Should Africa Join BRICS?
Obianuju Ndedigwe
Investment Analyst / Focused on Early Stage Ventures & Impact Investing In Africa
As the world's youngest and most resource-rich continent, Africa's engagement with BRICS raises questions about whether it is a strategic partner or merely a pawn in the geopolitical alliance.?
Critics of BRICS-Africa engagement often raise concerns related to what they perceive as neo-colonial tendencies and resource exploitation. They argue that, beneath the guise of mutually beneficial partnerships, BRICS nations are pursuing their own interests at the expense of African sovereignty and development.?
In contrast, supporters of BRICS-Africa cooperation emphasize? the positive aspects of these relationships, particularly the potential for economic growth and diversification. They argue that BRICS engagement can be instrumental in addressing Africa's developmental challenges.
This article delves into the complex dynamics of economic partnerships, geopolitical influence, and development initiatives, aiming to uncover whether Africa's interests are genuinely being prioritized or if it is merely a strategic piece in the larger geopolitical chessboard.
You can expect to find answers to the questions:?
About BRICS
BRICS is an alliance of the fastest growing emerging countries.
BRIC (stands for Brazil, Russia, India and China) officially commenced in 2009.?
The primary goal of the BRIC formation is to promote cooperation and collaboration among emerging economies, to enhance their global influence and address common economic, political and social challenges.?
In 2010, South Africa became the first African country to join the alliance thus giving rise to the extension of the name, BRICS.??
It's worth noting that all the BRICS countries are members in the G-20 forum (a forum of developed and rapidly developing nations). Africa is also represented within the G-20, although through the collective voice of the African Union (AU). However, in a significant recent development, the AU was granted permanent membership status within the G-20 during the New Delhi summit in September this year. This marks a crucial advancement in representing the continent's interests globally, expanding beyond the prior situation where South Africa was the sole African permanent member of the G-20 bloc.?
But, African nations want more representation and in fact, regard on the global stage which is evident in how swiftly some have moved to express their interest in joining BRICS, including Egypt, Ethiopia and Algeria.
Without a doubt, BRICS offers a rich opportunity for African nations to ambitiously pursue their distinct interests. This is a vital and bold step, particularly when you consider that Africa isn't a single country, and the priorities of the individual nations vary significantly.
Why BRICS and why now?
Assessing the Benefits for Africa
Although South Africa has remained the sole African member in BRICS, it's crucial to recognize the potential benefits that forging a partnership with BRICS could bring to Africa - the idea that it can lead to increased trade, more investments, and improved infrastructure across the continent. These promises have been emphasized repeatedly in the BRICS summit. It would be worthwhile to assess the progress made thus far and consider what Africa can anticipate as the bloc continues to expand to include more African nations.
Africa's engagement with BRICS opens up the possibility of substantially expanding trade volumes. Brazil, Russia, India, China, and South Africa? make up a quarter of the global economy. Collectively, they account for a fifth of global trade and are home to more than 40% of the world’s population. In 2021, over 17% of South Africa's exports had their destinations to other BRICS countries. The value of this trade is continuing to grow. By 2022, South Africa's exports to BRICS countries had risen by 7.1%.?
With the goal of fostering prosperity within their respective regions, the bloc recognizes that utilizing local currencies for global transactions will not only enhance speed and efficiency but also prove more economically advantageous to the trading partners. The aim is simple: strengthen their home currencies and create a fresh approach that prioritizes local economies in global trade.
As BRICS nations contemplate the possibility of embracing a unified currency, Africa has taken its first step towards reducing its dependence on the dollar, leveraging an African Union-backed Pan-African Payment and Settlement System (PAPSS). The overreliance on foreign currencies is said to cost the continent over $5 billion in transaction costs annually. It is hoped that this unified payment system will make trading between African countries more effective and seamless. Should this initiative flourish, it would significantly reshape the dynamics of trade between BRICS and Africa as well.
In a report released by the African Development Bank, it is revealed that Africa requires between? $130 billion to $170 billion to meet its annual infrastructure needs. At present, funding for African infrastructure falls significantly short by $68 billion to $108 billion annually.
Many African nations lack the financial resources to embark on the substantial infrastructure projects essential for driving their economies forward. To bridge this gap, it becomes imperative to explore external funding sources, such as seeking support from institutions like the International Monetary Fund (IMF), African Development Bank (AFDB), and even engaging in bilateral and multilateral relations with countries like BRIC who have expressed willingness to support Africa’s developmental goals.?
BRICS made good on its 2012 promise at the Delhi summit to create new financial institutions and establish the National Development Bank (NDB). By 2014, the National Development Bank had become operational. The NDB is a multilateral development bank that provides loans for infrastructure and sustainable development projects in BRICS countries and other emerging economies.
