By Andrew Bahlmann
The upcoming BRICS summit aims to enhance co-operation and development among the five countries and the Global South. One of the focus areas of the summit is to increase trade and investment ties with Africa, which could have a positive impact on South Africa’s economy and create opportunities for mergers and acquisitions (M&A) transactions.
This is because the BRICS countries have emerged as major recipients and sources of foreign direct investment (FDI) in the past decade. However, there could also be some challenges and risks associated with being associated with China and Russia, which are often seen as unfriendly or competitive by the West.
For example, some reports suggest that China’s outbound M&A activity has slowed down and faced more scrutiny in recent years due to geopolitical tensions and regulatory barriers. Therefore, it is possible that some Western investors or partners could be deterred by the political or economic implications of dealing with countries like South Africa that have closer ties with China and Russia.
There are some examples of BRICS countries investing in South Africa and pursuing vertical integration strategies. For instance, China has invested in the mining sector and has established joint ventures with local companies to process minerals. India has also invested in the energy sector and has acquired stakes in coal-fired power plants.
These investments could help South Africa diversify its economy and create jobs. However, there are also some challenges and risks involved, such as environmental impacts, regulatory uncertainty and political instability. It raises the question of whether the benefits outweigh the costs.
China and Russia are often criticised by some Western countries for their human rights violations, authoritarian regimes, cyberattacks and geopolitical ambitions.
Investing in South Africa could be a way for them to expand their influence and interests in Africa and the Global South, as well as to counter the dominance of the US and its allies. However, their investments could also bring benefits to South Africa, such as infrastructure development, technology transfer, trade diversification and regional integration.
Andrew Bahlmann, the chief executive Corporate and Advisory at Deal Leaders International.