As Host Chair of BRICS 2023 Johannesburg, President Cyril Ramaphosa’s announcement of the joint decision to invite Argentina, Ethiopia, Egypt, Saudi Arabia, United Arab Emirates and Iran to join as members on 1 January 2024, to many may have come as a surprise in terms of its immediacy, says the writer. Picture: GCIS.
Is there a healthy dose of realpolitik and pragmatism seeping into the BRICS eco-edifice?
Judging by the mood music at the15th BRICS Summit in Johannesburg last week, it seems so.
Behind the veil of the surfeit of curtain-raiser ministerial and technical meetings and their pronouncements leading up to the summit, it is inevitable that an expectation overload followed especially relating to membership expansion of the Bloc and the de-dollarisation of intra-BRICS trade and investment primarily through the launch of a so-called ‘BRICS currency’.
Both are political ambitions – the one to forge a New World Order as a counter to perceived western (US, EU, UK, Japanese and South Korean) hegemony of global affairs, and the other to end the dominance of the greenback as the international currency of global commodity trade especially oil, gas, minerals, metals and grains and its nefarious implications for the developing world including an imposed resort to unnecessary, costly and unequal correspondent banking services for dollar-based transactions out of New York; being at the mercy of the punishing exchange rate fluctuations of local currencies against the dollar; and beholden to the extra territorial reach of the so-called US Financial War against Terrorism with its Patriot Act variants and in recent years its arbitrary Sanctions Regime, especially against BRICS two dominant members – Russia and China.
As Host Chair of BRICS 2023 Johannesburg, President Cyril Ramaphosa’s announcement of the joint decision to invite Argentina, Ethiopia, Egypt, Saudi Arabia, United Arab Emirates and Iran to join as members on 1 January 2024, to many may have come as a surprise in terms of its immediacy.
But in reality it was a masterstroke of foreign policy pragmatism on behalf of the Bloc, whose cohort is poised to expand to 11 members. This perhaps to the chagrin of Indonesia, the most populous Muslim nation and host of the 1955 Afro-Asian Bandung Conference, which paved the way for the launching of the 120-member Non-Aligned Movement (NAM) in 1961 of which Indonesia, India, Ghana, Egypt and Yugoslavia were the founder members, and Nigeria, the most populous and largest economy in Africa.
Come New Year’s Day 2024, and assuming the invitees accede, the power dynamics of BRICS inevitably changes. Remember the Bloc is touted as an informal grouping of major emerging economies, but the new entrants do add to its flavour a beauty parade of socio-political exotica, albeit strange bedfellows, perhaps undermining the very basis of paving the way to a more structured economic power bloc.
BRICS+ Plus or BRICS Eleven sounds fun. Not even Generative AI could come up with more suitable acronyms of the proposed new grouping. Whether they suffice as a sobriquet for a Bloc with global geopolitical game-changing ambitions depends on its near future development.
Rampant expansion cannot be an option, albeit the two authoritarian members, China and Russia, are its keen proponents. Already the BRICS Eleven dispensation is economically and politically disparate – five democracies, two authoritarian states, two absolute monarchies, one theocracy and one military-industrial state.
Rapid expansion would only dilute the Bloc and conjure up a logistical nightmare.
One of the major mistakes of the EU was the haste to include the former Eastern Bloc countries and the southern Mediterranean nations, whose stages of economic and political development were way behind that of northern Europe.
Despite President Ramaphosa’s assertion that BRICS “is an equal partnership of countries that have differing views but have a shared vision for a better world,” and that “we have consensus on the first phase of this expansion process, and further phases will follow,” the two power brokers who prefer a measured approach to expansion are the two democracies led by President Lula Da Silva of Brazil and Prime Minister Narendra Modi of India.
Unlike China and Russia, who seek expansion as a tool for political and economic influence, if not hegemony, Brazil and India see it as a strategy for realistic and mutually beneficial economic cooperation.
South Africa should be under no illusions of grandeur about its role on the BRICS stage. In reality it negotiates from a position of weakness because of its structurally weak economy exacerbated by an embarrassing actuality of incessant load shedding, and its dysfunctional political governance which by the government’s own admission is wracked by corruption and self-enrichment, which has failed to deliver the benefits of post-apartheid liberation to the majority of its black and brown populations.
No wonder, Pretoria is looking to Moscow and Beijing to help mitigate some of its energy delivery shortcomings.
How strange that the “C” word dared not speak its name at the summit. Neither Ramaphosa in his various speeches including his final summing up of the BRICS outcomes, nor the Bloc’s Joint Ministers of Finance and Central Bank Governors Statement a week earlier, alluded to a BRICS currency.
This is the ultimate pragmatism of this Summit – the stark realisation that the launching of a new currency for such a diverse motley of economies and financial systems is far more complex than the rhetoric of generalities and aspirations suggest.
Frankly there is only one currency – the Chinese renminbi (RMB) or yuan – that has the potential capacity, reach and financial backing to act as an international currency akin to the US dollar. But that could take more than a decade to materialise, and would raise the same questions regarding dominance, hegemony, lender of last resort and exchange rate fluctuations levelled at the US dollar.
Perhaps the alternative solution would be to have a basket of strong currencies, akin to the IMF’s special drawing rights (SDR), although not a currency but an international reserve asset, backed by the dollar, euro, RMB, yen and sterling. The only problem is that the RMB is the only ‘strong’ currency in the BRICS cohort.
The internationalisation of the RMB carries great strategic significance for banks and financial institutions, given that over 1,900 financial institutions now use the currency for payments with China and Hong Kong. But as the latest tracking research published by the banking institute of SWIFT, the Brussels-based global provider of secure financial messaging services, reveals the US dollar remains the most active currency for global payments by value in the world and the RMB has a long way to catch up.
In July 2023, the RMB retained its position as the fifth most active currency for global payments by value, with a share of 3.06%. Overall, RMB payments value decreased by 6.13% compared to June 2023, whilst in general all payments currencies decreased by 14.91%.
For the month of July 2023, the renminbi’s share as a global payments currency reached a mere 3.06% - up from the 2.19% in 2021. This compared with 46.46% for the US dollar, 24.42% for the euro, 7.63% for the British pound, and 3.51% for the Japanese yen. The South African rand’s share was a miniscule 0.29%. The renminbi and the rand are the only two BRICS currencies featured in Swift’s 2023 tracking monitor.
The picture for the RMB excluding payments within the Eurozone, in other words with the rest of the world, the very countries targeted for expansion by BRICS is even more lagging.
According to SWIFT, here the RMB ranked 6th with a share of 2.23% in July 2023, compared with 59.21% for the US dollar, 13.61% for the euro, 5.65% for the British pound, 5% for the yen and 2.7% for the Canadian dollar.
Such are the vagaries of the internationalisation of a currency!
Parker is an economist and writer based in London
Cape Times
Related Topics: