South Africa in the BRICS

South Africa will celebrate its 20 years of democratic rule next year, following the demise of apartheid in 1994. The ruling African National Congress (ANC), which is also the oldest liberation movement on the continent, celebrated its 100th anniversary last year. As its core statement of principles, the “Freedom Charter” was adopted in Kliptown on June 26, 1955. It declared that “There shall be Peace and Friendship” and projected that South Africa shall be a fully independent state that respects the rights and sovereignty of all nations, strives to maintain world peace and the settlement of all international disputes by negotiation – not war, and calls for peace and friendship amongst all our people secured by upholding the equal rights, opportunities and status of all.

These statements further informed South Africa’s international relations and foreign policy since 1994, as also expressed in our Constitution. The preamble calls upon us to “build a united and democratic South Africa able to take its rightful place as a sovereign state in the family of nations.” The birth of the South African constitutional democracy also attests to the international community’s resolve to ensure the demise of the apartheid system as well as to support South Africa’s subsequent quest to address the inherited socio-economic inequalities of the apartheid era.

In an article in the November/December 1993 issue of Foreign Affairs, President Nelson Mandela, the first democratically elected President of the new Republic of South Africa, already foresaw global changes: “As the 1980s drew to a close I could not see much of the world from my prison cell, but I knew it was changing. There was little doubt in my mind that this would have a profound impact on my country, on the southern African region, and the continent of which I am proud to be a citizen. Although this process of global change is far from complete, it is clear that all nations will have to recast their nets if they are to reap any benefit from international affairs in the post-Cold War era.”

Contextualization of Key Foreign Policy Tenets

South Africa’s membership in the BRICS (an inter-governmental grouping comprising Brazil, Russia, India, China and South Africa) should be viewed in the context of “recasting” South Africa’s international relations  after decades of isolation during the apartheid era as a pariah state.

Cognizant of the shared historical bonds of solidarity in the fight against oppression and colonialism among like-minded countries, notably from our Continent as well as other regions in the world, the 1955 Bandung Conference laid the seeds of South-South cooperation. The creation of the Non-Aligned Movement in 1961 and of the G77 and China in 1964 was underpinned by this partnership and our shared objective for a different global template that is more responsive to the interests of developing countries. Subsequently, various other initiatives were multiplied from this progressive impulse. This is an important history to draw upon, but as the South African government, we are also conscious that history has marched on. The age of globalization urges us to elevate these partnerships to a different level, building on the ties of solidarity and the shared objective to generate mutually beneficial economic relations.

These shared historical ties make it much easier to share lessons about pursuing development paths based on our common understanding of the kind of challenges that we face as developing countries. The outdated “zero-sum game” paradigm framed in adversarial terms is being recast through progressive groupings such as the BRICS as an opportunity to strengthen collective global responsibility and achieve developmental gains for developing countries, and obviously from our perspective, Africa in particular.

It is therefore clear why key tenets of our foreign policy pertain to advancing the African Union’s (AU) agenda as well as strengthening South-South and North-South relations.

It is well recognised by the UN and Bretton Woods Institutions that the world economy is undergoing a profound structural shift in economic power, with the emergence of new sources of global economic growth, trade, and investment flows, which are re-defining global economic geography. The BRICS countries are at the center of these changes. In broad terms, there is a relative shift in the locus of economic power from the North and the West to the South and the East. The South African banking group, Standard Bank, in its 2013 insight analysis pointed out that the BRICS’ world trade amounted to an estimated US$5.6 trillion in 2012, making up nearly 16 percent of total global trade, compared to 10 percent in 2008, clearly constituting the new engines of global growth.

The BRICS evolved into a dialogue platform and diplomatic association between the Member States on issues of common interest, notably regarding international economic and financial cooperation.The BRICS are also increasingly discussing and making statements on political and other issues of global interest, holding common positions on multilateralism and international law and the central role of the UN in decision-making.

