BRICS and South Africa

In our previous posts on BRICS – WEF and BRICS and Building Africa with BRICS – we discussed the BRICS leaders undertaking to continue to support Africa’s efforts to accelerate the diversification and modernization of its economies. This is to be done through investment in infrastructure development, knowledge exchange and support for increased access to technology, enhanced capacity-building and investment in human capital, within the framework of the AU and NEPAD.

During the 23rd World Economic Forum taking place in Cape Town, South Africa, an open session on the role of BRICS in Africa is being held. During this session, the topics of collaboration toward delivering on Africa’s promise, intra-regional infrastructure links and economic and investment dynamism are being discussed.

In this post, we look at the impact of the BRICS collaboration on South Africa:

On a practical level, what does this all mean?

We can expect South Africa to benefit significantly from the BRICS partnership. Already a large number of agreements have been entered with other BRICS nations.

Being the economic hub of the continent, benefits to South Africa will have spill-over benefits for the rest of Africa. According to BRIC architect Jim O’Neill (who was originally sceptical about South Africa’s inclusion in the grouping), South Africa has an important role to play, both as a gateway to the continent and as a catalyst for African integration.

News agency AFP has quoted O’Neill (speaking at the recent African Venture Capital Association conference in Cape Town) as saying that South Africa “has a big role to play [within the grouping] and probably quite a responsibility in being some kind of genuine gateway to helping the rest of Africa become more successful”. If Africa could improve its technology, education and governance standards, as well as strengthen its trade and infrastructure links, “then my goodness me, it is not only the next decade [that will be Africa’s], it is going to be the next three or four,” O’Neill said.

It is in trade and infrastructure links that South Africa has the greatest role to play.

  • South Africa is investing US$35,6 billion into expanding and improving its railways, ports and fuel pipelines to be able to export raw materials and manufactured goods. As global demand for oil, metals, minerals, food and other natural resources grows, world economies will increasingly turn to the resource-rich African continent. Africa contains 10% of the world’s oil reserves, 40% of its gold ore and 95% of platinum, and already the demand from BRICS countries for these commodities has been a critical source of growth.
  • The South African Department of Trade and Industry signed a range of agreements at the last BRICS summit. These include agreements with China to set up a cement plant in Limpopo province and a ship repair and building facility in Richards Bay in KwaZulu-Natal. In another agreement, the Industrial and Commercial Bank of China (ICBC), which has a 20% share in South Africa’s Standard Bank, agreed to invest its share of dividends over the next five years in local renewable energy projects. At the same time, Russia agreed to send buying missions to look at expanding purchases of South African juices and other long-shelf-life food products, and Indian conglomerate the Action Group signed an agreement to set up an agricultural export hub at the Dube Tradeport in Durban. All of these will have spill-down benefits for the rest of the region.
  • South Africa is recognised as a dedicated and committed player both globally and regionally, and plays an important role in representing African interests at a global level. The country plays a constructive role in global governance structures, including the G20 (where it is the only African member country, and where the reform of the financial and economic global governance architecture is being dealt with). In order to reposition Africa in the global system, South Africa was one of the African countries that initiated the dialogue with the G8 in 2000, which led to the international community’s subsequent endorsement of the AU’s New Partnership for Africa’s Development (NEPAD).
  • South Africa has taken the helm in Africa’s regional integration efforts by taking responsibility for developing continental north-south rail and road links, championing infrastructure investment, skills development and the development of an enabling regulatory environment by means of a single free-trade zone. By June 2014, nearly 60% of the African economy is expected to be a single free-trade area which will facilitate a more efficient flow of goods, people and investments. The $1-trillion free-trade area, together with its associated infrastructure, will effectively expand South Africa’s market from 50-million to 600-million – and the same principle will apply for each participating country.
  • South Africa has a sophisticated and highly competitive financial and professional services industry which has facilitated increasing interaction with BRICS nations. At the same time, this capacity positions the country as a deal-making and services hub for the region.
David Okwara

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