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The BRICS group of economies — Brazil, Russia, India, China, and South Africa — is convening for its 15th heads of state and government summit in Sandton this week. What could have potentially turned into a nightmare for South Africa had President Vladimir Putin attended, has now become an occasion for President Cyril Ramaphosa to shine on the international stage. The agenda includes discussions on the potential expansion of BRICS, with 40 countries expressing interest, including Iran, Saudi Arabia, Indonesia, and Egypt. On the eve of the summit, President Ramaphosa expressed support for the expansion, stating that it will represent a group of nations with a common desire for a more balanced world order. However, Dr. Christopher Sabatini, a Senior Research Fellow at Chatham House, has warned that there is a real risk that the weight of democracies in BRICS could be further diluted if it is expanded. He said that citizens of India, Brazil, and South Africa should ask themselves if they want to align with what is essentially a rogue’s gallery of countries. In an interview with BizNews, Dr. Sabatini questioned the viability of a common BRICS currency, asking how a common currency can be created among countries that have shown little currency stability. He also said there is a need for trade protections for certain industries in peripheral BRICS economies to prevent them from being locked in providing raw materials to China, the 800-pound gorilla in BRICS. – Linda van Tilburg
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Relevant timestamps from the interview
- 00:10 – Introductions
- 01:30 – Dr. Christopher Sabatini on the possibilities for BRICS going forward
- 03:47 – The countries wanting to join
- 04:54 – Can BRICS be anything more with China being such a strong presence
- 07:18 – On scepticism around BRICS currency
- 10:34 – what kind of policies should BRICS countries ask for the future trajectory
- 14:13 – On Russia and China getting all the natural resources from these countries
- 17:31 – On the harsh reception towards President Ramaphosa
- 22:33 – Conclusions
Excerpts from the Interview
The World Bank lends more money in a year than the BRICS New Development Bank in 10 years
There was a certain common purpose among the states that form the BRICS, and that is primarily around development. It’s true that the existing Bretton Woods international financial system institutions have become undercapitalised for many developing needs and have become entangled in a number of bureaucratic constraints that limit their ability. This prevents them from funding things that are critically needed in developing countries, such as infrastructure. So, there is that need. The trouble is that the New Development Bank, the BRICS Bank, is severely undercapitalised. In its first ten years, it has only lent out as much money as the World Bank lends in a year. It is not meeting the financial needs of developing countries.
Expanded BRICS – Rogues’ gallery of Countries
You have to look at the existing membership to see whether it really has any legs beyond the diplomatic platitudes of cooperation and broadening the world order. It is somewhat of a mixed bag. You have two autocracies, China and Russia. One of them invaded another country. President Putin couldn’t attend because there is a bounty on his head for crimes against humanity, and then you have three nominal democracies with challenges, let’s be honest: Brazil, South Africa, and India. Right at the very beginning, the common principles of the organisation are very much in doubt. I think there’s a real risk that in expanding it, the weight of the democracies will be diluted even more and the potential for Russia and China to exert greater influence over the other members will be increased as well. The very stated nature of the BRICS is really to provide a platform for rebalancing global affairs as a platform for the global South, which itself is rather value-neutral. It’s not saying that it’s going to advance climate policies. It’s not necessarily saying that it will advance human development. What it really is, is an avenue, a platform for countries that have long felt locked out of the global system.
So, the somewhat hollow platitude risks being very value-neutral or very principle-free, in a way that one should ask what sort of world order are some of these democracies that participate in the BRICS seeking to create that they’re willing to align themselves with blatant autocracies and autocracies that even in the case of Russia invaded a democratic country, or China, which is rattling its sabre to invade Taiwan. Are these the sorts of partners you want to hook your global ambitions to?
I’m not sure that Brazilian citizens, Indian citizens, or even South African citizens are always asking that question. The need for global rebalancing is indeed absolutely true. But the question is, is that better done by reforming the existing system or even recreating some element of the former system, but more in favour of development? Or do you do it by making alliances with, in some cases, effectively a rogue’s gallery of countries?
How could you create a common currency among countries that have shown very little currency stability?
