South Africa kicked off the fifth Brics summit yesterday with high hopes that its association with the world’s fastest-growing major economies – Brazil, Russia, India and China – would give the country much-needed impetus to overhaul its economy and unlock opportunities for development for itself and the African continent.
As the host of this year’s summit, South Africa finds itself in the spotlight, not only about its stature as the smallest but strategically important member of the Brics, but also as a result of myriad challenges that continue to confront the country, 19 years after the end of white rule.
The summit in the port city of Durban offers South Africa a chance to burnish its image as an attractive investment destination, especially at a time when the country is grappling with widening budget and current account deficits, stunted economic growth, high unemployment, stubborn poverty and rising inequality.
The theme for this year’s summit is: Partnership for Development, Integration and Industrialisation.
As a member of the Brics grouping, South Africa expects to strengthen economic ties, garner investment and find new markets as it continues to capitalise on its position as a gateway to the continent of Africa, with its almost 1 billion consumers.
South Africa’s membership of Brics “meant Africa has connected with the world”, President Jacob Zuma said on the eve of the summit opening.
He said the Brics bloc was a “counterweight” in a world that was increasingly becoming more orientated towards the developing world.
But the success of the summit, which wraps up today, will be determined more by how many tangible benefits accrue to South Africa, as the country celebrates three years of being a Brics member, than by political rhetoric.
To that end, news that Transnet and China Development Bank had entered into an agreement yesterday to help the state-owned transport and logistics company diversify funding sources for its capital investment programme marks a positive spinoff from the summit.
Transnet and China Development Bank agreed to co-operate, explore and identify opportunities for the Chinese bank for future collaboration in Transnet’s infrastructure upgrade programmes.
Transnet plans to invest up to R300 billion over seven years to expand railways, ports and pipelines to boost exports, mainly of commodities.
“The co-operation includes, but is not limited to, the financing of the construction and upgrade of railways, and port infrastructure [and] localisation of equipment manufacturing – especially rail and port,” Transnet and China Development Bank said.
“In addition, the two agreed on future collaboration on research and development initiatives, manufacturing, marketing and the construction of cross-border infrastructure throughout the continent.”
The agreement was signed at the Union Buildings in Pretoria, where Chinese President Xi Jinping was hosted by Zuma for his first state visit to South Africa.
Transnet group chief executive Brian Molefe said: “This historic agreement between two state-owned entities within Brics illustrates the opportunities inherent in such diplomatic ties. The agreement will enable us to explore innovative funding options as we pursue our borrowing plan focusing on cost-effective solutions and diversity.”
The agreement is one of various country-to-country collaboration agreements intended to strengthen economic and trade relations among the Brics members.
In another development involving a Chinese institution, Sinopec and PetroSA signed an agreement yesterday that boosted the possibility of building a crude oil refinery at Coega in the Eastern Cape. Feasibility studies of the project will now forge ahead.
According to Engineering News, public domain information indicated that the project would entail the construction of a 360 000-barrels-a-day facility, with an associated price tag of about $11 billion, or about R100bn.
In addition, representatives from the two nations’ central banks signed an agreement yesterday enabling the SA Reserve Bank to invest about 3 percent of its reserves of $50.4bn in Chinese assets. China is South Africa’s biggest buyer of raw materials and its largest trading partner, purchasing 13 percent of the country’s exports.
In another move, signalling a strong intention by the Brics bloc to alter the global financial architecture, China and Brazil agreed to create a swop line allowing them to trade the equivalent of up to $30bn a year in their own currencies.
The agreement, which is due to last three years, marked a step by the two largest economies of the emerging powers group to make real changes to global trade flows, which have long been dominated by the US and Europe.
“Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets,” Brazilian central bank governor Alexandre Tombini told reporters after the signing of the accord in Durban.
Brazil’s Economy Minister, Guido Mantega, described the deal, called a bilateral currency swop accord, as “a sort of umbrella agreement”. But he did not spell out what specific areas or categories of bilateral trade would be affected.
When the summit wraps up later today, it is expected that further agreements will have been signed.
But more attention will fall on what the Brics leaders say about the establishment of a development bank, a move that may signal a challenge to the Bretton Woods institutions, such as the World Bank. – With additional reporting by Donwald Pressly in Cape Town and Reuters.