The NDB recently approved a loan of $5 billion for infrastructure projects, including roads, water, and energy in South Africa, in addition to the $300 million loan previously disbursed for energy projects as part of its $3 billion pledge for South Africa's Just Energy Transition initiative.?
Unlike western lenders who typically require Africa's economic and political policies to align with those of the west, BRICS advocates for the principle that nations should have the freedom to shape their policies as they see fit. BRIC financing, particularly from China, leans towards resource-backed lending ( whereby the borrowing country commits future revenues to be earned from its natural resource exports to pay loans secured from Chinese creditors) and “tied aid" (financing that is tied to purchases from the source country or credit lines where funds are channeled to firms of Chinese origin handling the infrastructural projects).??
The BRICS objectives are tailored towards infrastructural developments that will drive social impact, and that is exactly what Africa needs. Independently, these BRIC nations have shown that they are capable of working with African nations to advance development on the continent.
China has invested in building railways in Nigeria, Kenya, Ethiopia, Zambia, and other African countries. The Chinese Export-Import (EXIM) Bank provided 85% of the funding for the $475 million Addis Ababa Light Rail, which serves 4 million of the city's residents.?
China has financed the construction of several dams in Africa as well, including the Merowe Dam in Sudan, the Bui Dam in Ghana, and the Mphanda Nkuwa Dam in Mozambique. In 2012, Angola obtained loans from China Eximbank to finance the rehabilitation of the Benguela railway line which facilitates trade between Angola, the Democratic Republic of Congo and Zambia.
India has implemented over 194 developmental projects in over 37 African countries, including the Nyabarongo Dam hydroelectric power project in Rwanda and other rural electrification projects.
Several countries in Africa are exploring the possibility of adding nuclear power to their energy mix, as an alternative to clean, reliable, and cost-effective sources of energy.?
Russia has been actively engaged in financing nuclear projects in Africa, including the El Dabaa Nuclear Power Plant in Egypt which happens to be the first nuclear power plant in Africa. Russia is extending a $25 billion loan to Egypt to cover 85% of the cost of the project. Russia is also financing the construction of a nuclear research center in Rwanda.
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Ultimately, Africa stands to benefit from BRICS in advancing the continent’s development agenda, but like many deals, not everyone benefits the same way
China is Africa's largest trading partner and top lender. In 2021, China-Africa trade hit $254 billion; four times larger than the total trade between the United States and Africa.?
There is however a growing concern. More than three-quarters of African countries have trade deficits with China (their imports from China far exceed their exports to China).
Nigeria, Africa’s largest economy, imported the largest from China in 2021, amounting to $23 billion. Nigeria’s exports to China in the same year came down to only one-eighth of the imports. Data provided by the National Bureau of Statistics (NBS) also indicates that Nigeria’s bilateral trade deficit with China has been on a consistent rise since 2019.
Last year, Uganda exported products worth $44 million to China while its imports from China hit $1 billion.
The core issue here is the lack of value addition in African exports. Exporting raw materials means African countries miss out on the higher profits associated with processing these resources domestically.?
Also, China's economic slowdown since the COVID pandemic hit, is bound to have a significant impact on Africa's trade due to China's reduced demand for imports.?
In other words, a multilateral trade partnership with BRICS nations will help Africa diversify its export market, yet it may not effectively mitigate the issue of trade inequality stemming from declining commodity prices in the international market.
Unfortunately, there’s a limit to which we can make demands that countries increase their imports from Africa as a means to balance Africa's trade deficits. It is? not a sustainable approach. If Africa wants a fairer trade relationship with China or any other BRICS nation, we must seek solutions that address the underlying issues at the source.
Chinese lenders are responsible for about 12% of the total debt that African nations owe to external parties. From the year 2000 to 2022, 39 different Chinese lenders have given a total of 1,243 loans to 49 African governments and seven regional institutions. These loans collectively amount to $170.08 billion. The issue of African debts to China has been a contentious one, with some accusing China of setting a debt trap for numerous impoverished African countries.?
African leaders are not going into these deals with their eyes closed. The promise of infrastructure development has often overshadowed the consideration as to the cost of repayment should the projects fail to generate sufficient returns. Unfortunately, some of the initiatives have failed to meet expectations, potentially exposing them to Chinese government takeover.?
Some of the projects for which we have secured humongous funds are at best white elephants. These projects are often overpriced, underutilized showpieces that do little to drive economic growth or benefit local communities.
Case Study: Zambia
The Levy Mwanawasa football Stadium in Zambia cost $65 million to build, and has a capacity of over 40,000 people, but, it rarely attracts a crowd a quarter of its seating capacity. Zambia is one of the most aid-dependent countries in Sub-Saharan Africa with a huge debt default risk. Yet, in this instance, extravagance seems to have prevailed over pragmatism.
