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Johannesburg - The formation of the Brics grouping has yet to stimulate foreign direct investment between South Africa and Brazil, India and Russia, SA Institute of International Affairs researcher Cyril Prinsloo said this week.
However, there has been foreign direct investment exchanged between South Africa and China.
South Africa joined Brics in 2011.
“Brazilian and Russian investment into South Africa is marginal ... India and China is small.
"Even China – very little foreign direct investment is coming to South Africa. There is a lot of foreign direct investment from South Africa into China – predominantly Naspers through Tencent,” Prinsloo said.
“Part of the problem is the geographic and language barriers between these countries. There is clearly a recognition that this is a challenge and it is something they are very keen on addressing,” he added.
The Brics group makes up 19.5% of South Africa’s trade, 19.6% for the rest of Africa, 26.8% for the EU and 7% for the US.
Last year, China floated the idea of a free trade agreement within Brics, but it was met “with quite a bit of resistance” from the other members, Prinsloo said.
“The position that South Africa has taken on the free trade agreement is that where there are issues with Brics intratrade ... let’s sit around the table and address those issues rather than have a blanket free trade agreement,” he added.
The National Development Bank, or the Brics Bank, has recently opened up its membership to all members of the UN.
SA Institute of International Affairs CEO Elizabeth Sidiropoulos said the most likely African countries that could join the Brics Bank were Nigeria and Kenya, as well as north African countries such as Morocco and Egypt.
Sidiropoulos said many African countries were interested in joining the Brics Bank.
“In my discussions with east and southern African countries, there is interest. There are a number of factors that the bank will consider when it invites new members.
"Obviously, one is political commitment to the bank. That is one thing that credit ratings agencies are very much looking for – if the bank is in financial difficulty, would the members put up the additional funding?
“So, over the next 12 months, we can see the National Development Bank reaching out to countries to become members.”
One of the advantages of being a member of the National Development Bank is the speedy approval of loans.
“The Brics Bank has undertaken to complete the loan approval process within six months. For a long time, developing countries have complained about lending done in US dollars.
If you lend in US dollars, the exchange rate fluctuates and then, all of a sudden, you have to pay more money back without getting anything in return.
This is a key challenge that a number of the multilaterals have tried to address,” Sidiropoulos said.
“Developing countries feel that most Western countries have a lot of influence within the World Bank because they own the majority of the shares, yet they aren’t borrowing members so the policies they drive don’t influence them.
“Here, we see all members – equal vote, not veto – which is innovative in a sense.”
The new key development would be for the National Development Bank to obtain a credit rating from one of the major international ratings agencies.
At the moment, the Brics Bank can only fund projects in its member countries.
