Deepened BRICS led Engagement-Economic Trade-Offs and Benefits for local Economies in Developing countries. An African Perspective Emerging Economies Economic Policy Forum 2014 1 2 November 2014, Haikou, China Dr. Emmanuel Owusu-Sekyere Human Science Research Council/Africa Institute of South Africa Pretoria South Africa
Outline BRICS guiding principles of South-South Cooperation Foot prints in Africa individual countries and not as an Economic Block diversified areas of interest benefits and challenges for local economies in Africa Weaknesses of the BRICS as a new Block The African agenda - challenges for the BRICS BRICS Africa Policy Strategy
The BRICS Emerging as a force to reckon with in international development cooperation. Their strategic advantage is in the Size of their economies (GDP growth and population), South Africa slightly different (GDP 1/3 of Brazil, and smaller population, 52 million) Strong growth rates over the past decade leading to increasing significance in the global economy The demand for a stronger political voice in international governance structures which correspond to their economic status BRICS belong to other international development frameworks e.g. G20 etc. UN development programmes etc. South-South-Cooperation is their main focus and LICs their main sphere of influence
The BRICS guiding principles of SSC The idea of South-South-Cooperation is based on Solidarity, shared experiences and self-reliance of the South (Yamoussoukro, 2008) Trade, investments and economic growth are perceived to be the main vehicle for improvement and development Non-interference and sovereignty are guiding principles, whereas social standards and governance issues are not the main concern Soft diplomacy, mutual respect and üntied development assistance is the approach to bilateral and trilateral relations
The BRICS a heterogeneous group Sub-groupings within the BRICS; IBSA, BASIC, CIVIETS etc. are they complementary or distractive to the BRICS agenda Non-convergence in economic and foreign policies of member countries e.g. size, key areas and institutional framework. Economic weight of the BRICS is yet to translate into political weight in global governance, striving to be recognised as a new donor block In OECD-DAC; BRICS countries are largely categorised as recipients of aid and not donors
BRICS Africa relations How has this played out for Africa as a continent? There is no common development cooperation framework by which the BRICS as an economic block engages Africa as a continent no common African Policy The footprints of the BRICS in Africa are on individual country basis seeking their individual interests within SSC Three key areas of engagement has been in trade, FDI and development finance, and in some instances technical assistance Individual country interests are quite diversified and vary significantly among the BRICS countries
Footprints in Africa - Brazil Accentuates technical assistance more than financial aid especially in agricultural development (European Union, 2012) Exported the highest share of food products to Africa in in 2011 (47.9%) (UNECA, 2013) Focussed on social sector, food, education, health and poverty reduction a third of total aid goes to the 5 lusophone countries in Africa Angola, Cape Verde, Guinea-Bissau, Mozambique Sao Tome and Principe (John de Souza, 2008) These countries account for 74% of Brazil s technical cooperation to Africa (UNCTAD, 2010) Cultural, language and historic ties drive Brazil s engagement with Africa
Footprints in Africa - Russia Exports food to Africa, from $42 million in 2000 to $3.1 billion by 2011 Strong interest in African fuels and primary commodities - $38 million worth of fuels exports from Africa to Russia in 2000 increased to $2 billion in 2011 (UNCTADStat, 2012) Russia fuel interest is driven by the need to ensure adequate energy reserves since it faces the risk of a possible depletion of its energy reserves (AfDB, 2011) Contributes to health programmes focussed on SSA in the area of HIV/AIDS, tuberculosis, and malaria (Deauville 2011) through the Global Fund Further engages African initiatives through the World Bank and the UN (Walz & Ramachandran, 2010)
Footprints in Africa - India Focussed on technical cooperation, debt relief and loans for infrastructure Main sectors are rural development, education and health (Walz & Ramachandran, 2010) Contributed $200 million to the NEPAD Initiative, Pan-African E- Network Project (Kattie et al., 2009) Team-9 Initiative (Techno-Economic Approach for Africa-India Movement) - a credit facility for the promotion of socio-economic development in 8 African countries (Kattie et al., 2009)
Footprints in Africa - China China is EVERYWHERE!!!!!!!!!!! Driven by demand for oil and primary commodities - thriving manufacturing and industrial sector Angola, DR Congo, Sudan huge infrastructure investments in exchange for future oil supplies - The Angola-Model (Lum, 2009) Exports manufactured goods to many African countries, involved in the retail sector in may African countries Involved in agriculture sector, infrastructural development Mainly investment seeking development assistance in exchange for oil or primary commodities or market share in retail sector (ECA, 2011; Ajakaiye et al., 2009)