[Lord O’Neill] was quite harsh in his statements in the Financial Times. He said he is embarrassed by how this acronym, which he coined simply to identify and group together a set of emerging economies, has now taken on a life of its own. In some ways, there is a certain absurdity to that momentum. His comments on a common currency were particularly important. How could you create a common currency among countries that have shown very little currency stability? Russia is cut off from most of the international banking system due to the SWIFT laws and sanctions. China is trying to push its currency as a replacement for the dollar and Brazil, while its currency is stable, is battling with inflation right now, although keeping it under control, not reaching the levels that most people fear in South Africa. India is also not known for a huge amount of currency stability. So how are you going to peg some trading currency, whether it’ll just be within the BRICS nations or it will be sort of more broadly used by the developing world is unclear. Let’s draw a comparison that may upset many BRICS supporters but when you think about the European Union, the decision to create the euro was a political decision, but it essentially involved giving up control of your currency to a central bank. I just cannot imagine that these countries would be willing to do so, nor even that they would have the ability to do so within a BRICS framework.
Lord O’Neill, he’s a former chairman of Chatham House, and is also an esteemed emeritus fellow. He’s created, I think, unwittingly a Frankenstein monster of countries that sort of took on his acronym and now or with very little of the commitment to true multilateralism of creating institutions, of surrendering some elements of sovereignty, of even surrendering a certain element of national interest for a broader collective. We simply don’t see that happening.
What democracies, South Africa, India and Brazil should demand from BRICS
There need to be established standards for BRICS membership. Any meaningful club has standards of membership. You can’t invite countries haphazardly just because they may share a certain worldview.
The first thing is to determine what those standards of membership are. If you think about the OECD countries, they have commitments in terms of budget austerity, education, and a track record of educational effectiveness. There is a whole set of metrics against which countries must meet, are measured to be able to join, and then are tracked or monitored over time.
If the agenda is primarily focused on development or economic integration, then that is essential. What economic policies can be created to create a harmonious, pooled collective that is greater than the sum of its parts that is not being done? Again, the diplomatic language is about creating a new world order.
The second thing is that the democracies of the group, South Africa, India, and Brazil, need to be able to start making demands on China and Russia. The risk is that China and Russia, especially China, the heavier-weight members of the alliance, will dictate the rules and dilute the commitment to democracy that even these countries themselves have. This involves primarily establishing standards and monitoring mechanisms for human rights, democracy, and institutional integrity.
Finally, there is the issue of national sovereignty, which is very important to developing countries because of their history of colonialism and intervention. Russia, a member of BRICS, has flagrantly violated this principle, and another member, China, could be positioning itself to do the same. China certainly did this in the case of Hong Kong, and it may be doing it in Taiwan. If Brazil, South Africa, and India care about territorial integrity, they need to be able to talk about national sovereignty and build guarantees into it. Right now, they are remaining silent on the issue of Russia’s invasion.
Trade protection for key industries to prevent periphery countries from becoming mere providers of raw materials for China
There is a certain collective amnesia about development economics from the sixties and seventies. As the saying goes in Brazil, Brazil exports iron ore, which is then put on Chinese ships that are built with the iron ore that Brazil provided to China. Iron ore has very limited effects on the Brazilian economy, on working-class people, and very little ability to provide stable manufacturing jobs. This is very much the case in the BRICS. Right now, many countries are coasting on China’s generosity in providing support and investment through the Belt and Road Initiative. In the case of Argentina, China has even been generous enough to provide renminbi to help Argentina pay off its loans to the IMF. Obviously, it is benefiting from China’s raging economic demand for commodities. Brazil and Argentina are both major exporters to China, and China is their number one export market. So right now, they are coasting on the benefits of this demand, but with little concern about what it means for their long-term economic projects and prospects. One difference is that when Lula travelled to China a few months ago, he did include some carve-outs to protect Brazilian industry in a raft of agreements on trade and investment. China did yield on this, and it could be a way forward for the other countries. We’ll see if this is on the agenda. But if it isn’t, then again, they are simply riding a wave that we know will eventually crash, as it has in the past.
BRICS countries are mute on human rights, territorial integrity because of the 800-pound gorilla in the room
South Africa, Brazil, and India are committed to multilateralism. The question is whether they are willing to put forward serious proposals and requests to China and Russia that address their human rights conditions, lack of respect for the territorial integrity of neighbouring countries, and even Hong Kong’s status as a city-state.
China is the 800-pound gorilla in the BRICS group. These countries are in a difficult position because China underwrites the New Development Bank, a number of infrastructure projects, and is deeply involved in African development across the continent. It will be interesting to see how much they are willing to push China in the name of keeping harmonious relations within BRICS. I do not expect anything bold or that will ruffle feathers. Perhaps there will be signals of private conversations on difficult issues such as Ukraine, China’s South China Sea policy, and human rights. However, I do not expect much. China is the 800-pound gorilla that is driving these countries and unfortunately forcing them to remain silent on key issues that they and their citizens care deeply about.
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