South Africa's participation in BRICS: Round table discussion, including Deputy Minister

Meeting report

Chairperson’s introductory remarks
The Chairperson highlighted that this Portfolio Committee, in collaboration with the South African Foreign Policy Initiative (OSF-SA) had facilitated dialogue and discussion around the role of South Africa in the Brazil/Russia/India/China/South African forum (BRICS). This was aimed at strengthening South Africa’s role in BRICS, strengthening economic development within South Africa and Africa at large and, most importantly, this dialogue also formed part of the oversight mandate to establish how South Africa’s involvement in BRICS would benefit South Africa and its economy and assist in achieving the country’s developmental and security goals.

The 5^th BRIC Summit, to be held in Durban on 26 and 27 March completed the first cycle of BRICS Summits. BRICS was founded in Russia and South Africa was admitted into this forum in Brazil in 2010. For South Africa, the origin of its relationship with BRICS could be traced back to the support that the country’s liberation movement enjoyed at the time from BRICS countries. BRICS formation was therefore a model for future international partnerships for economic development. Within BRICS South Africa was a comparatively smaller economy with a limited market. However, the fact that it had built its own profile on peacemaking and humanitarian assistance on the African continent, and maintained an enabling environment for democratic governance were attributes that had given it more credibility within the international community.  

The Chairperson argued that, contrary to popular belief, South Africa was not regarded as the ‘gateway’ into the African continent. Many international organisations had opted to deal with Africa through engagement with South Africa, predominantly due to the country’s strengths, such as the soundness of its banking system, its corporate bonds and involvement in global governance structures. BRICS was therefore created as a structure to provide an alternative to the traditional global economic setup by bringing together voices of developing economies, and to provide an alternative institution to the Wold Bank and the International Monetary Fund (IMF) for financing development in poor countries, predominantly on the African continent.  The BRICS Parliamentary Forum would therefore create the necessary space for robust debate around the issues of domestic challenges by the BRICS partners. There was a need for a greater understanding within South Africa and the rest of the international community about the role of South Africa in BRICS. It was therefore important to understand the values of BRICS and the strategy around engagement.

The Chairperson then pointed out that since BRICS was not an alliance, the decisions and discussions were not binding. BRICS needed to have a stronger focus on the facilitation of trade, by forging strong alliances with government, business and academia.

Presentation by Mr Ebrahim Ebrahim, the Deputy Minister of International Relations and Cooperation
Ms Sanusha Naidu, Senior Researcher, South African Foreign Policy Initiative (OSF-SA), acted as the moderator of the discussion.

Mr Ebrahim Ebrahim, Deputy Minister, Department of International Relations and Cooperation, began by extending apologies from the Minister, Ms Maite Nkoana-Mashabane.

The first point of discussion was the rationale behind South Africa’s membership of BRICS. BRICS members played an important role in remapping the international economic structure, as policy making was a multi-dimensional approach. BRICS countries were therefore emerging powers who were ‘fellow travellers as Africans in the struggle against colonialism’, so they needed strong ties of solidarity and partnership in the development and reconfiguring of the existing structures of power in international relations.

Mr Ebrahim structured the presentation around three themes; the global dimension, regional dimension and the domestic dimension, as follows:

Global dimension
Mr Ebrahim stated that the end of the cold war brought about the emergence of ‘new’ countries, which shifted the economic development from that of the traditional Western way of doing things. These ‘new’ countries were expected to reshape the economic and political power relations in the world. BRICS provided for a new global template and caucus overriding the previous East-West and North-South constructs and divisions. With regard to the BRICS profile, he noted that BRICS’s contribution to global economic growth had reached over 50% over the past decade, making it the principal driver of global economic development. The global agenda of BRICS was therefore highly complementary especially in advancing South Africa’s foreign policy goals.

Regional dimension
Mr Ebrahim highlighted that economists, such as those from Standard Bank, reported regularly on the dramatic rise in BRICS-Africa trade and engagement, and the importance of such developments in light of their role in ongoing structural diversification of the global economy. Trade flows between developing countries, spearheaded by BRICS countries, were therefore rapidly increasing and had specific implications for Africa, such as increased flows of trade and investment toward the continent. BRICS countries had therefore moved Africa from the periphery of the global economy into a wider and inclusive centre.

