BRICS increasingly pivotal role in the continent
Kampala: On Mar. 29, the fourth annual BRICS summit began. The conference was attended by the heads of the five member states: Prime Minister Manmohan Singh of India, President Dilma Rousseff of Brazil, President Dmitry Medvedev of Russia, President Hu Jintao of China and President Jacob Zuma of South Africa. Along with these figureheads came each corresponding trade minister - China even brought along some high profile business executives.
Under the theme of "BRICS Partnership for Global Stability, Security and Prosperity," the conference sought to strengthen ties between the five countries in order to heighten bargaining power. As the leading emerging economies, the BRICS not only represent themselves but also act as the representatives of the developing world in general. To this extent, they are heralded as creating a sense of South-South cooperation.
This strengthening of ties, moreover, will undoubtedly impact Africa. "South-South cooperation is beginning to be seen as a new method of partnership between developing countries," says World Bank Economist Dr. Callisto Madavo, the former regional vice president for the Africa Region. "Everyone here benefits. I think it is good for Africa to learn from the experience of the BRICS. They have overcome pasts very much similar to that of Africa and the Chinese, or Brazilian, or Indian experiences should be studied to help Africans become more self-reliant."
The main agenda for the summit centered around the creation of a new development bank - an idea originally put forward by India - that will seek to play a similar role to the already existing International Monetary Fund, Asian Development Bank and World Bank.
"It would fund various development projects in member countries and other emerging economies and may act as a relief provider for first time buyer mortgages in case of real financial crisis and disaster," wrote journalist Svetlana Petrova of the World Reporter. "It will be acting as a vessel for risk-sharing."
"It is a way the emerging nations are trying to pull out of the Western-dominated World Bank and the IMF," said John Mashaka, financial analyst at Wells Fargo Capital Markets. "Basically, India, China and perhaps Russia are trying to show off their economic clout; they are trying to demonstrate to the West that they can do without them. Above all they need freedom from Western financial influence."
Riding on this anti-Western sentiment, the countries signed an agreement - Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement -to begin weeding themselves off a dollar back financing system.
Instead, they plan on offering credit to each other in local countries. For now, however, the system necessitates the greenback: if Russia wants to conduct trade with India, Russia must convert its own rubles to dollars and then send it to India, where the dollars are converted to rupees. If this agreement were enacted, these countries will be able to eliminate the intermediate step of utilizing the dollar and save transaction fees.
This agreement comes with the objective of facilitating another agenda item: the strengthening of inter-regional trade. According to The New Age in South Africa, BRICS trade with Africa is "projected to increase from $150bn in 2010 to $350bn in 2015."
Over the last decade or so, Chinese economic activity with Africa has spiked beyond comparable measures. According to UN Trade data, trade between Africa and China increased from US$11 billion in 2000 to US$56 billion in 2006.
However, "while the world is focused on China in Africa, they are often missing the story of India Brazil and South Africa in Africa," says Dr. Madavo. Outside of China, these countries remain some of the largest players in South-South relations and on the African continent.
"It is essential to not view Africa as a charity-case, and instead, as a place where businesses can invest and help the local economy," says Madavo. "All these countries -- China, India, Brazil -- come to Africa to do business, for pure gain. And by doing so, the foster growth, allowing businesses to grow and employing locals in the workforce."
Trade between Brazil and Africa tripled from 2004-2010, totaling over $20 billion. And it is growing at a faster rate than ever before, propelling Brazil to become Africa's sixth largest trading partner. "Brazil's trade with Africa could triple to $60-billion by 2017," said Roberto Giannetti da Fonseca, head of foreign trade at the Sao Paulo Industrial Federation.
Whereas Indian trade with Africa reached $60 billion in 2011, "India and Africa have agreed to raise their bilateral trade target to $90 billion by 2015," according to The Hindu. And while Russian activity on the African continent remains low - at $7.3 billion in 2008 - it is also expected to grow.