Africa’s Bruising BRICS Reappraisal

With economic growth and financial market performance divergence widening into 2014 between Sub-Sahara Africa and the large country BRICS grouping with one-fifth of global GDP and 40 percent of the population, the UN’s regional commission urged re-orientation of aid, trade and investment relations between the blocs in a recent study. Cooperation had “gained momentum” before the current skid, which sidetracked formal launch of the latter’s own development bank, with exports the main channel as they doubled the past five years to $350 billion in 2012, as China’s share in particular eroded traditional partners. Bilateral commerce should reach $500 billion by mid-decade, over 80 percent in the form of farm, metal and fuel shipments to China and India, and the level should exceed EU volume. BRICS imports into the continent in turn bring lower consumer goods prices especially for clothing, but also deflation and employment strains, according to the report. The commodity sector lacks linkages to the broader competitive and manufacturing base, and has been the FDI focus although information technology and financial services also feature. Angola, Sudan and the Republic of Congo rely overwhelmingly on Chinese petroleum sales as the mainland sends machinery and transport equipment for one-third of needs in Cameroon, Madagascar, Ghana and Nigeria. Brazil and Russia take raw materials for food in return, while South Africa provides small-scale assembly ties. Chinese extractive industry inflows also support infrastructure, construction, athletics and tourism and thousands of private firms alongside the state-owned giants seek low wage and third-country duty preference destinations such as under the US AGOA program. Russia has preferred energy, and South Africa telecoms and agribusiness as well as banking with Standard Bank possessing a “continental footprint.”

Official flows target “untraditional” recipients and are predominantly through Beijing’s concessional loans. Although detailed statistics are unavailable it has pledged several billion dollars annually while the rest of the BRICS account for less than 10 percent of the total, UNCTAD estimates. India has offered assistance to otherwise shunned countries including Cote d’Ivoire, Djibouti and Niger. Brazil stresses technical knowledge in Portuguese-speaking zones, and Russia food and health security programs. Moscow has written off $20 billion in African debt and hosts and underwrites the stay of thousands of university students. South African initiatives have concentrated on post-conflict areas like the neighboring Democratic Republic of Congo. In summarizing differences, the UN notes that China and India emphasize project grants, while Brazil’s concessional funding is through subsidies to private multinational companies with regional interests. South Africa’s development bank and industrial promotion agency are also active, and they have backed the launch of the NEPAD economic policy and governance arrangement and of the full-fledged African Union a decade ago. The Commission concludes that private development and employment could be better served by “engagement beyond extractive sectors,” and that the Sub-Sahara-BRICS nexus could reinforce poverty and capital flow vulnerability with continued divide over skill and wage attributes.