Dispatch

One of These BRICS Is Not Like the Other

One of These BRICS Is Not Like the Other

CAPE TOWN, South Africa — This week, 5,000 delegates from developing nations have gathered in the coastal city of Durban for the fifth annual BRICS summit, and the first to be held in South Africa, which joined the association of emerging national economies in 2010, formally becoming the "S" in the BRIC wall. But the location of this year’s summit underscores a question often asked: Why exactly is South Africa a BRICS member?

After all, listing Brazil, Russia, India, China, and South Africa sounds like that game on Sesame Street: "One of these things is not like the others." Unlike China, South Africa is not an economic powerhouse. It has neither the profit potential nor the productivity of India or Brazil. Russia’s economy (the smallest of the BRIC nations) is four times larger than South Africa’s, which accounts for just 2.5 percent of the bloc’s gross domestic product (GDP). And with a population of 50 million, South Africa lacks the sizeable citizenry of those other countries.

In relation to its much-larger partners, South Africa exists, with apologies to David Frum, as the axis of asymmetry. Goldman Sachs economist Jim O’Neill, who coined the BRIC acronym in 2001, was himself surprised by South Africa’s inclusion. What began as a economist’s snappy acronym was actualized as an organization after the foreign ministers of the BRIC countries began a series of meetings in New York City in September 2006. This was followed by a diplomatic summit in the Russian city of Yekaterinburg, in May 2008, where the foundation for the organization was established. Shortly after it was announced that his club had gained a member, O’Neill wrote to his clients that "While this is clearly good news for South Africa, it is not entirely obvious to me why the BRIC countries should have agreed" to invite it.

Surely a more robust and exciting economy — Turkey, Mexico, or South Korea — would be a better fit?

No doubt. But Turkey, Mexico, and South Korea are not in Africa. South Africa is Africa’s largest economy, and Africa is key for BRIC resources, trade, and economic expansion. According to economists at South Africa’s Standard Bank, the BRIC nations trade more with South Africa than with each other. Thus it was not particularly surprising, then, that shortly after his 2009 inauguration, South African President Jacob Zuma made partnership with BRIC countries a priority, visiting each state and lobbying for closer ties.

South Africa’s selection the following year thus made strategic sense, even as it baffled more literal-minded economists. The country’s inclusion in the consortium had everything to do with politics, and very little to do with economic equivalency, developmental dynamics, or societal similarities. The invitation was about "location, location, location" — and a favor from some very powerful friends. In return for which the BRIC states get political capital, increased trading ties, and a steadfast African ally.

One of the planks of this year’s summit is "BRICS and Africa — a partnership for development, integration, and industrialization." The Standard Bank economists estimate that BRIC-Africa trade will exceed $500 billion by 2015, with 60 percent of that figure resulting from China-Africa trade. In 2009, South Africa-China trade totaled $59.9 billion, which was almost one-third of Africa-China trade.

Perhaps it should have been apparent, then, that it was China that invited South Africa to join the BRIC consortium. The world’s second-largest economy, China is wealthier than all the other BRIC countries combined. It is often said that China sees South Africa as the gateway to Africa. But this formulation is too narrow and too neat. China would do just fine on the continent if South Africa did not exist. The truth is that China sees Africa as the gateway to a richer and stronger China. Playing the long game there — investing $15 billion in the continent’s infrastructure over the last decade; constructing factories and purchasing real-estate in strategically valuable regions — has paid off for Beijing, even as Africans become increasingly suspicious that they are getting the short end of this deal.

China has flooded the African market with cheap goods, benefiting from a manipulated currency and low labor costs. Yes, African consumers benefit from these low-cost goods, too, but African workers and small-business owners (especially in the retail sector) are sidelined by the stealth and quiet aggression of Chinese commerce. In the memorable phrase of Stewart Jennings, chief executive of PG Group, a South African glass manufacturer, China is "exporting unemployment" to Africa.

In March, Lamido Samusi, the governor of Nigeria’s central bank, wrote an op-ed in the Financial Times, in which he argued that Africans must realize that their "romance" with China has encouraged "a new form of imperialism." China, he wrote, is no longer "a fellow underdeveloped country" but a "significant contributor to Africa’s deindustrialization and underdevelopment."

Sanusi’s argument is not much different from that of Zuma, who, addressing the China-Africa Forum in Beijing last July, spoke with surprising frankness about the inequality and "unsustainability" of Sino-South Africa trade. Zuma noted that "Africa’s past experience with Europe dictates a need to be cautious when entering into partnerships with other economies." And yet the day before, China’s then-president had pledged $20 billion in loans to Africa.

China has built strategic railroads, wind farms, dams, and airports across Africa. And early last year, the African Union unveiled their lavish new headquarters — a complex implicitly intended to rival New York’s U.N. Plaza — in Addis Ababa, Ethiopia. The building cost $200 million and was "built and paid for by China as a gift to Africa." Perhaps South Africa’s BRICS membership is another such gift.

China has fought for an increased role for Africa at the United Nations, and African countries have proved important allies. In 2007, when South Africa served its first stint as a non-permanent member of the United Nations Security Council, it shocked much of the world (and, it must be noted, many South Africans) when it voted against a resolution calling on the Burmese military to stop human-rights violations. The only other countries to vote against the resolution were China and Russia. South Africa’s Security Council record of failing to oppose oppressive regimes (and, in one bizarre instance, declining to cosign a resolution condemning Holocaust denial) was so egregious that Archbishop Desmond Tutu called it "a betrayal of our noble past."

