The business industry in South Africa has expressed satisfaction at the successful hosting of the 15th BRICS Summit as business can do much to support and facilitate the business opportunities that BRICS presents.
Business Leadership South Africa (BLSA) said yesterday that BRICS member nations were focused on how they could support each others’ development and a rules-based multilateral system.
BLSA CEO Busi Mavuso said she was impressed by how Brazil, China, India, Russia and South Africa (BRICS) 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.
Mavuso said the BRICS nations also spoke of the importance of trade between the nations and putting in place the right regulations and facilities to achieve it.
She said one clear theme was the importance of appropriate trade rules that ensured an expanded BRICS was not a mechanism for unbalanced trading relationships between the partners.
“These themes are exactly the right ones to have focused 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,” Mavuso said.
“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.”
At the BRICS Summit, the group invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to join the group with effect from January 2024, making the group now the BRICS+ bloc.
President Cyril Ramaphosa described the move as the first phase of membership expansion.
The group’s finance ministers did not explicitly endorse the idea of a common currency but promoted the use of local currencies in trade among the member countries.
The finance ministers’ committee will explore the use of local currencies, payment instruments and platforms, and report back at the 16th summit in Russia in 2024.
Based on 2023 population estimates, BRICS+ countries account for 46% of the global population.
The International Monetary Fund forecasts show that BRICS+ will account for 38% while the G7 will account for 29% of global gross domestic product by 2026.
RMB chief economist Isaah Mhlanga said though economic conditions in South Africa would not change immediately, there were benefits for being a member of an influential group of countries such as cheaper funding that has a lesser burden on taxpayers.
Mhlanga said the second important decision, after the expansion of BRICS, was that the New Development Bank (NDB) would increase its issuance of member countries’ local currency debt from less than 20% to 30% of its total issuance.
“This does not represent de-dollarisation as many would like to think. In fact, de-dollarisation will not be a short-term process if it happens, likely to be measured over decades,” Mhlanga said.
“Nonetheless, the issuance of local-currency debt, especially for financing infrastructure, will help countries reduce reliance on expensive foreign loans from two perspectives.
“The first one is that the NDB has a better credit rating than most of the BRICS+ countries, thus it can borrow at cheaper rates. Second is the reduction in currency risks for the member countries that will receive local-currency funding from the NDB.”
BUSINESS REPORT