BRICS Summit not only a talk shop, as SA emerges with signed deals

President Cyril Ramaphosa at the BRICS Summit. Photo: GCIS

President Cyril Ramaphosa at the BRICS Summit. Photo: GCIS

Published Aug 25, 2023


A frequent criticism of conferences like the BRICS Summit is that they are basically talk shops, but little action actually takes place. Aware of this criticism, conference organisers make sure that there are deals that are signed on the sidelines of such conferences.

The theme of the Summit was “BRICS and Africa: Partnership for mutually accelerated growth, sustainable development and inclusive multilateralism”.

To address this theme, five key priorities were selected. They were:

– Developing a partnership towards an equitable Just Transition. This aim is to alleviate the effects of climate by moving towards a Net Zero carbon dioxide emissions target by 2050, while at the same time ensuring that no one gets left behind.

– Transforming education and skills development for the future. This is especially pressing as the latest test results show that a massive 81% of South African Grade 4 learners cannot read with meaning. It is also a priority for the Presidential Commission on the Fourth Industrial Revolution to equip the youth with the skills needed to benefit from this megatrend.

– Unlocking opportunities through the African Continental Free Trade Area. To help with achieving this priority, the BRICS Business Forum organised a trade fair at Gallagher Estate, where more than 200 businesses could showcase their products and services. It is at such trade fairs that new partnerships are established that have a material impact on South Africa and its people. The Gauteng provincial government also previously hosted a briefing on the Inter Africa Trade Fair that will be held in Cairo, Egypt in November 2023.

– Strengthening post-pandemic socio-economic recovery and the attainment of the 2030 Agenda on Sustainable Development. In that respect, the BRICS Cooperation in Customs Matters Agreement (CCMA) has been finalised, but not yet signed.

– Strengthening multilateralism including working toward real reform of global governance institutions and strengthening the meaningful participation of women in peace processes. The BRICS have been promoting this measure for several years, but as of now there has been no structural reform of the United Nations Security Council for several decades now.

– The highest profile deals that were announced either ahead of or during the BRICS Summit were the debut issue of rand-denominated bonds by the New Development Bank (NDB), the loan by the NDB to the Trans-Caledon Tunnel Authority (TCTA) to develop Phase II of the Lesotho Highlands Water Project (LHWP) and the grant by China to South Africa to address the current load shedding crisis.

– On August 15 the NDB successfully issued its debut rand-denominated bond in the South African bond market, becoming the highest rated issuer to issue in this market since 2015. The book was well supported, with more than R2.5bn in bids across both the 3- and 5-year tranches allowing NDB to exercise its option to upscale the trade from R1bn to R1.5bn.

The NDB already in 2019 said it intended to issue R10bn in the South African capital market and Leslie Maasdorp, the NDB vice-president and chief financial officer told Business Report that the bank was looking at issuing a further R500 million bond this year, but the size and tenor would depend on market conditions in September and October.

The issue by the NDB is likely to revive the rand-denominated Eurobond market, which has seen a decline in recent years.

According to the South African Reserve Bank, there were net redemptions of R4.9bn of rand-denominated bonds in the European and Japanese bond markets in the first five months of 2023. This meant that the total outstanding amount of rand-denominated bonds in issue in both these markets declined to R276bn at the end of May 2023, R41.9bn less than the recent high of R318bn in March 2022.

The R3.2bn loan to the TCTA will ensure that South Africa will receive the liquid gold of water in 2028 as drought conditions are likely to return as the planet moves back into an El Niño event later this year.

China’s President Xi Jinping announced on August 21 that China would donate R167m to South Africa for emergency power equipment and would provide a R500m grant to address load shedding. Around 550 public facilities such as clinics and police stations will get generators, power-supply vehicles and off-grid solar PV energy storage supply systems. These are some of the real rewards of talks.

These rewards are not confined to this year as the outreach to other African countries will result in multi-year benefits as institutions like the NDB and the Africa Export-Import Bank (Afreximbank) address transport infrastructure constraints that hamper inter-African trade. This will benefit South African construction and transport companies.

In 2022, the rest of Africa was the best performing region for South African exporters with a 28.1% year-on-year (y/y) gain compared with a 11.1% y/y rise for total exports.

Helmo Preuss: Economist at Forecaster Ecosa.