Case Study: Angola
In 2008, Angola forged a bilateral agreement with China aimed at supporting the nation's infrastructure development initiatives. In return for their investment, China was granted a decade-long concession of tax-free mining rights in Angola. Angola has since focused on fixing its infrastructure as a crucial part of rebuilding the country and making its economy stronger after a civil war.?
Although there was a notable uptick in economic growth in 2022, with a 3.0% increase compared to the 1.1% growth seen in 2021, the broader assessment over the last ten years indicates that Angola's GDP has experienced more contractions than expansions which has also affected the quality of life of the citizens.?
As of 2022, half of the Angolan population lived in extreme poverty. The number of poor people in the country has been following an upward trend. In 2016, there were around 10 million Angolans in extreme poverty. By 2026, it would increase to 16.3 million. Urban and youth unemployment have reached alarming levels. The informal sector now dominates the job market, with half of the employed population engaged in subsistence jobs. Given a decade of prioritizing infrastructure development, one might have expected a more optimistic outlook on the economy.?
Case Study: Nigeria
The new Lagos international airport terminal which was part of a larger plan to build five new terminals in five different Nigerian airports to boost air travel in the country,? lacks adequate space for full operation. Over what would be considered an internal feud amongst some stakeholders in the country, the new international terminal was sited at the most inappropriate place without consideration for aviation bridges for wide-body aircraft.?
More than two years after the facility was commissioned, the terminal remains highly under-utilized. In response, the government has initiated corrective measures to fix the problems, which will make the whole project more expensive. On top of that, the Nigerian government has approved the construction of a second airport at the Lekki-Epe axis of Lagos. Given that the Murtala Muhammed International Airport recently expanded its capacity with a new terminal, it seems unnecessary as to why the Nigerian government would embark on a similar capital intensive project especially at a time when it is dealing with a lot of debt.
According to a report by the World Bank, Nigeria spent nearly all the revenues it earned in 2022 servicing its debts, with debt service as a proportion of government income increasing to 96% in 2022 from 83% a year earlier. The debt situation in Nigeria has been described as "vulnerable and costly" by the World Bank, and the International Monetary Fund has projected that "the Nigerian government may spend nearly 100 percent of its revenue on debt servicing by 2026". The situation has been made worse by low revenue and rising interest payments, leaving Africa’s largest economy with almost no money after paying interest on debt.
From every indication, countries in Africa do have a lot to learn from emerging counterparts like China about running a cost effective, forward thinking government.?
Africa has remained on the receiving end for far too long. China wrote off at least $3.4 billion of debt between 2000 and 2019, almost all interest-free loans to African countries. As of 2022, China has forgiven 23 interest-free loans in 23 African countries. Even before the pandemic, more than 30 African countries spent more on debt service than on healthcare.?
After all is said and done, the critical paths forward in Africa's engagement with BRICS will be to promote industrialization and manufacturing within the continent, prioritizing economic viability in infrastructure development and stronger trade negotiations
It is often said that he who pays the piper calls the tune. While Africa’s development is heavily reliant on relations with other emerging and developed economies, we must be careful not to overcompensate.?
Africa needs BRICS, and BRICS needs Africa.?
Africa's population is growing rapidly, and it represents a significant consumer base. BRICS countries seek new markets, resources, and strategic partnerships, which Africa can provide. In return, African nations benefit from investments, technology transfer, and economic development opportunities offered by BRICS members. This mutual interdependence fosters collaboration rather than dependence.
African countries must assert their influence in negotiations and partnerships with external actors. They should prioritize their own development goals, set their terms for cooperation, and ensure that investments and projects align with their national interests.
In closing, the question of whether Africa should join BRICS is just one piece of a much larger puzzle. What truly matters lies in the hands of African leaders themselves—their commitment to tackling corruption, their vision for a self-reliant Africa, and their determination to shape the continent's destiny.?
Nobody will prioritize Africa’s interests above theirs. It is up to us, the people of Africa, and our leaders to chart the course toward a better future for the continent. No one is coming to save Africa, not even Captain America; there’s no philanthropy, from the south or west without a cost.?
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1 年Le BRICS est peut-être un rempart contre les injustices bénis par les USA et l'occident. Les limites n?tre justice est flagrantes. Il faudrait changer de cap et aller dans cette voie.
Before reading the article, I was wondering if the caption "should Africa join BRICS" is a typo error. My reservations were simply that why should it always be a continent against a country? Who exactly wrote this script???. However, the content of your article is centered on the partnership implications od such an agreement for Africa. Yet I heave a sigh!