He outlined why Africa was so important. Africa had 60% of the world’s unused arable agricultural land, a young growing population, a growing middle class with considerable purchasing power. This continent offered the highest returns on investment of any region, and was the second fastest growing region after Asia. In 2010, six of the world’s ten fastest growing economies were in Africa and seven African countries were expected to be in the top ten over the next five years

Africa’s output was expected to expand by 50% over the next four years, from US$1.6 trillion in 2010 to approximately US$2.6 trillion in 2015. Economic growth was projected to expand by an annual average real rate of 5.5% each year through the five year period

Estimates of the total infrastructure spending need for Sub-Saharan Africa ranged between $75 and $100 billion a year, more than 12% of the region’s GDP. BRICS-Africa trade was projected to increase threefold from US$150 billion in 2010 to $530 billion in 2015. BRICS’s share of Africa’s total trade would increase from the one-fifth of 2010, to one third over the next five years. Foreign Direct Investment (FDI) from BRICS was projected to increase from $60 billion in 2009 to more than $150 billion by 2015

For all these reasons, the partnership between South Africa and BRICS was crucial for the economic growth and development of the African continent. Sub-Saharan countries were spending nearly 8 percent of their GDP on roads, power, aviation, telecommunications, and other sectors, and African countries were therefore investing aggressively in infrastructure, spending about $45 billion, with projected needs expected to double for the next ten years. The estimated financing requirement to close Africa’s infrastructure deficit amounted to US$ 93 billion annually until 2020. Whilst this financing requirement was a challenge, African governments had a wide range of policy options that could open new sources of finance.

Domestic dimension
Mr Ebrahim said that the Minister had also emphasised that membership in BRICS offered South Africa prospects to attract investments into the economy, contributing to the growth of exports, and creating conditions for employment creation.  Bilateral SA-BRICS trade grew substantially in 2011, powered by significant increases in trade and exports. Bilateral trade between South Africa and China last year grew by 32%, trade with India by 25%, and trade with Brazil by 20%. South African exports to China grew the most - at 46% - while exports to India grew by 20%, to Brazil by 14%, and to Russia by 7%.

Mr Ebrahim stated that South Africa’s financial systems were sophisticated and robust, with the banking regulations ranked as among the best in the world. South Africa had therefore established relations with India and Brazil through its membership of the Tripartite IBSA relationship and had a Comprehensive Strategic Partnership with China and a Treaty on Friendship and Partnership with Russia. This meant that South Africa had already had standing relationships with BRICS countries before it joined the alliance.

Mr Ebrahim moved to outline the role of BRICS in South Africa, stating that Cabinet had approved the BRICS Strategy (classified Top Secret) on 19 September 2012. That had included extensive consultation with government stakeholders and it would guide South Africa’s strategic engagement in BRICS. This strategy therefore outlined the envisaged role of South Africa in BRICS with regard to its foreign policy objectives and its comparative advantages.

The role of South Africa in BRICS and its foreign policy objectives were also outlined. Mr Ebrahim stated that the mission of the Department of International Relations and Cooperation (DIRCO) was to promote South Africa’s national interests and values in the world, to promote human rights, democracy, and good governance, and to and champion the African Agenda. South Africa’s constructive role in global governance structures, as well as its position within organisations such as the AU, G77 and China, and the Non-Aligned Movement (NAM), was appreciated by BRICS members and other like-minded partners. South Africa was also the only African country represented in the G20.

Following the 4th BRICS Summit, held on 29 March 2012 in New Delhi, BRICS leaders said: “We have considered the possibility of setting up a new Development Bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development.  We direct our Finance Ministers to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us by the next Summit”. After that Summit, it was agreed that India (as incumbent Chair) and South Africa (as incoming Chair) would co-chair the Joint Working Group (JWG) that would prepare this study.

South Africa’s objectives in relation to BRICS could therefore be summarised as:
i) to advance the country’s national interests as outlined in the President’s State of the Nation Address;
ii) to promote its regional integration programme and related continental infrastructure programmes;
iii) to partner with key players of the emerging world on issues related to global governance and its reform.

Mr Ebrahim then outlined some comparative advantages that South Africa had in its membership with BRICS. Much of this was based on South Africa’s considerable non-energy mineral wealth (estimated at $2.5 trillion or R18 trillion). South Africa was the world's largest producer of platinum, chrome, vanadium and manganese, and the third-largest gold miner, as well as offering highly sophisticated mining-related professional services. It contributed significantly to the BRICS resource pool. South Africa’s excellence in science, technology and innovation was also recognised, as evidenced by the fact that it had been awarded the majority stake in controlling the Square Kilometer Array (SKA).

