. You can follow him on Twitter: @theotherafrika, visit his blog at theotherafrika.wordpress.com, or see his Facebook page, Africa: The Other Side of the Coin.