On the lighter side of this week’s Brics Summit in Sandton, it is with some relief that only one new member of the bloc has a name starting with a consonant or the new acronym would have been a nightmare, says trade consultant Donald Mackay (*).
The director at Global Trade Consultants was quipping about the news that Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have been allowed into the existing fold of Brazil, Russia, India, China and South Africa.
On the more serious side of new developments around South Africa’s ever-cosier affiliation with countries that are as strong on human rights abuses as they are on trading with Africa’s third-strongest economy (after Nigeria and Egypt), Mackay has some sobering thoughts about the bulking out of Brics.
Talking about the implications of the six new members that will formally join the bloc in January 2024, he said: “Aside from the Brics New Development Bank and Russia invading Ukraine, Brics has not really done much and the more members you add, the harder it will be to get anything done.”
Amidst all the talk of more muscle and de-dollarisation, Mackay argues that South Africa’s membership of Brics has actually “been a cause of significant stress, with no appreciable payoff.”
One only needs to think of the diplomatic manoeuvring President Cyril Ramaphosa had to pull off to avoid Vladimir Putin from attending the summit, and the threat of the US cancelling SA’s trade benefits under the African Growth and Opportunity Act (Agoa) to get Mackay’s point.
He said: “The 11 countries that make up Brics+ from next year will consist of four real democracies (Argentina, Brazil, India and South Africa) - and the rest either autocracies or shadow democracies.
“Certainly, Brics is starting to feel rather anti-Western, which could have interesting implications going forward. Adding Argentina to the bloc will immediately make a Brics currency much harder to achieve, even if that is just an agreement to trade with the group’s currencies for intra-Brics trade.
“After all, who wants to be left holding the Argentinian peso? Yet even after depreciating 87% in eight months, it is not the worst currency to join Brics. This honour goes to Iran, where American sanctions are so severe that there has been no official trade in their currency this year.”
As for hard trade data, Mackay pointed out that China and India account for 73% of our imports from Brics+ nations and 81% of our exports (based on 2022 data).
In comparison, trade with Iran, Egypt and Ethiopia is minimal and hardly worth mentioning.
“Even Russia, at about 1.3% of our Brics trade, is more significant. This is not to say this cannot change, but it’s not clear what would cause that to happen.”
In comparison, at least R275 billion in goods were exported from SA to the US, of which about 21.6% (approximately R59.59bn) entered the US under Agoa.
To understand what it means for the country’s fiscus and export interests to maintain Agoa relations with the US, consider that the trade value under the agreement has tripled since 2019, when about R17.8bn was traded with the US under Agoa.
So how will our big trading partners view SA now?
According to Mackay, not much is likely to change in the short term.
“I’m sure there will be some complaining about some of the new members, especially Iran, but I doubt much more will happen. The world will be watching Brics+ closely, and if the anti-Western rhetoric escalates, things could get quite exciting. Which things exactly? I don’t know yet.
“We should watch the US closely. If the Agoa forum, set down for later this year, doesn’t happen in South Africa then we should be alarmed.
“I get why Russia and China want Brics to expand, but it's not clear what’s in it for South Africa. Except for Egypt and Ethiopia, none of the countries that joined are likely to increase trade with South Africa. Egypt and Ethiopia will be because of the African Continental Free Trade Area, not Brics. None of these countries will bring significant investment, but many do bring additional risk.”
Making sense of all that has happened on the trade front over the past week may just be easier through the amber hue of a nice tumbler of whiskey. Choose a new Brics acronym and win a bottle of the good stuff by clicking here: https://tinyurl.com/3dwfux73
