South Africa and the BRICS alliance

Transnational Institute’s (TNI) Shifting Power Working Paper Series seeks to help movements navigate our changing multipolar world as well as provide an invaluable source of alternative analysis for students, analysts and journalists.

The BRICS Alliance: Challenges and Opportunities for South Africa and Africa

For the past decade, Africa has experienced the longest continuous growth spurt since independence from colonialism. The African boom has been fueled mostly by a mining boom, with income generated by the export of natural resources financing a consumer boom.

Most of the $43 billion foreign direct investment into Africa in 2013 was in extractive industries. Natural resources still account for three-quarters of sub-Saharan Africa’s exports, according to World Bank figures. The seemingly unlimited appetite for African commodities from the fast-growing emerging markets mainly the BRICS countries, such as China and India, have been among the key drivers of African growth.

The rush by BRICS countries to invest in Africa has turned it into a globally positive investment story, rewriting Africa’s narrative into one of new opportunities, rather than the old narrative of the continent being a burden, waiting for handouts from the West and former colonial powers.

In 2013, BRICS members’ trade with Africa stood at $350 billion. According to South Africa’s Standard Bank, BRICS members’ trade with African countries had jumped 70 per cent in the past five years, or by $150 billion since 2008. China’s share of the BRICS-Africa trade in 2013 was 61 per cent, with India having 21 per cent, Brazil 8 per cent, South Africa 7 per cent and Russia 3 per cent. The BRICS countries share of total global output was 20 per cent in 2013.

Brazil over the last decade has increased its trade with Africa from $4.2 billion to $27.6 billion, with these investments mostly focused on the Lusophone African countries. In early 2013, Brazil cancelled the $900m debt of 12 African countries. More than half of Brazil’s technical cooperation is with Africa. Natural resources make up 90 per cent of Brazil’s imports from Africa. Brazil sells manufactured products to Africa such as vehicles, machinery and processed goods as well as agricultural goods such as diary products, meat and sugar.

Brazil has used its cultural affinity to Africa, its large African-origin population and its language ties with Lusophone Africa, as a competitive advantage. Brazil under former Workers’ Party leader Lula da Silva, stepped up its trading with Africa as a means of diversifying its dependence on industrial countries.

India has increased trade with Africa, from $3 billion in 2002 to $62 billion in 2011. The Indian government aims to increase this to $90 billion by 2015. Primary commodities make up 91 per cent of Africa’s exports to India, with oil making up 61 per cent of this over the last decade.

In 2012, Russia wrote off debts of $20 billion of from African countries. Bilateral trade between Russia and Africa rose to a peak of $7.3 billion in 2008—a tenfold increase from the $740 million in 1994. Almost 80 per cent of Russia’s imports from Africa are agricultural products—edible fruit and nuts (29 per cent), cocoa (16 per cent) and tobacco (9 per cent). Russia exported mostly processed products to Africa: cereals (31 per cent), machinery (3 per cent), and wood (12 per cent), iron and steel (11 per cent), fertilisers (6 per cent), mineral oil and fuel (22 per cent). Russia has dramatically expanded its military cooperation with Africa, selling arms, military equipment and providing military training to African countries, accounting for almost 15 per cent of African arms purchases.

In 2012, if South Africa is excluded, Africa was the source of 15 per cent of overall BRICS imports, or $420 billion out of $2.8 trillion, according to figures from South Africa’s state-owned Industrial Development Corporation. The imports were concentrated on selected countries and dominated by minerals: Angola, Nigeria, Libya, Algeria and Egypt for crude oil and gas; the Democratic Republic of Congo and Zambia for copper; and Liberia, Sierra Leone and Mauritania for iron ore and concentrates.

In 2013, South Africa’s trade with the rest of Africa stood at $25 billion. South Africa exports mostly manufactured goods to other African countries. The top five South African exports to Africa in 2012 were machinery (22 per cent), base metals (14 per cent), transport equipment (14 per cent), chemical products (11 per cent) and mineral products (10 per cent). Almost 80 per cent of all South Africa’s imports from other African countries are minerals and oil-related products.

BRICS total trade with Africa is more than trade between BRICS countries. In 2012, for example, BRICS total trade with Africa was $340 billion, while trade between BRICS countries for the same period amounted to $310 billion. By the end of 2012, South Africa’s trade with BRICS countries represented 19 per cent of the country’s total trade. By the end of 2011, South Africa recorded R4.2 billion ($504m) in trade with Russia, R55billion ($6.6bn) with India, R18 billion ($2.2bn) with Brazil and R188 billion ($22.6bn)with China. South Africa ran a trade surplus with Russia of R1 billion ($120m) in 2011. South Africa ran a trade deficit with China of R18 billion ($2.2bn) in 2011; in the same year, the trade deficits with Brazil and India were R6.1 billion ($732m) and R4.9 billion ($588m) respectively. South Africa’s exports to China and India are dominated by mineral exports, mostly iron-ore and concentrates, and coal. In 2012, about 46 per cent of South Africa’s exports to China were iron-ore and concentrates, and 11 per cent of coal products. Also in 2012, 53 per cent of its exports to India were iron-ore and concentrates, and 6 per cent were coal. South Africa’s exports to Brazil are more diversified, including manufactured products—which actually create jobs and higher income—and chemicals and minerals. Transport-related machinery, including vehicles, made up around 28 per cent and agroindustrial products 40 per cent of South Africa’s exports to Russia in 2012.

BRICS members’ interest in Africa as a new investment destination has prompted Western countries-such as the US, Japan and the European Union(EU)—and oil-rich Middle Eastern countries to follow suit. Suddenly, BRICS interest in Africa has prompted Western countries and companies to invest in ways never done before. Africa has become the new frontier market for many old industrial powers wanting to reboot their economies, and for the new emerging powers wanting to maintain high growth levels.