South Africa’s role in BRICS

On March 27, 2013, South Africa hosted the Fifth BRICS Summit and assumed the Chair of the BRICS for 2013 through 2014, which requires that we provide strategic direction to the BRICS agenda. In addition, the Fifth Summit completed the first cycle of Summits and presents an opportune moment to reflect on the achievements of the BRICS thus far. The BRICS have developed into a significant catalyst for global change that has captured the imagination of the global community in a comparatively short period of time. In the eThekwini Declaration of 2013, BRICS Leaders clearly articulated their vision for the BRICS to provide solutions to global problems and to champion a new paradigm for international relations: “We met at a time which requires that we consider issues of mutual interest and systemic importance in order to share concerns and develop lasting solutions. We aim at progressively developing BRICS into a full-fledged mechanism of current and long-term coordination on a wide range of key issues of the world economy and politics. The prevailing global governance architecture is regulated by institutions which were conceived in circumstances when the global landscape in all its aspects was characterised by very different challenges and opportunities.”

The BRICS provide an amplified voice to the interests of emerging players to participate in formulating global agendas. South Africa’s membership has enhanced the political component of BRICS deliberations since we were invited to attend the Sanya Summit. We have also received support from our BRICS partners for African peace, security, and development issues which notably feature on the agenda of the UN Security Council (UNSC).

The Fifth BRICS Summit was also the first BRICS Summit hosted on the African continent and coincides with the celebration of the 50th anniversary of the establishment of the Organization of African Unity (OAU) and the AU. Hence, we proposed the theme of “BRICS and Africa: Partnership for Development, Integration and Industrialization” for the Fifth BRICS Summit.

The South African Cabinet adopted a BRICS Strategy in 2012 which informs our engagement with this grouping. Our BRICS membership is aimed at four levels of engagement: 1) the domestic level to strengthen political and economic relations; 2) on the regional level to enhance the African agenda and to promote Africa’s sustainable development with emphasis placed on continental and regional infrastructure development programs; 3) to pursue global governance reform and 4) to strengthen intra-BRICS cooperation from a more organizational perspective.

Our domestic drivers for BRICS engagement address our apartheid legacy’s triple challenges of poverty, inequality, and job creation through key growth areas identified in our New Growth Path (NGP).

While South Africa’s economic links with traditional trading partners remain important, the country’s prospects for growth and development will depend increasingly on diversifying and strengthening economic links with these dynamic economies of the South and with Africa. The expansion of South Africa’s trade and direct investment with the countries of the South, notably our BRICS partners, continues apace, with China and India at the forefront. The share of BRICS in South Africa’s total trade has grown from 10 percent in 2005 to 19 percent in 2012. Since 2009, China has been South Africa’s largest bilateral trading partner, while India ranked fifth in 2012. By comparison, the share of the European Union (EU) in South Africa’s total trade has declined from 35.7 percent in 2005 to 25 percent in 2012. South Africa also continues to attract substantial diversified investment from the BRICS. For the period April 2011 to December 2012, foreign direct investment (FDI) markets have been able to track 31 projects from 25 BRIC companies with a potential investment of R12.6 billion in the South African economy.

There are strategic economic considerations that anchor South Africa’s participation in the forum. First, South Africa seeks to use the forum to build stronger economic linkages with the world’s fastest growing and most dynamic economies. The International Monetary Fund’s (IMF) latest forecast for 2013 indicates that emerging market and developing economies will grow by 5.3 percent this year, compared with growth of 1.4 percent in advanced economies. Our prospects for growth and development will depend increasingly on diversifying and strengthening our economic links with BRICS economies and with Africa. Second, the forum provides a platform to address some of the challenges that arise from the rapid growth in intra-BRICS trade. A core concern for South Africa is the structure of trade, whereby our exports to China, India, and Brazil continue to be dominated by low value-added products. One of the priorities for South Africa’s term as BRICS chair is to coordinate a joint study to explore ways to promote more value-added exports that will support our industrial development objectives. Third, there is an historic opportunity for the BRICS countries to champion a new paradigm for collaboration for more sustainable, equitable,  and mutually beneficial development which should involve closer cooperation among the BRICS countries to support our growth, development, and poverty objectives and avoiding   inter-country competition.