In closing, Mr Ebrahim drew reference to a statement made by Minister Nkoana-Mashabane at the annual meeting of BRICS Ministers of International Relations/Foreign Affairs, on the margins of UNGA68, on 26 September 2012 in New York. The Minister proposed some key Summit outcomes or deliverables that were supported in principle by BRICS counterparts. These were the launch of the BRICS-led new Development Bank, the BRICS Leaders-Africa Dialogue Forum, the launch of the BRICS Business Council, and the launch of the BRICS Consortium of Think Tanks.

Discussion
A Committee member began by stating that the presentation highlighted the broader significance of BRICS, not only from its trading perspective, but also as a catalyst in the development of Africa as a whole, and in development of South-South cooperation, which would enable ‘newly’ developed countries to compete on an equal footing with countries of the North. BRICS therefore offered the opportunity to these developing countries to disengage from their former dependence on the North, anchored to early historic ties, as well as releasing them, more recently, from the dependence on financial aid and assistance. The proposed parliamentary forum dedicated by BRICS to reinforce cooperative alliances would receive adequate support from the Committee.

The Idea of BRICS and Africa: Institute of Global Dialogue presentation
Dr Sphamandla Zondi, Executive Director, Institute of Global Dialogue, thanked Mr Ebrahim for the space to interact and discuss issues pertaining to BRICS. The institute for Global Dialogue had some concerns that there had not, to date, been enough communication and engagement with the public about the role of BRICS. It was wise for South Africa to join BRICS, even though it was considered to not be on par with the rest of the BRICS countries, economically, politically and otherwise. This was a similar project as that initiated by the likes of Julius Nyerere, former President of Kenya, who had envisaged a structure that included a disobedient order in the post cold war era, a building of a third world (where “third world” meant worlds in sequence), where new visions would be created by those who had previously suffered, and where developing countries would become agents rather than objects of global change, being willing to take full responsibility for their growth and development. South-South cooperation would have to move towards widening development options across the region.

BRICS countries were therefore part of a global world order and sought to use their different resources to address their separate and different needs, widening development opportunities. BRICS was part of the global world order and therefore faced many challenges which stemmed from processes such as globalisation, which give rise to issues of exclusion and inclusion. BRICS countries were significant in GDP, capital and legitimacy terms within Africa, and thus opened up new economic opportunities for these developing countries in global reform, which had been unbalanced due to the nature of relationships with other global powers in the past. BRICS was therefore an evolving initiative and it still needed to be shaped.

BRICS created an opportunity for alternative pools of capital to finance effective and sustainable growth in the South and in other parts of the world. The fundamental problem facing Africa was that this continent had various countries that were not viable as they depended on donors and were not sustainable on their own. About 65% of African countries depended on foreign financial aid for budget support. Another hindrance to the development of Africa was that many countries exported raw and imported manufactured goods. BRICS-Africa relations were therefore of vital importance. African countries therefore need to be convinced that donor aid was not good for Africa’s development, as many countries were accustomed to this dependence. Therefore it was necessary to question, for instance, whether Africa was ready to depart from the North and whether the policies already in place were sufficient to weight the debates not only towards the donors, who currently tended to dictate policies. BRICS countries should therefore push for a “disobedience” to the current world economic order, keeping in mind that old global powers would not allow BRICS to take over, and prepare Africa to deal with these challenges. The inherited economic structure, which assumed that aid was the only logical recourse for African development assumed that Africa was the land of the empty, and this clearly needed to be challenged, with the African Union being one of the greatest anchors in this regard. The benefits for Africa were now only a promise rather than a reality. It was necessary that the continent make very difficult decisions to change the current structure of the inherited economic logic, which advocated for the export of primary resources and the import of manufactured goods, as well as perceptions around culture.

Discussion
A Member highlighted that South Africa’s interaction with BRICS should be centred around South Africa’s national interests, and stated that, given the country’s economic size in relation to the rest of BRICS countries, it would be in the country’s interests to pursue an agenda of regional integration in the Southern Africa Development Community (SADC). In order to do that, South Africa needed to also be able to sell itself abroad, primarily by integrating the private and public sectors. As a point of reference, the well known tensions between the Department of Trade and Industry (dti) and the Department of International Relations and Cooperation (DIRCO) in regard to trade needed to be addressed, so that the country could thrive. There was a need also to invest in and promote the people of South Africa as one of its comparative advantages.

