FIFI PETERS: Later this week President Cyril Ramaphosa will join the presidents of China, Brazil, Russia and India at the 14th Brics leaders’ summit, which will be hosted virtually by the Chinese president, Xi Jinping. This year marks 12 years since South Africa has been part of the emerging-markets cluster.
To review the impacts of that membership and the likely agenda of this year’s summit I’m joined by Isaah Mhlanga, the chief economist at Alexforbes. Isaah, good to catch up with you again. I imagine that you would’ve seen President Ramaphosa’s weekly newsletter today, where he wrote about the Brics partnership and he wrote that it has great value for South Africa. I’d like you to unpack that for us. What is this value and how has this partnership benefitted us so far?
ISAAH MHLANGA: Thanks Fifi, for having me. I think the benefits to South Africa are quite clear, especially if we consider the recent funding from the new Brics bank or the New Development Bank. At the height of Covid we got quite a significant amount of money to assist South Africa to weather the Covid pandemic, which would not have been available had South Africa not been part of Brics.
But also if you look in terms of trade, South Africa’s trade with the likes of China, India, Brazil, even Russia itself, has been quite significant over the past 10 years or so.
It is in this context that the Brics meeting this week is quite important, particularly taking the global environment where we currently are in terms of geopolitics – where we have Russia, which is also a member of the Brics, under sanctions – but also the push, particularly by Western countries, towards greening the global economy, which for many emerging markets will happen at the expense of urgent development and reduction in unemployment rates, because the priorities that emerging markets have relative to the richer countries are quite different.
ISAAH MHLANGA: So I think that that is going to be top of mind, but also quite important to discuss and have a convergence that is also going to impact other emerging markets that are outside the Brics grouping in terms of what they take to Egypt on the COP 27 meetings later.
FIFI PETERS: In terms of that assistance you were talking about under Covid, the emergency loan programme, we got $2 billion from the New Development Bank then. Just looking at what the president wrote, he said that around R86 billion had been received from the New Development Bank in total. I’d like to understand, as you mentioned the bank, if that could be a possible conversation that we do have at the summit – just new money. And do you think that we have a need for new money from the New Development Bank at this stage?
ISAAH MHLANGA: I think we should not personalise it to South Africa only. These are funds that are available to all Brics members because we are subscribers or we pay subscription fees to be able to access that money, much like what we have as far as the World Bank is concerned, or also the IMF [International Monetary Fund] is concerned. So by being members and contributors to the funds of the institutions, we automatically have a right to access funding whenever we need it and at a preferential rate [compared to] what we would get if we were to borrow the money from the bond markets.
I think if we were to contextualise it that way, I would imagine they would continue to strengthen that policy coordination, financial architecture, in terms of making countries access funding whenever they need – but also move towards the reform of the other multilateral institutions, such as the IMF, which is one of the agenda items which they have, to say its membership but also the voting powers must reflect an increasing importance of emerging markets, of which the Brics nations are a big part.
So those are some of the discussions that I would imagine are going to take place, in addition to various meetings that should work to enable more people-to-people coordination, macroeconomic coordination as well as political coordination, having that uniform or coordinated view, especially in global forums such as the G20, the World Trade Organisation, the UN, where poor countries, emerging and developing economies have had less [of] a say in how the global architecture is shifted.
FIFI PETERS: In terms of South Africa’s total trade with the Brics countries having increased significantly, as you said, to paint a bit of colour in terms of those numbers, R702 billion is what we traded in 2021. This is up from R487 billion in 2017. We do export quite a bit but we import a whole lot more, and I’m wondering what you think or what your view is of South Africa’s terms of trade with the Brics grouping, and whether you think there is room for improvement there.
ISAAH MHLANGA: There is always room for improvement in terms of trade, not only in terms of volume but also in terms of the quality of what we trade with the Brics nations.
As you alluded, a lot of our trade of our exports is mostly commodities, which are undefined. But what we import is mostly manufactured products, which are high-value products. As a result we end up having a trade deficit with the Brics countries, which means the value of what we import is significantly larger than the value of what we export, simply because of the differences in the commodities that we trade with these countries.
I think the ease and opportunity for South Africa to continue to improve in terms of the value of what we trade [is] by beneficiating more of our mineral commodities into end products that will attract higher value. You can pretty much say it’s applicable to much of the continent, the African continent in general.
We have to move higher up in the trade value chain to export finished products rather than commodities, which will then mean that jobs can be created much more sustainably without being impacted by the commodity cycle, because high-value products generally have a much smaller cyclical impact compared to commodities that have not been refined.
FIFI PETERS: Just lastly, as you mentioned, the political nuances as well – I was [wondering] whether this meeting may be a bit awkward, given the elephant in the room and the fact that Russia is at war. How do you think the members will tackle that particular issue? How do you see those conversations playing out?
ISAAH MHLANGA: So far I think it’s quite clear [as to] the position of some Brics countries. Take China and India, for instance, which continue to buy Russian oil, even though the European Union had instructed its members to limit the procurement of oil from Russia. So it’s quite clear those two countries have taken a position not to be involved in the conflict between Russia and Ukraine.
South Africa as well has taken a neutral position against Russia, also choosing not to be directly involved, trying to advocate for a mediated resolution in the conflict. So you can see already you have four countries that have signalled their position, not necessarily in pushing against Russia, but saying the atrocities must be ended. But as far as condemning, they still fall short of outright condemning Russia for its invasion.
So I think it’s quite clear that it’s not going to be perhaps top of the discussions and trying to condemn Russia, but the main [issue] will be economic security across all countries that will be discussed, given that you also have issues as far as food prices globally are concerned.
We did have an African Union delegation going into Russia a couple of weeks ago, given that Africa is a continent [where] somehow some countries are quite dependent on [that] which comes from Ukraine and Russia. One of them is Egypt, with quite a significant portion. So it’s not just going to be a South Africa or Brics discussion, but it’s going to touch across a number of global issues that have come about because of this Russia/Ukraine conflict.
I’m not foreseeing Russia being singled out as a bad player in this particular instance.
FIFI PETERS: All right, we will leave it there. I think it will be interesting to see the outcome of the summit. We’ll have a lot more to discuss then. But for now, thanks so much for your time. Isaah Mhlanga is the chief economist at Alexforbes.