South Africa Looks on While Brazil and India Face Off China and Russia

Johannesburg BRICS Summit (22-24 August 2023)

Is the Johannesburg summit anything more than just a chatgroup meeting for importers and exporters? Wim Romeijn reports.

A champion of moderation, and its own interests, India seems determined to thwart plans by Russia and China to transform the BRICS group of emerging economies into a non-aligned movement.

The five countries are meeting for their annual summit in Johannesburg, South Africa. Some 20 countries have formally asked to join the forum; Russia and China support the group’s expansion, while India and Brazil appear happy to keep BRICS as it is. India’s foreign secretary, Vinay Kwatra, said that his country keeps an open mind on new members — but added that a consensus on the criteria was needed.

South Africa, the first — and so far only — addition to the original group of four, is straddling a desire to cosy up to Russia and China while not straying too far from the US and Europe. Under president Cyril Ramaphosa and his predecessors, the country has drifted away from the West under the guise of multilateralism.

In a televised address to the nation, Ramaphosa said that South Africa would not be drawn into a contest between global powers. He calls for a more balanced global order. For South Africa, this implies a deeper insertion into the Global South — a loosely defined collection of emerging economies in Africa, Asia, and Latin America. It may enjoy some greater economic heft there.

The trouble, for BRICS, is that it lacks a clear purpose. In its 14-year history, it hasn’t really outgrown the chatgroup stage. Attempts to create a reserve currency that lessens members’ dependency on US dollar — discussed since BRICS celebrated its 2009 inaugural meeting in Yekaterinburg, Russia — have produced no discernible results.

No-Strings Cash

Though the Shanghai-based New Development Bank (NDB) was set up in 2015 as a counterweight to the International Monetary Fund and the World Bank, it so far largely failed in a bid to extend loans in local currencies (aside from the Chinese renminbi). The development bank is chaired by Dilma Rousseff, a former president of Brazil who resigned in 2016 after being impeached on what are seen by some as politically inspired charges.

The NDB has deftly managed the fallout of the bank’s exposure to Russia, which holds 19.4 percent of its capital. Though the bank’s credit rating was downgraded by one notch to AA, it managed to retain access to US capital markets — where it successfully placed a $1.25bn green bond in May. Unfortunately for Rousseff, American investors don’t “do” rand, rupee, rouble, or real.

Rousseff says the bank has been forced to suspend all Russian operations to avoid sanctions. “We cannot deny that the international financial system exists,” she said, “and just have to live with that.” The NDB chair said that the bank has a $33bn credit portfolio, and — unlike the IMF and World Bank — its loans do not come with political or ethical conditions. “We repudiate any kind of conditionality and respect the policies of each country.”

That may sound like a disaster waiting to happen, but the NDB is part of a broader network of interlocking policies, institutions, and initiatives that seeks to affirm China’s position in the developing world.

Before the summit, President Xi Jinping conferred with his South African host to press the case for BRICS expansion. Though officially receptive, South Africa’s already limited clout in the group could suffer from the accession of new member states. That’s a concern shared by Brazil and India, who suspect China of plotting to stymy their attempts to secure a permanent seat on the UN Security Council.

Criteria, Please

The Johannesburg summit will probably try only to define membership criteria, and leave the admittance of new members for another occasion. This is sure to disappoint the leaders of candidate countries, who were invited to come to the Johannesburg event but excluded from participation.

Russian president Vladimir Putin was in March indicted in The Hague for the abduction of Ukrainian children, a war crime. He did not make the trip to South Africa, sparing the host nation the embarrassment of having to either comply with an arrest order from the International Criminal Court or risk falling foul of its treaty obligations as a party to the court.

Putin’s absence will be a relief to some participating heads-of-state who, like Ramaphosa, are reluctant to join Western condemnation of Moscow — but would not necessarily want to be seen shaking his hand.

The apparent lack of purpose that characterises the BRICS states is rooted in economic divergence. While China and India have registered sustained, accelerated GDP growth since the inception of the group in 2009 (138 percent and 85 percent respectively), Russia (13) and Brazil (four) have lagged behind. Over that period, South Africa saw its GDP shed five percent. China now represents 72 percent of the BRICS combined GDP, perhaps justifying the country’s insistence on getting its way.

From a different perspective, BRICS is a club: two of the world’s biggest commodity importers, and three commodity exporters. A sceptical observer could conclude: “Move on, nothing to see here.”

That onlooker would probably be right — but maybe not for long.