Mr Ebrahim responded that regional integration of SADC was at the top of South Africa’s agenda, and that the trilateral agreement in SADC between India, China and Brazil strengthened these ties. Involvement of the private sector in trade relations was also an issue that was high on the country’s agenda, as evidenced by the success of the business community indabas.

Mr Ebrahim said, in relation to the apparent tensions between dti and DIRCO, that both these departments placed much emphasis on economic diplomacy, even though the dti was not as ‘equipped’ to deal with such matters, which was why DIRCO now had a special course offering training to ambassadors and diplomats on economic diplomacy.

Ms S van der Merwe (ANC), Portfolio Committee on Trade and Industry, began by highlighting that the levels of trade between South Africa and BRICS countries was highly commendable. She questioned the role of BRICS in bilateral trade agreements and growth in South-South relations and trade, and asked to what extent the BRICS structure was developing trade. She also asked how BRICS was evolving and more especially how it BRICS fitted into South Africa’s relations to the G20 and the non-aligned movement.

Mr I Davidson (DA) pointed out that BRICS had enormous potential as a developmental tool. He added that there needed to be a common value system within BRICS, just as in any other international organisation. He commented on the internal contradictions among BRICS members; for instance, there had been high levels of trade between China and South Africa, but the nature of that trade had been primarily that South Africa exported commodities and imported manufactured goods, so this was not an equal trade relationships. South Africa needed to develop its own manufacturing base. South Africa, in its relations with China, was not taking into account the fact that China was moving from an export-led economy to a consumption-led economy, and the impact that this would have on trade relations around the world.

Mr Ebrahim agreed that trade with China had increased tremendously, and that South Africa had a strategic relationship with China. The dti had identified ten value added products that could be exported from South Africa to China in an attempt to balance trade. Also BRICS countries play an important role in developing and enhancing trade relations between their member countries, and Africa was an important development point. It would therefore not be very long that the Chinese economy would surpass that of the United States. The impact of this on the world’s economic, political and financial systems would need to be evaluated. Fortunately, all five BRICS countries (Brazil, Russia, India, China and South Africa) were all members of the Security Council and reached consensus on a number of issues.

Dr Anil Sooklal, Deputy Director General, Asia and Middle East, DIRCO, responded that South Africa’s approach to BRICS was three-fold. It would, firstly, advance the national agenda, secondly would develop and strengthen regional integration, and thirdly would empower BRICS partners in influencing and informing the global economic and political agenda. With regard to government and private sector relations, BRICS participated in the business forum and drove the idea that both government and the private sector need to have a common approach to international trade. During a BRICS Summit the challenge was identified that leaders of industry did not have the opportunity to interact directly with the BRICS leaders, but this had since been changed.

Dr Sooklal also commented tensions between DIRCO and dti were not something new, and fighting for space was a natural phenomenon around the world. However, it was a clear economic mandate of DIRCO to advance economic development, highlighting the need for it to offer the economic diplomacy course, with the assistance of the dti. The dti did not have the capacity to deal with economic diplomacy. It was also agreed that one of South Africa’s comparative advantages was indeed its people and DIRCO was looking into creating a youth and women forum within BRICS, in an attempt to involve the broader civil society. Bilateral arrangements among BRICS countries were a major contributor in advancing trade relations. South Africa also had very strong trade relations with SADC countries as well, so that strong bilateral trade among both BRICS countries and SADC countries were crucial. The BRICS Business Council would be an important structure in advancing trade relations.  

Dr Sooklal also agreed that DIRCO was well aware of the changes taking place in China’s trade industry. It was doubtful whether equal relationships would ever exist, as seen by the G8 members. BRICS was trying to bring about new trade relations, based on sustainability and collaboration.

In conclusion, Dr Sooklal stated that the World Bank did not fund any hydro power project in the African countries, and that about 60% of African countries were still dependent on foreign aid for green projects, which was why the development bank now proposed was a new avenue for fundamental development needs of African countries. It would concentrate on funding for the development of infrastructure.