As the BRICS Chair, South Africa will play a key role in shaping the agenda for economic cooperation. The third meeting of BRICS Trade Ministers on March 26, 2013 in South Africa adopted a BRICS Trade and Investment Cooperation Framework, which places the activities of the Contact Group on Economic and Trade Issues (CGETI) established at the New Delhi Summit (2012), as a key platform for BRICS Members to exchange views on a range of economic, trade, and investment related issues, in a longer-term framework for enhanced coordination and possible joint action. South Africa has identified two priorities for its Chair, namely 1) a Joint Trade Study, which will identify ways of promoting more value-added exports among BRICS Members and which will be presented to BRICS Trade Ministers at the next summit in Brazil in 2014 and 2) a seminar on investment agreements in order to share BRICS policy experiences and perspectives on investment regulation, including Bilateral Investment Treaties (BITS).

Interactions amongst BRICS members are beginning to bear fruit at a more practical level. At the Sanya Summit (2010), in line with the Member Countries’ commitment to strengthen cooperation amongst BRICS development banks, the BRICS Interbank Cooperation Mechanism was signed by the member banks which included South Africa’s Development Bank of South Africa (DBSA). Following the conclusion of further agreements at our recent Summit on Multilateral Infrastructure Co-financing in Africa and Multilateral Cooperation and co-financing for Sustainable Development, these banks will explore the establishment of bilateral agreements aimed at establishing cooperation and co-financing arrangements that will ensure mutual benefit.  In this case, a common sense of purpose on minimizing exchange rate risks and the associated transaction costs will accelerate the process towards practical bilateral engagements. These agreements will enhance intra-BRICS trade

Regional: In Africa, it is estimated that more than US$90 billion is required to improve infrastructure, whilst US$17 billion can be achieved from spending efficiencies. African countries, predominantly middle and low-income countries, do not have the fiscal capacity to build the kind of infrastructure needed to support their economies.

The BRICS countries are already deeply involved in Africa’s economic transformation process and their presence is growing significantly. This is reflected in rapidly growing trade and investment flows, as well as economic cooperation activities across a range of sectors. According to Standard Bank, BRICS total trade with Africa reached US$340 billion in 2012, representing a more than ten-fold increase over the course of a decade. The BRICS countries can contribute to Africa’s development by increasing support to build infrastructure and industrial capacity, and importing more value-added manufactured products from the continent.

Another area in which South Africa could share knowledge with its BRICS counterparts is in the area of infrastructure development.

International: The BRICS countries have a shared interest in pursuing the reform of multilateral institutions for global governance to give greater voice to developing countries in these institutions and, thereby, enhance the legitimacy of the institutions themselves. BRICS Leaders  at the Fifth Summit called for the reform of International Financial Institutions in order to make them more representative and to reflect the growing weight of BRICS and other developing countries and expressed concern with the slow pace of the reform of the IMF. Leaders reiterated the urgent need to implement, as agreed, the 2010 IMF Governance and Quota Reform and urged all members to take all necessary steps to achieve an agreement on the quota formula and complete the next general quota review by January 2014.

We have further strengthened coordination in the World Trade Organisation’s (WTO) Doha Round to defend and champion a development outcome as well as in other forums where trade and investment issues arise. With regard to the recent selection process for a new Director-General of the WTO, BRICS Trade Ministers called for the appointment of a candidate who “demonstrates a commitment to multilateralism and to enhancing the credibility and legitimacy of the WTO including through a commitment to support efforts that will lead to an expeditious conclusion of the Doha Development Agenda.” Brazil’s candidate, Ambassador Roberto de Azevedo, was subsequently elected as the new WTO Director-General from September 1, 2013, and South Africa has warmly welcomed his appointment.

Organizational: While the BRICS countries have their unique individual political, economic, and social profiles, each country’s experiences provide invaluable lessons for the other members and all five nations ought to use the group as a platform for sharing experiences and best practices.

