DEVELOPMENT: African LDCs Won’t Benefit Much from BRICS Arrival

• by Servaas van den Bosch (windhoek)
• Monday, January 31, 2011
• Inter Press Service

A Christmas present from China, or a diplomatic victory for South Africa, the invitation to South Africa to join the prestigious BRIC configuration next April has cast a spotlight on the emerging power.

Analysts have raised questions whether even the epithet 'emerging power' is justified. With a nominal gross domestic product (GDP) of 286 billion dollars, South Africa is dwarfed by Brazil (two trillion dollars), India (two trillion dollars), Russia (1.6 trillion dollars) and (China (5.5 trillion dollars).

Population-wise, South Africa’s 50 million seems insignificant beside China’s 1.3 billion people and India’s 1.2 billion. In terms of growth rates, Africa’s powerhouse recorded a meagre three percent last year, in contrast to China’s 10.5 percent.

Much has been made of South Africa’s position as a gateway to the Southern African Development Community (SADC), boasting over 250 million consumers, and the African market as a whole, projected to grow to two billion people over the next two decades.

In late January South Africa’s trade and industry minister Rob Davies defended the membership along these lines at the World Economic Forum in Davos: 'The African continent is the next great economic story. We are quite small but, when we look at the African continent as a whole, the numbers start to add up.'

The membership would also reflect a geopolitical move by China to build a Southern axis and add weight to the reform of multilateral institutions such as the United Nations Security Council, the International Monetary Fund and the World Bank to reflect the increasing importance of emerging powers.

But what can BRICS bring to the region outside South Africa, most of which remains locked in least developed country (LDC) status? Very little -- even in the best-case scenario, trade critics told IPS.

'At this stage it seems to be a political rather than an economic move,' says independent trade analyst Wallie Roux from Namibia, which currently chairs SADC. 'BRIC is the vehicle for global economic recovery and as such it puts South Africa in the spotlight, but I do not expect it will mean anything for other African countries in the short to medium term.'

In the worst-case scenario, BRICS will further frustrate the problematic process of regional integration in SADC and Africa, say analysts.

'There is a constant obsession in the region to connect with the global economy and sign up to a neoliberal ‘free trade’ agenda,' comments South African trade analyst Michelle Pressend. 'It reflects the linear approach that SADC has taken to regional integration. South African BRICS membership, with its emphasis on access to the regional market, exemplifies this.

'But most SADC countries are one-resource economies with very small industrial bases. South Africa believes in the rules of liberalised trade, such as lowering tariffs and loosening capital control regulations. BRIC itself has not always necessarily traded by these rules and rather focuses on building their own economies first.'

Pressend concludes that the ascension of South Africa to BRIC could propel a further drive to market access (this time from the other members of the bloc), which is not necessarily in the interest of countries that have yet to build industrial bases. It may result in them remaining commodity export dependent economies.

Sanusha Naidu, research director of communication network Fahamu’s 'emerging powers in Africa' programme, has a similar view.

'What most people fail to realise is that by joining BRIC, South Africa offers a strategic partnership for investors from these countries. These investors do not necessarily have the savvy to do business on the continent, nor do they want to take all the risks associated with it. Linking up with South African capital can provide the commercial spin they are looking for.'

Through such alliances BRICS would facilitate a further flow of South African capital into Africa. Says Naidu: 'It will enlarge the footprint of South African corporations in the region and further embed the trade and investment agenda of South African capital.

'Standard Bank’s one billion dollars private equity deal with the Industrial and Commercial Bank of China is an example of this. Partnering with BRIC investors enables South African capital to further exploit the region.'

This could add to existing diplomatic tensions, given South Africa’s contentious hegemonic status in the region, says South African trade analyst Dot Keet.

'South Africa positions itself strongly as a gateway into Africa and a facilitator of trade. The region does not necessarily identify with this position. Countries currently pursue a dual agenda of benefiting from South Africa’s power and countering it, often resulting in inconsistent trade policies,' Keet adds.

'South Africa has pushed itself into BRIC by bargaining on behalf of a 250 million consumer market in SADC but many of the 53 African countries do not recognise South Africa as their leader,' says Dr Siphamandla Zondi, director of the South African think tank the Institute for Global Dialogue.

He thinks BRICS will benefit the region only marginally: 'There will be a larger diversity in investments and BRICS also offers large consumer markets for African small industry. Finally it might bring in significant tourism streams from countries other than the U.S. or Western Europe. But all in all the benefits for BRICS will be more extensive than for the African countries.'

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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