- Published: 5th Oct, 2023
The conclusion of the 15th BRICS summit, held at Johannesburg, saw the group agree to an “historic” expansion as China’s president, Xi Jinping put it. The group, which consists of Brazil, Russia, India, China, and South Africa, has agreed to add six new members – Iran, Saudi Arabia, Egypt, Argentina, the United Arab Emirates, and Ethiopia – from 1 January 2024.
BRICS – which held its first summit in 2009 and did not originally include South Africa – is a geopolitical bloc of emerging economies which serves as a rival of some sorts to the G7 bloc of advanced economies. One of its major initiatives being BRICS Pay – a digital payments options for participating countries to reduce the cost and complexity of international payments.
BRICS has also created the Contingent Reserve Arrangement (CRA), a framework to protect its members from being adversely affected by global financial pressures, creating an emergency reserve currency pool of $100 billion to ease short-term liquidity pressures, strengthening the New Development Bank (NDB) – a multilateral development bank similar to the World Bank or the International Monetary Fund (IMF).
The NDB aims to support projects in developing nations through financing and expertise. It also aims to create an alternative to the G7-controlled multilateral organizations like the World Bank and the IMF, where voting rights distribution are heavily skewed against developing nations. This is where African countries aim to benefit from BRICS.
Africa and the G7
African nations have usually relied on multilateral organizations like the World Bank, International Monetary Fund (IMF), the European Investment Bank (EIB), and the African Development Bank (AfDB) for development financing. However, there has always been the perception that these ties have kept the region perpetually subject to the G7 – the United States, Japan, Germany, France, United Kingdom, the United Kingdom, Italy, and the European Union, who control these development finance institutions (DFIs).
The skewed balance of power comes from the outsized advantage these advanced economies hold in terms of voting rights. As a result, African countries have looked towards other sources of finance in recent decades, as well as trade. China and India have emerged as favorite destinations for both.
Take Nigeria, for instance.
As of Q1 2023, China is the largest lending nation to Nigeria. The West African nation’s $4.33 billion debt to China surpasses that of the IMF and the AfDB (although it is still considerably behind the World Bank). This phenomenon can also be found in other African countries such as Zambia and Kenya.
In terms of trade, Africa is also looking towards BRICS. In 2021, the Economic Community of West African States (ECOWAS) made 13.8 percent and 13.5 percent of all its exports to India and the United Arab Emirates, respectively. China received 7.47 percent and South Africa, 2.37 percent. A whooping 32.8 percent of all imports into the region came from China, with a further 8.32 percent from India.
ECOWAS’s regional counterpart, the Common Market for Eastern and Southern Africa (COMESA), also imports heavily from China cumulatively–19.5 percent of all the bloc’s imports. An additional 7.07 percent comes from the UAE, 5.98 percent come from Saudi Arabia, 5.77 percent come from India, and 4.39 percent from South Africa. Russia is also a significant trade partner of Africa at large, as signified by the Russia/Ukraine War-induced sanctions leading to scarcities of energy and food on the continent.
Trade with BRICS member countries is firmly established on the continent and is in the process of surpassing – if not already surpassed – that with G7 or G7-adjacent countries. It will be unsurprising to see financing and bilateral or multilateral partnerships go down this road.
The effects of BRICS expansion on Africa
The decision of BRICS to expand means that Africa now has three permanent members – South Africa, Egypt, and Ethiopia. This gives voice and representation to the continent, ensuring that African issues are given priority. Comparatively, African membership of BRICS will now stand at 27 percent to intergovernmental organizations like the G20 with just one African member or the United Nations Security Council which has three rotating non-permanent members who have no veto power.
BRICS and its new member nations are interconnected with other African nations. Saudi Arabia, Iran, and the United Arab Emirates are oil-producing giants who share OPEC membership with African countries like Algeria, Nigeria, Angola, Gabon, the Republic of the Congo, and Equatorial Guinea. This is particularly important, as BRICS and its new members possess massive reserves of oil and gas, both in terms of reserves and production capacity. This gives the bloc significant power in shaping the global economy.
The most important aspect is arguably trade and finance. The combined real GDP of the updated BRICS members is up to $22 trillion, signifying a shared economic strength that can rival the G7. African countries already trade heavily with BRICS member countries, and they will likely seek financing from them too, likely with more favorable conditions than that of the G7-run DFIs.
However, Africa must be careful to not repeat its mistakes with BRICS that it has with the G7 and G20. African countries cannot become reliant on goodwill and must seize the opportunity to grow. If they do not, they will simply be exchanging one master for another.
