BRICS impact: 2024 and bey­ond

pressreader.com/9gk8/20241018/281706915145343

Ian Riggs

18 Oct 2024

+9
AS the BRICS (Brazil, Rus­sia, India, China, South Africa) mem­ber­ship grows, so will its
impact on the global eco­nomy in 2024 and the com­ing years. One of the most evid­ent
effects of BRICS’ impact expan­sion is the gradual weak­en­ing of the US dol­lar and its
replace­ment in global trade set­tle­ments. Other effects expec­ted in the near future are the
increas­ing food secur­ity in the BRICS ter­rit­or­ies, replace­ment of Visa and Mas­ter­card
pay­ment pro­viders, and gradual refusal from SWIFT and CHIPS in inter­na­tional pay­-
ments.

There­fore, BRICS has a con­sid­er­able effect on global eco­nomic affairs and con­ducts an
act­ive trans­form­a­tion of the global eco­nomic land­scape by under­min­ing the set West­ern
order.

Africa and the BRICS: A win-win part­ner­ship?

In a world dom­in­ated by the eco­nomic power of the USA, the BRIC bloc ini­tially star­ted as
an informal group of lead­ing emer­ging eco­nom­ies.

The term was coined by Jim O’Neil — an eco­nom­ist who envi­sioned the future of these
regional giants in cooper­a­tion and eco­nomic alli­ance. In 2005, the group included only
Rus­sia, China, and India, and in 2006, Brazil joined the bloc. South Africa joined in 2010,
mak­ing the ini­tial struc­ture of the BRICS entity com­plete.

Almost two dec­ades after the BRICS group’s ori­gin­a­tion, it has become an organ­isa­tion
cap­able of chal­len­ging West­ern eco­nomic dom­in­ance and build­ing a new eco­nomic
paradigm based on mul­ti­polar­ity and frag­ment­a­tion.

Vital BRICS stats

Here are a couple of eco­nomic stats to illus­trate the present-day impact of the BRICS
bloc on the global eco­nomy:

◆ 32% of the world’s GDP (equal­ing $27+

tril­lion).

◆ 18% of global trade.

1/5
◆ 25% of for­eign dir­ect invest­ment (FDI). ◆ Approx­im­ately 40% of the world’s pop­u­la­tion
(around 3 bil­lion people).

◆ BRICS growth is pro­jec­ted at 5.2% in 2023 and 4.5% in 2024.

These fig­ures are true for the ori­ginal com­pos­it­ion of the BRICS bloc, which has more
than doubled in Janu­ary 2024 after the BRICS+ format came into force. At present, this
entity includes 11 coun­tries, and its eco­nomic weight is expec­ted to con­tinue increas­ing.

Implic­a­tions of the BRICS+ format

Since most of the BRICS founders have faced stag­nat­ing eco­nomic growth and a vari­ety
of socio-eco­nomic and polit­ical pres­sures, the bloc’s expan­sion with six new mem­bers is
a prom­ising step for­ward for the entity.

For instance, Venezuela and the UAE have immense depos­its of nat­ural resources. New
BRICS mem­bers also have a well-estab­lished pres­ence in many regional alli­ances, such
as ASEAN, OPEC, Mer­cosur, GCC, etc., thus giv­ing BRICS greater influ­ence and pen­et­-
ra­tion in regional affairs at all levels.

However, the most ser­io ­ us implic­a­tion of BRICS growth for the world eco­nomy is the
bloc’s refusal to use USD as a global cur­rency for inter­na­tional pay­ments. While Rus­sia
has refused the US dol­lar after the escal­at­ing sanc­tions, other coun­tries like China fol­-
lowed the lead and endorsed trade trans­ac­tion set­tle­ments in national cur­ren­cies. This
way, with BRICS fos­ter­ing a non-USD eco­nomy, the far-reach­ing eco­nomic trend can sig­-
ni­fic­antly weaken the USA as the only issuer of USD, which it used to dom­in­ate and reg­u­-
late the world’s eco­nomic affairs.