Are the political realities of being a BRIC now undermining South Africa’s rainbow
legacy? Last July, South Africa initially abstained from a vote sanctioning U.N. action against Bashar al-Assad’s government in Syria — a vote which Russia and China double-vetoed three times. (Bizarrely, Assad has now asked "for intervention by the BRICS to stop the violence in his country and encourage the opening of a dialogue." Human Rights Watch is now advocating a strong BRICS denunciation of the Syrian dictator.) In fact, it’s not uncommon for BRICS nations to have questionable U.N. voting records and illiberal policies at home. As Morgan Stanley Emerging Markets analyst Ruchir Sharma, one of the most astute critics of BRICS, notes : "Of the 124 emerging-market countries that have managed to sustain a five percent growth rate for a full decade since 1980, 52 percent were democracies and 48 percent were authoritarian. At least over the short to medium term, what matters is not the type of political system a country has but rather the presence of leaders who understand and can implement the reforms required for growth."

Some see South Africa’s U.N. voting record as evidence of a country moving away from its post-apartheid ideals (a champion of equality and liberal decency) to, in the words of the Economist, "becom[ing] more like most other countries around the world — putting their own interests before principle." Today’s South Africa is a country that has fully transitioned from hopeful adolescence to pragmatic and troubled adulthood. South Africa’s membership in the BRICS club is primarily about self-interest, and, despite grandiloquent press releases, it has little to do with principle.

To attend the BRICS summit is to enter the world of the five Rs: the ruble, the rupee, the real, the remnimbi, and the rand. But the Rs too often lacking from the conversation are "recession" — the 2008 financial collapse and the eurocrisis have negatively impacted South Africa, Brazil, India, and Russia — and, quite frequently, "reality." After all, what does the organization stand for, really? Its mandate is entirely unclear, and some of its aspirations are so broad as to make any practical definition impossible.

Within hours of the start of this year’s summit, on March 26, it was announced that the organization had agreed to the establishment of a BRICS bank, the developing-nations equivalent of the International Monetary Fund or World Bank. The idea of a BRICS bank is not new — it has been discussed at past summits and nothing has come of it. And, once again, despite this latest round of fanfare and photo opportunities, a BRICS bank remains elusive and perhaps even unworkable.

It’s a good idea in theory, but less desirable in practice. For one thing, it is difficult to see why it would be in China’s interest to encourage a BRICS bank, when Beijing already offers cheap loans, and owns profitable banks, throughout Africa. And that’s just one problem. As Jaswant Singh, India’s former foreign minister, has pointed out, "Some hopeful Indians see a BRICS bank as a way to channel China’s surplus funds — as well as its expertise and experience — to such investments (especially railways), as well as to strengthen Sino-Indian ties. But, given the two countries’ many serious bilateral problems, will either government really want to bind itself so closely to the other?"

The architecture of a BRICS bank would emphasize, rather than eliminate, South Africa’s unequal status. The bank has pledged for each nation to contribute $10 billion. But that sum is one-fifth of South Africa’s gross foreign-exchange reserves. Perhaps China can loan South Africa this start-up cash, too.

Indeed, it is difficult to know when the BRICS are flexing their muscles and when they are just striking poses and making empty gestures. One item on the summit’s agenda is to develop an internal rating for universities to rival the British and American systems. But what has this got to do with the BRICS mandate, if, at this point, such a mandate even exists?

Besides, why should South Africa which has an appalling record of education, be in any position to grade universities? During apartheid, many black schoolchildren reacted against the oppressive regime and racist education system by boycotting school and carrying placards reading "Liberation Before Education." In 1979, the apartheid government banned the Pink Floyd song, "Just Another Brick in the Wall," because the lyrics ("We don’t need no education…") were considered to be inflammatory.

Almost 20 years into liberation, South Africa’s education system remains badly broken, with high levels of functional illiteracy and millions of students with no prospects and few skills. With 40 percent youth unemployment, and a total unemployment rate of almost 25 percent, South Africa today has little to be proud of. Last August’s Marikana massacre, in which police killed 34 illegally striking miners, intensified an atmosphere of widespread uncertainty, led to downgrades by three international rating agencies, and triggered a lack of confidence from international investors. Business in South Africa is over-regulated, and therefore unattractive to international companies, who are frequently opting to invest instead in neighboring African countries. The mining sector, often called the "backbone" of South Africa’s economy, is in a critical condition, riven by labor-corporate conflict, lack of demand, and increased production costs.

Meanwhile, agitation and unease intensifies, with violent protests, police brutality, and increased militarism — confrontation between privileged authority and the unemployed majority is eerily reminiscent of the apartheid past. According to the Geni coefficient, which measures the disparity between rich and poor, South Africa is a more unequal society now than during apartheid.

It is not yet clear what benefit BRICS membership will be to South Africa. What the country’s leadership and the international community need to realize is that South Africa is a unique country, with significant problems and challenges. These require serious, rather than superficial, solutions.

More than anything, South Africa aspires to be a major player both on the continent and abroad. As a mid-sized economy with major problems and a storied past, the country has always punched above its weight, but lately it feels that it is punching in the wrong direction. It needs to look more deeply inward, where its challenges are enormous and increasing. Only when the country achieves greater stability, equality, and prosperity at home will it be a genuinely impactful player abroad. But if anything’s clear as this summit kicks off, South Africa is not just another BRIC in the wall.