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BRICS and the big picture

Updated: 2013-06-14 07:48
By Chris Davis ( China Daily)

BRICS and the big picture

Leaders of BRICS countries shake hands at the 5th BRICS Summit in Durban on March 27, 2013. Provided to China Daily

The bloc has key role to play as Africa asserts its growing economic power

The term BRICS was first coined by Jim O'Neil of Goldman Sachs as a catch phrase for a basket of investment opportunities in the emerging markets of Brazil, Russia, India, China, and later South Africa. The name caught on and has become a buzzword for the trend of five large, fast-growing emerging economies, predicted to overtake the developed G7 economies by 2027, if not sooner.

According to World Economic Outlook, the BRICS countries account for about 3 billion people and a combined GDP of $14.8 trillion.

Co-opting the term, the leaders of the nations held their first formal summit meeting in Yekaterinburg, Russia, in 2009, and have met every year since, most recently in Durban, South Africa, in March. Their over-arching theme: How they can leverage their rapidly expanding regional and global influence to engage a full range of issues, from global peace, stability, development and cooperation to addressing climate change, energy needs and unemployment.

The Durban summit was held under the banner "BRICS and Africa: partnership for development, integration and industrialization", and had special significance for many as it coincided with the 50th anniversary celebrations of the Organization of African Unity and the African Union.

South African president Jacob Zuma welcomed leaders to "the warm African shores" and the "cradle of humankind", saying that the BRICS forum gave them "the opportunity of an amplified voice for political, financial, economic and social interests around a common growth and development agenda based on our shared values".

BRICS had established itself as a credible and constructive force in "our quest to forge a new paradigm of global relations and cooperation", he said. The focus of the summit, Sub-Saharan Africa, had achieved growth of over 5 percent last year and was expected to continue, notwithstanding weak but improving growth prospects in the rest of the world, he said.

President Xi Jinping of China addressed the gathering, saying "people of kindred spirit are never far apart". No matter how the international situation might change, "we must always adhere to peaceful development and win-win cooperation", he said.

Xi called on fellow BRICS members to work together to make Africa "a new bright spot in the world economy".

Russia's president Vladimir Putin said the BRICS countries, accounting for 27 percent of the world's gross domestic product, were becoming more and more aware of their role and responsibility as global growth leaders. He reaffirmed the group's commitment to expanding investment flows and "stimulating the growth of its huge domestic markets".

That included carrying out "mutually advantageous business projects in third world countries", he said, announcing that he had signed a multilateral agreement to co-finance infrastructure projects in Africa.

The keynote topic of the conference was the idea of creating a BRICS-led development bank to rival the Western dominated International Monetary Fund. But as with a second proposal to create a $100 billion contingent reserve, the motions were limited to agreements in principle, with no detailed features or timelines for implementation.

Sebastian Spio-Garbrah, managing director of Damina Advisors, a company in New York that provides political risk research on Africa to investors, says the BRICS nations were unable to agree on what the bank would look like or what it would do.

"I think it is likely to be an idea that will die a natural death."

While all BRICS nations are having increasing relations with many African countries and with the continent as a whole, the Chinese interest in Africa is the one that the media has highlighted.

"But India has a strong presence in Africa," Spio-Garbrah says, "and has had almost centuries of contact with African countries. When you go to most African countries, most of the local grocery stores and retail businesses are owned by Indians. It is something that has been going on for generations, from Lagos to Kampala to Nairobi to Accra to Dakar. Indians own quite a few businesses, which is a bit different from the Chinese investment, which has come more in the fashion of state investment."

Indian investments in Africa, he said, are the most sustainable because they come from private, small and family-owned companies. They are more scattered and more in the consumer area and not in the government-regulated area, as are most of China's stakes.

Brazil's investments have also come from larger companies, mostly in construction and mining, which often means they have to deal with the government, which often means that corruption becomes an issue, he says.

"Russia doesn't really sell much to Africa," he says. "And where it does it's often more weapons, military hardware and sometimes nuclear reactors. Why? Russia has its own natural resources - iron ore, gold, oil, and the like, so they really don't need Africa for that."

Indian investment in Africa will grow over the coming years and surpass Chinese and Brazilian investment and last longer than any of the three, Spio-Garbrah says.

If the BRICS nations band together they can represent the views of "the growing half of the world", he says. BRICS nations often understand what the growing countries in Africa are going through, because most of them were recently themselves "almost Third World Countries", he says, "making them better able to understand the challenges facing continents like Africa". It is part of the reason why African countries have taken very strongly to the BRICS nations.

While many have called this the Asian century, Spio-Garbrah calls it the Asian-African century. For it to be an Asian century, most of the growth of Asia, in terms of natural resources the Asian countries need to manufacture, will come from Africa, he says. He predicts that "over the next 10 years we are likely to see a lot more indigenous Asian brands, which are not able to compete with established Western brands in Europe and America, look into Africa as a virgin territory for growth".

There are bottlenecks, of course. Most African countries do not produce enough electricity for their population, and other major infrastructure issues, are given high priority in BRICS discussions, which also highlight issues such as poverty eradication, food security and employment.

As economies grow, Spio-Garbrah says, some of those problems are diminishing.

"If you are South Africa, or Nigeria or Ghana, and your economy is growing at 5 or 6 percent, over time it will reduce poverty and naturally reduce unemployment, because more people will be needed to work in a growing economy, (and) more families will have an income."

He calls the African outlook "cautiously hopeful, structurally boldly hopeful, because fundamentally, the African economies have nothing to do but to grow".

The declaration at the end of the Durban summit spelled it out in no uncertain terms, calling for sustainable infrastructure throughout the land "to support industrial development, job creation, skills development, food and nutrition security and poverty eradication and sustainable development in Africa".


(China Daily Africa Weekly 06/14/2013 page20)

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