Does BRICS cre­ate a new eco­nomic paradigm?

The ini­tial goal of the BRICS setup was the pro­mo­tion of peace, secur­ity, and cooper­a­tion
among emer­ging eco­nom­ies, aimed at a more equit­able global eco­nomy in the long run.
For many coun­tries, BRICS brought hope for bet­ter eco­nomic pro­spects for Latin Amer­-
ica, Africa, and Asia.

This way, BRICS has offered a viable altern­at­ive to coun­tries unwill­ing to play by the
mature West­ern eco­nom­ies’ rules. Ulti­mately, the rapid BRICS growth and recog­nised
influ­ence in the global eco­nomy has enabled the bloc to reshape inter­na­tional trade, fin­-
ance, and invest­ment domains that used to be mono­pol­ised by the USA and West­ern
Europe.

The fifth meet­ing of the BRICS coun­tries held in Durban, South Africa, from March 26 to
27, 2013, was seen as an oppor­tun­ity for Africa to strengthen its ties with these major
emer­ging eco­nom­ies.

2/5
The theme of the sum­mit was “BRICS and Africa — part­ner­ships for integ­ra­tion and
indus­tri­al­isa­tion” with the goal to unlock poten­tial for cooper­a­tion between the BRICS and
Africa. In fact, Africa has demon­strated huge poten­tial in terms of eco­nomic devel­op­ment
pro­spects, abund­ant nat­ural resources, grow­ing con­sumer power and favour­able demo­-
graph­ics.

The emer­gence of the BRICS as major global play­ers has raised hope that a win-win
part­ner­ship could foster the devel­op­ment of the con­tin­ent.

In recent years, the BRICS have expan­ded their involve­ment in Africa. Their share in for­-
eign dir­ect invest­ment (FDI) inflows and trade volume has surged rap­idly.

For instance, trade volume between China and Africa increased from US$10 bil­lion in
2000 to US$190 bil­lion in 2012.

The part­ner­ship between India and Africa, for instance, has sig­ni­fic­antly pro­moted the
devel­op­ment of small- and medium-scale enter­prises on the con­tin­ent. Mean­while, Brazil
and Rus­sia have been heav­ily involved in the min­ing and energy industry in Africa
through pub­lic-private part­ner­ships.

BRICS engage­ment with Africa

The BRICS are now Africa’s largest trad­ing part­ners with trade expec­ted to reach more
than US$500 bil­lion by 2015, with 60 per cent from China.

The BRICS are also becom­ing sig­ni­fic­ant investors in Africa, espe­cially in the man­u­fac­tur­-
ing and ser­vice sec­tors. With respect to for­eign dir­ect invest­ment, BRICS coun­tries have
strengthened their pres­ence on the con­tin­ent com­pared with tra­di­tional part­ners, such as
the US and Europe.

In 2010, for example, the BRICS’ share in FDI inward stock and FDI inflows to Africa
reached 14 per cent and 25 per cent, respect­ively. The share of BRICS coun­tries in the
total value of African green­field projects reached 25 per cent in 2012 com­pared with 19
per cent in 2003. Trade between the BRICS and Africa rose to as much as US $340 bil­-
lion in 2012 —10 times higher than the value recor­ded in 2002 . Cur­rently, the BRICS
trade more with Africa than they do among them­selves.

Main motiv­a­tions of the BRICS coun­tries’ engage­ment in Africa

The reas­ons behind BRICS coun­tries’ involve­ment in Africa include their appet­ite for the
con­tin­ent’s nat­ural resources, Africa’s large and untapped agri­cul­tural sec­tor as well as
the oppor­tun­ity for invest­ments and trans­fer of tech­no­logy and know­ledge tar­get­ing the
grow­ing middle class which is estim­ated to include more than 300 mil­lion people.

