Indian Prime Minister Narendra Modi, Chinese President Xi Jinping, President Cyril Ramaphosa, Russian President Vladimir Putin and Brazilian President Michel Temer pose for a family picture at the 10th Brics summit in Johannesburg, July 26 2018. Picture: SIYABULELA DUDA
Indian Prime Minister Narendra Modi, Chinese President Xi Jinping, President Cyril Ramaphosa, Russian President Vladimir Putin and Brazilian President Michel Temer pose for a family picture at the 10th Brics summit in Johannesburg, July 26 2018. Picture: SIYABULELA DUDA

The Economist magazine has come up with a smart catch-phrase to depict the outcome of the Brics summit held last week in SA: "Acronymy is better than acrimony".

The phrase neatly captures the moment in a world in which US President Donald Trump is tearing up the rule book and creating uncertainty and distrust. By contrast, the unlikely grouping of Brazil, Russia, India, China and SA is suddenly looking like a great option. In the same way that Brexit has ironically saved the EU by illustrating the perils of breaking away, the Brics grouping has been boosted by a newly uncertain global environment.

As a result, the agenda and popularity of the SA Brics summit have both quickly expanded. Witness, for example, the large number of African leaders who appeared at the summit. Even Zimbabwean President Emmerson Mnangagwa took time out from a crucial election campaign to attend the summit, which took place less than a week before voting day. Suddenly, everybody now wants in.

Furthermore, as The Economist points out, at the first summit in Russia in 2009, the final communique held only 15 identifiable commitments, according to a Canadian study. In China eight years later, this increased to 105 commitments in 75 paragraphs. The number of commitments for this year’s summit has not yet been quantified by the University of Toronto, but the final communique was 25% longer and included everything from how to settle trade disputes to making more movies together.

SA’s current foreign investment into China is massively out of proportion

This new mood is welcome, and illustrates the savvy plotting of some Mbeki-era diplomats who engineered SA’s unlikely inclusion in the group.

However, looking closer from a South African perspective at the real dynamics between the countries since the formation of the grouping, a more uneven picture emerges. A Deloitte report highlighted an uncomfortable fact: SA’s current foreign investment into China is massively out of proportion to China’s investment in SA, despite the huge difference in size between the two countries. The number is a bit of a statistical anomaly since it is based largely on Naspers’s investment in Chinese internet company Tencent, which has seen exponential growth.

Even worse, SA’s trade relationship with the other countries in the group is either small and not growing particularly fast, or large and in deficit from SA’s point of view. Neither have they particularly helped SA’s attempt to improve its level of industrialisation. SA’s exports and imports from Brics countries exploded since 2001, but ironically since the group was formed in 2009 they have remained more or less static.

Exports and imports from India and Russia more or less match; Brazil has a big trade advantage but the numbers are small. The big problem is China, where exports and imports more or less matched until, ironically, the grouping was formed when by coincidence, commodity prices fell. Chinese desire for SA’s raw materials has not declined, nor has SA’s desire for Chinese manufactured goods. But the commodity price changes have meant that the trade deficit has blown open.

Presumably not by design, the creation of the bloc has seen an increase in raw material exports in percentage terms and a decline in the exports from SA of manufactured goods. Raw material exports increased from 34% to 70% of total exports to the group from SA between 2001 and 2018. Likewise, manufactured products dropped from 41% to 24%.

From the perspective of these numbers it’s easy to see why the Chinese pledged investments to the tune of $14.7bn (R193bn) as well as loans to Transnet and Eskom, presumably to try to even out the balance a bit.

Behind the hype and the handshakes, the real lesson of the Brics summit for SA is that while membership of multilateral groups might be satisfying and advantageous, it doesn’t substitute for real economic reforms on the ground. The groups are a great pageant, and no doubt this helps on the margins, but the real work needs to be at the coal-face — building businesses that make products which people in Brics countries and elsewhere need. No photo opportunity of global leaders can substitute for that.

Please sign in or register to comment.