South Africa will host the Brics summit in August 2023. The event could offer the country an opportunity to exercise leadership in the Brics’ efforts to reform the arrangements for global economic governance and in supporting sustainable and inclusive development in Africa and the Global South. However, the opportunity has morphed into an international challenge because Russia’s President Vladimir Putin, who has been indicted by the International Criminal Court, has indicated that he will attend. South Africa could face the wrath of its Brics partners if it fulfils its international obligation and arrests him. On the other hand, if it does not arrest him, it could face sanctions from those countries that want to see Putin tried for war crimes.
Hosting the 2023 Brics summit is, therefore, fraught with dangers. The international environment is complicated, dynamic and unpredictable. South Africa can avoid embarrassment and capitalise on the opportunities presented by the summit only if it is able to skilfully manoeuvre in these choppy waters.
Trying to understand South Africa’s dilemma raises a number of questions: Who are the Brics? What has the grouping achieved?
Who are the Brics?
In 2001, the global investment bank Goldman Sachs stated that it expected Brazil, Russia, India and China to become leading actors in the global economy. It collectively named the four countries “Brics”.
These countries decided that Goldman Sachs had a point and that they could enhance their global influence if they co-operated. They first met at a ministerial level in 2006 and at a leaders’ summit in 2009. In 2010 they invited South Africa to join the group. The group became known as “Brics”.
A primary objective of the group is to reform global economic governance so that it is more responsive to the concerns and interests of the Global South. For example, the Brics have called for a new global currency that can challenge the dominant role of the US dollar in the international monetary system. It has also pushed for a greater voice – and more votes – for developing countries in key international economic organisations like the IMF and the World Bank.
The group has also sought, through groups like its business forum, to promote greater economic co-operation between the participating countries.
What has the Brics grouping achieved?
The Brics record of achievements is mixed.
In 2016, the group established two new international economic entities.
The first was the New Development Bank. They contend that it is a “new” multilateral development bank which offers its members an alternative to institutions like the World Bank. It claims that its governance is fairer than the World Bank because its five original members all have equal votes. At the World Bank, shares (and therefore votes) are unevenly distributed among member states.
The development bank also strives to provide financing more quickly than the World Bank, and in a way that is more respectful of the laws in its member states.
However, to date, the New Development Bank has been less transparent and accountable than other multilateral development banks.
It has provided US$32.8 billion to 96 projects in the 5 Brics countries and it has begun looking to expand the scope of its operations.
Since 2021 it has approved membership for Bangladesh, Egypt, United Arab Emirates and Uruguay. It is expected to add new members in the coming years.
The second new entity was the Contingent Reserve Arrangement. This established a series of swap arrangements between the Brics central banks. These arrangements allow each central bank, when its country is facing a balance of payments crisis, to exchange its local currency for hard currencies, like the US dollar, with its counterparts in the Brics.
Pursuant to the terms of the arrangement, a central bank can only draw on a fraction of the available financing without also having to enter into a financing arrangement with the IMF. Thus, the conditions that are attached to the IMF’s finances also become applicable to the funds made available through the Contingent Reserve Arrangement.
To date, no Brics central bank has used the arrangement.
According to their communiques, the Brics leaders have agreed to create other entities, such as a vaccine centre and a new credit rating agency. However, they have not yet implemented these agreements.
They have not been successful either in reforming the existing institutions and arrangements for global economic governance, such as the IMF. One reason for this failure is the strong opposition to reform from states, primarily those in Europe, which currently have dominant voices in the IMF and would lose them in the case of true reform.
But another important reason is that the Brics are not unified in their demands for reform. For example, while Brazil, India and South Africa support reforming the UN Security Council to include more permanent members and to eliminate the veto power of the existing permanent members, China and Russia, as sitting permanent members, don’t.
Similarly, not all the other Brics have supported South Africa’s call for a third African seat on the IMF’s board of directors.
Are there any downsides to Brics membership?
The global political and economic situation has changed dramatically since 2010. These changes have created both opportunities and challenges for the Brics.
One opportunity arises from the fact that approximately 19 countries in the Global South, including Argentina, Cuba, Iran and Saudi Arabia, have expressed an interest in joining the Brics. It is expected that the Brics will consider the issue of membership at their upcoming August 2023 summit.
Another opportunity arises from the growing interest around the world in having an alternative currency to the US dollar as the basis for the international financial system. The Brics have been vocal supporters of de-dollarisation. However, given the complex economic and political relations between the Brics member states, there is considerable skepticism about the feasibility of the Brics developing a new global currency in the near term.
The primary challenges facing the Brics arise from geopolitics. The war in Ukraine has created tensions within the Brics. The participating states have been forced to balance their respect for such international law principles as self-determination, sovereignty and peaceful resolution of disputes with their friendly relations with Russia. In addition, the Brics cannot escape the fallout from the growing economic and security tensions between China and the west, particularly the US.
Both these issues complicate the efforts of the other Brics to maintain their formal non-aligned position. They also exacerbate existing tensions within the Brics. The most important example of this is the complex and tense relationship between India and China. In recent years, they have had military skirmishes in disputed border areas. In addition, India has imposed economic constraints on Chinese companies operating in India. The two countries have refused to renew the visas of journalists from each country so that now there are almost no journalists from Chinese publications in India and vice versa.
What hangs on the summit?
South Africa faces another opportunity that is fraught with danger when it hosts the G20 in 2025. The G20, which brings together the 20 leading economic powers in the world, has called itself the “premier forum” for global economic governance. South Africa is currently the only permanent African member of the G20, and 2025 will be the first time the group is hosted by an African country.
Planning for this G20 event must begin soon because in 2024 South Africa will join India, the current G20 host, and Brazil, the 2024 G20 host in the troika that manages the G20 process. If the country does not plan carefully and effectively for this G20 event, South Africa risks emerging with a diminished reputation and its credibility shredded.