Appet­ite for nat­ural resources: For many experts, the engage­ment of the BRICS in Africa
is essen­tially driven by the con­tin­ent’s abund­ant nat­ural resources. BRICS are major play­-
ers in the exploit­a­tion of nat­ural resources in many African coun­tries includ­ing Angola,

3/5
Demo­cratic Repub­lic of Congo, Nigeria and Sudan. Brazil and China are the most act­ive
in explor­ing and exploit­ing gas, oil and min­er­als resources in Africa. The pres­ence of
these major global play­ers in the nat­ural resources sec­tor has brought large invest­ments
in vari­ous infra­struc­ture projects in recent years to the con­tin­ent.

However, nat­ural resources do not rep­res­ent the main BRICS invest­ment in Africa.
Accord­ing to the United Nations Con­fer­ence on Trade and Devel­op­ment (UNCTAD), 75
per cent of the value of BRICS FDI projects in Africa between 2003 and 2012 are in man­-
u­fac­tur­ing and ser­vices.

Only 10 per cent and 26 per cent of the num­ber and the value of projects, respect­ively,
are in the nat­ural resources and agri­cul­tural sec­tors.

Africa’s agri­cul­tural sec­tor:

The agri­cul­tural sec­tor is vital for African eco­nom­ies and it is hoped that it will con­tinue to
be an engine of eco­nomic growth for the con­tin­ent.

The engage­ment of BRICS coun­tries in the African agri­cul­tural sec­tor is motiv­ated by the
fact that these coun­tries would need to pro­mote their exper­ie ­ nces in terms of agri­cul­tural
devel­op­ment as a way to unlock the con­tin­ent’s poten­tial. Brazil, which is a lead­ing global
player in trad­ing agri­cul­tural com­mod­it­ies, can be a model for African coun­tries regard­ing
agri­cul­tural devel­op­ment and can assist Africa in enhan­cing agri­cul­tural pro­ductiv­ity and
redu­cing the impact of food insec­ur­ity.

The suc­cess of the Brazilian agri­cul­tural model is mainly due to the ver­tical integ­ra­tion of
the sec­tor, the strong sup­port of the state and high levels of mech­an­isa­tion. Fos­ter­ing
agri­cul­ture in Africa will be a major devel­op­ment tool to erad­ic­ate poverty and hun­ger
over the long term. In that con­text, shar­ing the exper­ie­ nce of the BRICS would boost
Africa’s agri­cul­tural pro­ductiv­ity.

Seek­ing diver­si­fic­a­tion and new mar­kets:

Besides the huge poten­tial offered by the African primary sec­tor, the BRICS are attrac­ted
by the bene­fits of diver­si­fic­a­tion of African eco­nom­ies as well as the pos­sib­il­ity to enter
into a large untapped mar­ket of one bil­lion African con­sumers. Over the years, the BRICS
coun­tries have accu­mu­lated large amounts of reserves which have been inves­ted mainly
in the developed world.

The per­sist­ence of the global fin­an­cial crisis, which has hit developed coun­tries par­tic­u­-
larly hard, is motiv­at­ing the BRICS to shift a por­tion of their invest­ments toward other
emer­ging des­tin­a­tions in order to max­im­ize returns while redu­cing risks. Hence, Africa
may offer BRICS the oppor­tun­ity to diver­sify towards new fron­tier mar­kets.

Moreover, invest­ing in Africa implies access to a one bil­lion con­sumer mar­ket with its
grow­ing middle class. In recent years, sec­tors such as tele­com­mu­nic­a­tions, fin­an­cial ser­-
vices and retail have recor­ded high rates of growth in most African coun­tries due to high

4/5
demand by Africa’s middle class.

Implic­a­tions for Africa

The stra­tegic interest of the BRICS in Africa will strengthen the pos­it­ion of South Africa as
a lead­ing regional power and a gate­way for other BRICS coun­tries to the African mar­ket.
As the BRICS are con­sol­id­at­ing their pos­it­ions in Africa through massive invest­ments, this
seems to cre­ate a new source of devel­op­ment fund­ing for the con­tin­ent.

5/5