For its part, South Africa has a number of its own positive experiences to share with BRICS.  South Africa’s financial services sector has been globally recognized as sophisticated and highly competitive, ranked second in the world in terms of soundness of banks by the recent World Economic Forum’s World Competitiveness Report. This is especially important as BRICS economies continue to grow and attempt to modernize their financial services sectors. This capacity suggests that South Africa has a sound investment environment and has been a source of increasing interaction with BRICS nations.

Linked to these levels of engagement, South Africa successfully achieved the following key Summit deliverables:

1. The New Development Bank

In New Delhi, BRICS Leaders discussed the need to address the infrastructure financing backlog experienced by developing countries. Infrastructure needs, especially during this global economic crisis, are immense and vary from one country to another, in particular, across emerging markets.  The current funding architecture in existing multilateral institutions does not have the capability to sponsor multi-country and regional projects for pursuing inclusive growth and thus to reduce poverty. The idea of the New Development Bank is to reinvest surpluses into viable projects that could augment infrastructure growth. The proposed bank will complement the efforts of existing multilateral and regional financial institutions, and not act as a competitor. Indeed, when established, this new Bank will draw lessons and utilize experiences from existing institutions.

In Durban, BRICS Leaders discussed a feasibility study that was conducted by the BRICS Finance Ministers and announced the launch of this initiative. BRICS Leaders further announced that the establishment of the Contingent Reserve Arrangement (CRA) with an initial size of US$100 billion wa feasible and desirable, after being subject to internal legal frameworks and appropriate safeguards to forestall short-term liquidity pressures, provide mutual support, and further strengthen financial stability (similar to the Chiang Mai Initiative). BRICS Leaders will receive a report at their next meeting in the margins of the G20 Summit in St Petersburg in September 2013 on progress achieved in realising these initiatives.

2. The BRICS Leaders Africa Dialogue Forum 

This post-Summit Retreat was convened and chaired by me on March 27, 2013, at the Fairmont Zimbali Resort. It was attended by the BRICS Leaders, and 12 African Leaders, including the Chairperson of the AU, the Chairperson of the AU Commission, the Chairperson of the New Partnership for Africa’s Development (NEPAD) Heads of State/Government Orientation Committee, the Heads of State and Government Chairing the AU’s eight Regional Economic Communities,  the Heads of State and Government championing the AU/NEPAD Presidential Infrastructure Championing Initiative, and representatives from other supportive structures of the AU. The BRICS Leaders have pledged to take their cooperation forward to support Africa’s efforts to accelerate industrialization, diversification, and modernization of its economies. They also support regional integration through infrastructure development, knowledge exchange and support for increased access to technology, enhanced capacity-building, and investment in human capital, especially that of African institutions, within the framework of the AU and NEPAD. The African Side presented a set of Priority Infrastructure Projects for consideration by the BRICS Leaders. South Africa will keep the African Side informed of developments regarding the BRICS and Africa cooperation through the AU Assembly.

3. Launch of the BRICS Business Council

The 5th BRICS Summit in South Africa also launched the BRICS Business Council, a high-level advisory body that will make recommendations to Heads of State.

4. Launch of the BRICS Think Tanks Council

This structure will link respective BRICS Think Tanks into a network to develop policy options such as the evaluation and future long-term strategy for BRICS that they are currently preparing.

Conclusion

This crucial juncture in history affords us the unprecedented opportunity to construct a new world order for the next several decades to come. As an important part of the South and the global community, South Africa as well as the African continent has to take its rightful place in the new equitable world order. The current global financial crisis has clearly illustrated that the global security and financial architectures of the post-Second World War era are at great variance with current global realities and in need of urgent reform to deal with the common challenges of humanity.


 

About Author

Jacob Zuma

Jacob Zuma�has served as the President of South Africa since 2009. He became the President of the African National Congress in 2007. Mr. Zuma previously served as a Deputy President of the ANC and an Executive Deputy President of South Africa.