How can BRICS make a positive influence in the world?

For nearly two centuries, global economic power has focused on the USA and Europe. Not much happens in the world that these two global superpowers do not influence.

Many established blocks have tried to challenge this dominance, and all have failed. The European Union came close in 2008; however, the geopolitical problems that the block has faced have seen what was once plenty of promise be reduced to a contender that will only challenge the dominance of the USA if there is a significant financial fallout of the Dollar.

The world’s largest developing economies formed a promising alliance in 2010 when Brazil, Russia, India, China and South Africa came together. Since then, the block has been working towards becoming a global superpower that now houses the world’s second-largest economy (China).

As the BRICS summit closed last week, plenty of promising moves were made. These moves excited Busi Mavuso, CEO of Business Leadership South Africa, who shared her thoughts with Moneyweb. Below is an extract of that article.

Common challenges

The striking feature of the sessions I attended was the common challenges that the BRICS nations face. Ministers from Brazil, India and China spoke of the importance of the energy transition and the need to build the infrastructure to support the growth of their economies and adaptation to climate change. They spoke of the importance of trade between the nations and putting in place the right regulations and facilities to achieve it.

In his opening address, our minister of trade, industry and competition, Ebrahim Patel, spoke on the need to facilitate trade that will support inclusive growth in an accelerated but sustainable way. He said the next wave of global growth was going to come from Africa, given its young and growing population, and BRICS nations needed to position themselves for it. He spoke of the importance of the African Continental Free Trade Agreement and entrepreneurship on the continent. This was a strong positioning for South Africa as an enabler and gateway to the growth of Africa.

These themes are exactly the right ones to focus on. The fast-growing economies of BRICS, leaving aside Russia, whose fate is bound up in its own geopolitical issues, do have a great deal to gain from trade with each other.

Lots of learning

We also have a lot to learn from each other, particularly on how to transition our energy systems and create the infrastructure we need.

It is important for South Africa that the benefits of such cooperation be focused on enabling its capacity to grow. That is certainly not a threat to the West – a thriving South African economy is something the West would welcome as a place for investment, trade, tourism and much else. Indeed, the West is important in enabling this – our manufactured goods, in particular, are sold mostly to Western markets. In order for us to build scale, those markets are an important anchor. We need to leverage that to become competitive in ultimately serving fast-growing markets like India and China.

Of course, the summit was also heavy with geopolitical issues, there was no escaping that. Those are for the politicians to sort out and business can only hope that sensible choices are made in the interests of South Africa.

One clear theme was the importance of appropriate trade rules that ensure an expanded BRICS is not a mechanism for unbalanced trading relationships between the partners. As BRICS develops and expands, countries need to be held to a set of rules on how they interact with one another.

Key commitment

President Cyril Ramaphosa did well in his closing remarks to reinforce his commitment to multilateralism and the rule of law, including the United Nations Charter. He also encouraged multilateral institutions and international organisations to be constructive in building global consensus on economic policies. This framing was a careful balance of BRICS aspirations and engagement with the West. The politics will need to continue to be managed carefully – the expanded list of 11 members all have their own features and finding common ground will not be straightforward.

Business can, however, do much to support and facilitate the business opportunities that BRICS presents. The expanded BRICS, with six developing countries joining, would cover 47% of the world’s population and 37% of its gross domestic product on a purchasing power parity basis. Given the respective rates of growth, member countries will account for the majority of the world’s population soon and likely the majority of economic activity in the medium run. That shows its importance as a trade opportunity for South African business.

The New Development Bank is well established and already funding infrastructure projects, which will boost economic development in member countries.

I think the South African government did well in its hosting of the summit to foreground the economic opportunities and objectives of championing the needs of the people of the Global South. It was a mature strategy that did serve the interests of South Africa. Business can actively support this approach, working for positive outcomes of BRICS, ones that do not risk critical existing economic relationships.

Encourage progressive policy

How can BRICS make a difference?

There is a global movement towards carbon neutrality and Net Zero economies. However, While plenty of countries say they are committed towards this ideal, more needs to be done to achieve this.

This is where BRICS can stand out. The block has two of the world’s biggest polluters in China and India. However, these two countries also have the largest populations in the world, so they have the labour force to work towards this meaningfully. Renewable energy can offer significant benefits to these countries and there is plenty of literature that these countries can refer to that will highlight the financial benefits of this decision as it can significantly increase employment.

With the expansion of the BRICS block on the horizon, it is time for politicians to step out of their comfort zones and make meaningful changes.