Footprints in Africa - South Africa South Africa is a strong regional player in Africa technology, mining, oil, primary commodities, education, health, peace keeping, defence, retail and more The driver of the free trade area in SADC, Tripartite agreement between members of SADC, Common market for Eastern and Southern Africa and East African Community - with a population of 600 million, $1 trillion GDP and 26 member states Champions intra-african trade, accounts for half of intra-african trade (ECA et al., 2012) South Africa exported manufactured goods worth $10.2 billion making it a strong driver of trade and economic growth on the continent
Implications for local economies in Africa Is Africa stuck as a producer of primary commodities with minimal multiplier effect on economic growth and unemployment? Increasing calls for industrialisation as key to economic diversification, long term job creation and growth e.g. agro-processing, manufacturing Trade, FDI and Aid is still not adequately directed at sectors that create jobs, reduce poverty and minimise inequality in African economies Returns from commodity boom are not properly channelled into other productive sectors to diversify African economies and reduce the dependence on primary commodity export for growth and also avoid Dutch disease effects do we have the technology to do so? Can the BRICS help? Commodity price boom also has dire consequences for commodity importing African countries. E.g. oil prices, luckily currently declining
Implications for local economies Africa How do we shift African economies from overdependence on primary exports Technology transfer and capital investments for beneficiation of mineral resources, could India help? Oil refinery could Russia help? Agro-processing could Brazil help? within the framework of BRICS development cooperation Could the shift in China towards manufacturing and industrialisation lead to outsourcing of labour intensive production to local economies in Africa? Currently going to neighbouring ASEAN countries How do we ensure local content utilisation in implementing FDI projects e.g. infrastructure development to date development assistance has been tied in that respect, China brings its own labour to implement FDI projects. This minimises knowledge and technology transfer to local economies in Africa. A few countries like Nigeria and Ghana have managed to change that a little bit We need to learn from Brazil - 70% local content sourcing in the oil and gas industry (Ospina, 2012) but domestic suppliers must perform to standard
Challenges for the BRICS the link to Africa The link to Africa is South Africa a or the gateway? each BRICS country is already individually involved in Africa South Africa s size, as compared to other BRICS Members but access to approximately 840 million Africa market The extent of South Africa s interlinkages with the rest of the continent Does the rest of Africa accept South Africa as a gateway Are there contentions from other countries? Nigeria, GDP? Size of its markets? Is the next eleven worth paying attention to?
Challenges for the BRICS the link to Africa The complexity of Sub-regional groupings in Africa, diversity and its impact on South Africa as a gateway can regional protocols be leveraged as an advantage or are a barrier? Each region has a regional power Nigeria - West Africa, Egypt - North, Kenya East Africa, Uganda great lakes region, Rwanda emerging, South Africa Southern Africa Region. Principle of non-interference threat of political instability and accountability to FDI and trade relations
Conclusion The diversity in economic and foreign policies of the BRICS leads to individual footprints in Africa and sub-grouping within the BRICS BRICS is not seen as a new Economic Block relating to a Continent raises scepticism on the African continent Africa itself is extremely diverse, strong sub-regional protocols and groupings aligned to North - South relations To emerge as a viable alternative to Africa s traditional trading partners and markets the BRICS would have to differentiate its approach, better addressing Africa s challenges in the areas of jobless growth, poverty, inequality, food security and real development
Conclusion It this regard the BRICS as a block need a common and institutionalised Africa Development Cooperation Strategy, besides its individual footprints on the continent, with a differentiated approach from Africa s traditional donors The BRICS - Africa Strategy for Development Cooperation will have to contend with a few issues as raised in this presentation These issues would need to be looked into prior to consolidating such a strategy Is there a role the new BRICS Bank could play? Would the new BRICS Bank coordinate and converge BRICS engagements in Africa? These are issues to ponder on in deepening BRICS led engagement in Africa.
Policy Recommendation We need a coherent and institutionalised BRICS - Africa Strategy for Development Cooperation!!!!!!
Thank You Email: esekyere@hsrc.ac.za