BRICS wants to tap more into own potential

Diamonds and oranges: Five countries that jointly represent at least 40 per cent of the world's people and GDP discussed details of economic collaboration at the 10th BRICS summit in South Africa.

"The first decade saw BRICS cooperation getting off the ground and bearing rich fruit. The next decade will see faster changes in the international landscape and the international alignment of forces," China's President Xi Jinping said at the start of the BRICS summit in Johannesburg. 

Xi and his South African counterpart Cyril Ramaphosa opened the summit together with trade ministers and business leaders from Brazil, Russia, India, China and South Africa on July 25. The two were joined on July 26 by Brazil's President Michel Temer, Russia's President Vladimir Putin and India's Prime Minister Narendra Modi, as well as invited guest President Recep Tayyip Erdogan of Turkey. 

Ramaphosa highlighted the achievements of the group in fields such as finance, trade, agriculture, science, security and academic dialogue. He also noted its relevance for the development of Africa and the problems the continent still faces. 

The establishment of its New Development Bank (NDB) and a business forum were two of the most important achievements for BRICS, he said.

Left to right, the leaders of India, China, South Africa, Russia and Brazil at the 10th BRICS Summit in South Africa in July 2018

The Shanghai-based NDB bank has already disbursed $5.1 billion (€4.3 billion) in loans since it was established some four years ago, with $1.7 billion approved this year alone, Ramaphosa told summit delegates.

Ramaphosa plugs Africa's potential

"There is great potential for investment in Africa. In the past decade, Africa's economy has grown two to three percent points faster than global GDP growth," Ramaphosa said.

Massive infrastructure and skills development are needed to realize that potential, especially as Africa's working age population is expected to double in the next 25 years.

The recently agreed African free trade deal would provide access to a market of more than 1 billion people and a combined GDP of $3 trillion, Ramaphosa noted. The African Continental Free Trade Area (AfCFTA), that will see an easier flow of commodities, goods, and services across the continent, has been signed by most of the 55 African Union members.

How emerging donors are transforming the foreign aid industry

New players in development assistance

Despite signs of slowing growth, the scope and scale of emerging donor activity has increased markedly over the past few years. According to a study conducted by global development platform Devex, emerging donors could contribute close to 20 percent of total foreign aid by 2020, up from an estimated 7-10 percent in 2012.

How emerging donors are transforming the foreign aid industry

The rising dragon

With a 2013 foreign aid budget of $7.1 billion (5.93 billion euros), China is not only by far the biggest emerging donor, it's also the sixth-largest in the world. Reaching 121 countries, Beijing’s program has a clear Africa focus and is a key element of its diplomatic and economic push into the continent. Almost half of China’s overall foreign aid goes towards infrastructure projects.

How emerging donors are transforming the foreign aid industry

Sustained aid growth?

The Devex report, which surveyed nearly 1,000 development executives, says emerging donors will continue to boost their foreign aid spending over the next decade. "We are taking efforts to increase steadily the size of our ODA [Official Development Assistance] for several years," the deputy government director for ODA South Korea said in the report.

How emerging donors are transforming the foreign aid industry

United Arab Emirates on the rise

In 2013, the United Arab Emirates (UAE) recorded the largest jump in its development assistance among all donor governments — a staggering 435 percent increase. The bulk of UAE's foreign aid goes to majority-Muslim countries, particularly in the Middle East and North Africa. The Gulf State is also a major donor to humanitarian crises as far as the Philippines and the Central African Republic.

How emerging donors are transforming the foreign aid industry

Donor profiles: Russia and Turkey

Russia's re-emerging foreign aid program focuses on health and education and is considered a by-product of its familiarity with the medical and school systems of its development partners in the former Soviet Union. However, Western sanctions over Ukraine begin to take their toll. In Turkey, things look brighter: Ankara's ODA rose more than threefold to $3.4 billion between 2010 and 2014 alone.

How emerging donors are transforming the foreign aid industry

Changing of the guards?

The Devex report looked at funding strategies and priorities of eight emerging donors: the BRICS economies (Brazil, Russia, India, China and South Africa) as well as South Korea, the United Arab Emirates and Turkey. At the 2017 BRICS meeting last month in China, the emerging donors urged "developed countries to honor their Official Development Assistance commitments in time and in full."

How emerging donors are transforming the foreign aid industry

Focus close to home

Even as they contend that their foreign aid programs have global ambitions, emerging donors generally direct the vast majority of their funding toward neighboring regions. India, UAE and South Africa have a particularly sharp focus on their home regions. China, Russia and South Korea are the exceptions to this trend.

How emerging donors are transforming the foreign aid industry

Peace building, democracy and governance

Albeit having considerably lower aid flows than its peers, South Africa has been aggressively positioning itself as an emerging donor over the past decade, directing nearly all its budget to the continent — 70 percent alone goes towards the Southern part of Africa. According to the Devex report, priorities are peace building, democracy and governance as well as humanitarian assistance.

Gems a common thread

Russian President Vladimir Putin said more trade between BRICS countries was needed. "BRICS has a unique place in the global market. This is the largest market in the world and its joint GDP is 42 percent of the global economy," Putin said. 

The BRICS business forum has set up a business council and regularly brought together representatives of industry and small businesses across the continent, South Africa's Trade and Industry Minister Rob Davies said. The forum has discussed how to support investment-led trade and trade in intermediate products within BRICS, he added.

Diamonds and citrus fruit sourced within BRICS were named as products to which value can be added before they are exported, Davies said.

The gems are a common thread for BRICS countries. Russia and South Africa are diamond mining giants, while India and China are centers in the diamond cutting industry. 

Read more:  Inside Russia’s diamond mines

South Africa is a leading exporter of oranges, lemons and grapefruit, but mostly trades through the African Growth and Opportunity Act (AGOA) of the United States.

Diamonds are mined in various African countries, including Sierra Leone, South Africa, Botswana and the Democratic Republic of Congo

China says 'reject protectionism'

The summit opened against the backdrop of a standoff over trade between the US and major economies, including China. US President Donald Trump has accused Beijing of using what he calls unfair trade practices. 

As the BRICS leaders gathered, details of a "zero tariff" trade breakthrough deal between the US and the European Union began to emerge.

Read more:  Germany reacts to Juncker-Trump trade deal with cautious relief

In Johannesburg, Xi decried what he said was an escalation of unilateralism and protectionism and urged global institutions to work against it and for global trade disputes to be settled though dialogue. 

BRICS countries must work together to safeguard multi-lateral trade rules, promote trade and investment and "reject protectionism outright," the Chinese leader said.

India's Prime Minister Modi said BRICS countries had to share best practices and policies.  Technology, he added, had to be employed to advance BRICS countries.

Digital dimension

Brazil's President Michel Temer also touched on the issue, saying "information, knowledge and the digital dimension of things have definitely become the core of economic activity." 

Xi and Modi both stopped in Rwanda en route to the summit. Xi also visited Senegal to and is expected in Mauritius after the summit, having already signed a string of bilateral deals along the way.

Modi opened India's purse to Rwanda before travelling on to Uganda, where he announced that his government would set up 18 embassies in Africa.

Related content