Dr Zondi made the point that national interests needed to encompass African needs and values, and that, as Africans, South Africa and other countries had a mandate to restore African dignity following its colonial history. There was also agreement about the point that people were a major element of the developmental agenda, and he stressed the importance of issues such as access to proper health and education systems.

Dr Zondi responded to Ms Van der Merwe that trade had been growing significantly among BRICS country members. Research about trade was largely donor funded and was therefore at the risk of being biased, so this funding for research needed ideally to come from within South Africa, not from outside. The BRICS strategy needed to be promoted and not be kept secret by government.

Dr Dot Keet, Research Associate, Alternative Information Development Centre (AIDC), stated that South Africa could not be seen as a ‘gateway’ to Africa and therefore could not speak on behalf of other African countries. There seemed to be different criteria for BRICS membership and partnerships. She noted that the partnerships among BRICS countries should be about rebuilding trade criteria that had been lost during the periods of imperialistic rule. Therefore, she suggested that BRICS needed to set its own developmental criteria that acknowledged that Africa had its own developmental framework and criteria and that it should put forward to other countries in their relations with Africa.

Ms Michelle Pressend, Coordinator: Tax Justice and Political Economy, Economic Justice Network, drew attention to that fact that the social inequality aspect of development had not been discussed. The main interests on which discussion had focused now were those of business and finance. She questioned whether the BRICS bank would operate based on the frameworks outlined by the International Monetary Fund (IMF) and the World Bank, or whether it would it be an alternative mode of banking, and questioned its feasibility.

Mr Daouda Cisse, Research Fellow, Centre for Chinese Studies, University of Stellenbosch, drew attention to the imbalanced content of trade imports and exports between African countries and the rest of the world. It would therefore be important to devise policies that would seek to improve Africa’s manufacturing industries, so as to promote the export of goods rather than raw materials. Another point raised related to the partnerships that BRICS had with the African Union and SADC, and the role that they play in the development of fair trade on the continent.

Mr N Gcwabaza (ANC), Portfolio Committee on Trade and Industry, stated that a large section of the world’s population lived on less than US$2 a day, largely in developing countries. He asked how BRICS was developing the agricultural sector in Africa, noting that Africa had enough land to feed half the world’s populations, yet still suffered from huge hunger and poverty. He also made the point that it was worrying that mining industry had the responsibility to dig and export, but apparently not to develop the mining sector, which begged the question where then this particular responsibility lay. Government could not be solely responsible.

Ms Naidu raised a question on the currency issue in China.

Mr Ebrahim agreed that people, being such an important resource, needed to be supported and developed, which was why the outreach programme by DIRCO was an important factor. On the issue of agriculture and land, there was agreement that food security was indeed an important issue and that it was the responsibility of government and business to deal with it.

Dr Sooklal added that the Ministers of Agriculture and Health had met in New Delhi to collaborate and to deal with issues of social inequality, poverty, underdevelopment and unemployment. These issues were therefore incorporated into the programme of action of BRICS.

Dr Sooklal responded to questions on the BRICS bank by noting that its mandate was not to compete with any other financial institutions, and that it was rather to help grow investment from BRICS countries into each others’ sectors. He highlighted, by way of example, the capital investments that were flowing from Brazil and India into South Africa.

Dr Zondi said that economic diplomacy was an important element in attracting investment in the African region, particularly since a common mistake had been to pay insufficient attention to the fact that all African countries were not equal and should not be treated the same. The new Asia-Africa partnership was a very important initiative in region-to-region diplomacy.

Mr Richard Humphries, Consultant, South African Foreign Policy Initiative, enquired about the depth of sectoral collaboration that was currently taking place in New Delhi, and wondered whether BRICS would have a permanent secretariat in the future, in order to strengthen region-region diplomacy.

Ms Marianne Buenaventura Goldman, Governance Advisor, Oxfam asked how BRICS would be dealing with social inequality issues, and asked whether there were any other ways that civil society could engage in dialogue with BRICS.

Dr Sooklal responded that BRICS was a relatively young institution and that the question on whether it would establish a permanent secretariat would be discussed at a later stage. There were various different social forums and platforms where the public could already discuss social issues, such as the Urbanisation Forum and the Partnership City Forum.

The Chairperson noted, in his closing remarks, that BRICS was a significant and relevant forum, with a number of responsibilities, which not only included trade and economic development but also included people development. For these reasons, BRICS needed to also take into account social and domestic issues in its agenda.

The meeting was adjourned.