No significant economic gains for South Africa from Brics

There were no significant economic gains in the form of trade or investment deals, that we know of, for South Africa from the Brics summit. Also, none of the six countries invited to join Brics are major trading partners with South Africa, although the member expansion does present some opportunities for the country.

Economic research group, Oxford Economics Africa, says there was a lot of hype and uncertainty, mostly due to South Africa’s perplexing foreign policy and perceived bias towards Russia. “The summit was mostly characterised by aspirational, neutral language and an appeal to a fairer, multipolar world.”

President Cyril Ramaphosa put down the foreign policy marker before the Brics summit, which provided a sensible view and appeased financial markets, aiding the South African rand’s appreciation over this past week.

The group says the addition of new members Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE next year gives further economic clout to the Brics grouping and arguably strengthens its goals, which include, boosting trade, investment and developmental finance in member country currencies.

“Talks of a central currency is fanciful in our view. Claims that the US dollar is losing ground as a global reserve currency are, as before, exaggerated.”

While South Africa may benefit from closer economic relationships with members of the new Brics+, China’s comparative economic importance within the group remains significant, the group points out.

“China is South Africa’s largest trading partner along with India and other European and African countries that are not part of Brics+. Out of all the newly announced members, the UAE and Saudi Arabia are the largest trading partners from South Africa’s perspective.”

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Small volumes in trade from Gulf countries

However, from the Gulf countries’ perspective, volumes traded with South Africa are small in comparison to the goods traded with India and China. South Africa does not conduct a lot of trade with Brazil or Russia.

Brics+ will comprise three countries from Africa, three from the Middle East and two each from South America and Asia. “South Africa will no longer be the group’s economic minnow, with out-of-place Ethiopia taking that spot. From a merchandise trade point of view, the US alone offers more than the newly announced members from South Africa’s perspective.”

However, the group says, one cannot rule out the potential for increased trade and investment opportunities. “A common interest that appeared to stem from the summit was the need to enhance cooperation within the group to lift Africa’s economic development.”

With the economic potential of the African Continental Free-Trade Agreement (AfCTFA) yet to be unlocked, South Africa could play an integral role in this process, the group says.

“South Africa’s foreign policy has not always been coherent in recent times and has been blighted by double-speak and perceived anti-Western sentiment. Ramaphosa noted ahead of the summit that South Africa’s foreign policy is about more than just Brics and that the country remains committed to multilateralism.”