The Brics countries (Brazil, Russia, India, China and South Africa) have been in the news lately, but for all the wrong reasons.
Apart from Russia’s war-mongering in Ukraine and China’s renewed hostility towards Taiwan, the newly elected leader of Brazil, Lula da Silva, has been at the forefront of plans to establish an alternative international trade and reserve currency to the US dollar.
These attempts already surfaced at the first summit of the Bric countries in 2009 in Russia (one year before South Africa’s inclusion) and have now become vogue again as China and Russia start to consolidate efforts to create a so-called new world order. Fourteen years on and nothing much has changed in the realm of the dominant international financial status of the US dollar and the Euro.
It seems clear that the heightened geopolitical tensions arising from Russia’s military invasion of Ukraine and China’s ambitions to expand its communist model of authoritarian government has renewed the appetite of Brics and also like-minded countries to challenge the US dollar and the Euro.
This task seems futile when considering the long history behind the role played by Western currencies in trade and official foreign exchange reserves. A member of the Russian parliament was recently quoted in a Bloomberg report as stating that the Brics nations are in the process of creating a new medium for payments that deliberately replaces the equivalent demand for US dollars and Euros.
Differences on policy issues
Here is the first snag in these over-ambitious plans, namely the huge differences in the economic prowess between the five countries. Differences will continue to abound on issues such as environmental protocols, intra-Brics trade balances, trade policy (especially China’s habit of “dumping”), human rights, and lingering hostility between India and China.
Any meaningful undervaluation of individual Brics currencies will also lead to tensions, as this will erode the competitiveness of the other currencies.
Differences of opinion may also arise with any future expansion of Brics. Several of the countries that have indicated an interest in joining Brics have serious problems in the areas of fiscal and monetary stability, whilst most of them have dubious rankings in the Fragile State Index.
South Africa’s membership of Brics has puzzled political and economic researchers ever since disgraced former president Jacob Zuma accepted the invitation to join in 2010. At the time, Bric was widely regarded as an anti-America club, although India has not been as fervent as the other three countries in criticising the Western world order (characterised by democracy and economic freedom).
When considering the relative sizes of the Brics economies, it seems clear that South Africa is destined to merely toe the line, without any meaningful influence in key decisions – hence the embarrassing stance on Russia’s war on Ukraine.
Brics currencies have mountain to climb
The futility of the Brics ambitions for a new international reserve currency is underscored by the current composition of global foreign exchange reserves. It seems as if China and Russia, who have been particularly vocal about their de facto opposition towards the values enshrined in the UN Charter on Human Rights, have missed an important point – they are not doing battle with the US alone, but with its allies as well.
South Africa’s association with the repressive regimes of China and Russia have been a source of both embarrassment and concern for many South Africans. In March, the International Criminal Court issued a warrant of arrest for Russia’s president,
Mr Vladimir Putin, for the unlawful deportation of children, whilst in August 2022, the United Nations reported that China’s government had committed abuses that may amount to crimes against humanity. The latter follows concrete evidence of mass arbitrary detention, torture, cultural persecution and forced labour of people in the Xinjiang region.
It is clear that the war in Ukraine has led to an escalation of a stark political dividing line between Russia (supported by China) and the West, which threatens to turn Brics into an association not so much interested in economic development, but rather bent on spreading a dangerous system of authoritarian nationalism.
Viewed against the background of the strategically important trade and investment relationship between South Africa and its key trading partners in Europe and the US, it is in the economic interests of the country to reconsider its membership of Brics and rather focus on strengthening the logistics infrastructure and trade relations in Southern Africa.