The fifth meeting of the BRICS countries (Brazil, Russia, India, China and South Africa) held earlier this year in Durban, South Africa, was seen as an opportunity for Africa to strengthen its ties with these major emerging economies. [hidepost=9][/hidepost]
The theme of the summit was “BRICS and Africa – partnerships for integration and industrialisation” with the goal to unlock potential for cooperation between the BRICS and Africa. In fact, Africa has demonstrated huge potential in terms of economic development prospects, abundant natural resources, growing consumer power and favourable demographics. The emergence of the BRICS as major global players has raised hope that a win-win partnership could foster the development of the continent.
In recent years, the BRICS have expanded their involvement in Africa. Their share in foreign direct investment (FDI) inflows and trade volume has surged rapidly. For instance, trade volume between China and Africa increased from US$10 billion in 2000 to $190 billion in 2012. The partnership between India and Africa, for instance, has significantly promoted the development of small- and medium-scale enterprises on the continent. Meanwhile, Brazil and Russia have been heavily involved in the mining and energy industry in Africa through public-private partnerships.
BRICS engagement with Africa
The BRICS are now Africa’s largest trading partners with trade expected to reach more than $500 billion by 2015, with 60% from China. The BRICS are also becoming significant investors in Africa, especially in the manufacturing and service sectors. With respect to foreign direct investment, BRICS countries have strengthened their presence on the continent compared with traditional partners, such as the US and Europe. In 2010, for example, the BRICS’ share in FDI inward stock and FDI inflows to Africa reached 14% and 25%, respectively. The share of BRICS countries in the total value of African greenfield projects reached 25% in 2012 compared with 19% in 2003. Trade between the BRICS and Africa rose to as much as $340 billion in 2012 –10 times higher than the value recorded in 2002. Currently, the BRICS trade more with Africa than they do among themselves.
Main motivations of the BRICS countries’ engagement in Africa
The reasons behind the BRICS countries’ involvement in Africa include their appetite for the continent’s natural resources, Africa’s large and untapped agricultural sector as well as the opportunity for investments and transfer of technology and knowledge targeting the growing middle class, which is estimated to include more than 300 million people.
Appetite for natural resources: For many experts, the engagement of the BRICS in Africa is essentially driven by the continent’s abundant natural resources. BRICS are major players in the exploitation of natural resources in many African countries including Angola, Democratic Republic of Congo, Nigeria and Sudan. Brazil and China are the most active in exploring and exploiting gas, oil and mineral resources in Africa. The presence of these major global players in the natural resources sector has brought large investments in various infrastructure projects in recent years to the continent. However, natural resources do not represent the main BRICS investment in Africa. According to the United Nations Conference on Trade and Development (UNCTAD), 75% of the value of BRICS FDI projects in Africa between 2003 and 2012 are in manufacturing and services. Only 10% and 26% of the number and the value of projects, respectively, are in the natural resources and agricultural sectors.
Africa’s agricultural sector: The agricultural sector is vital for African economies and it is hoped that it will continue to be an engine of economic growth for the continent. The engagement of BRICS countries in the African agricultural sector is motivated by the fact that these countries would need to promote their experiences in terms of agricultural development as a way to unlock the continent’s potential. Brazil, which is a leading global player in trading agricultural commodities, can be a model for African countries regarding agricultural development and can assist Africa in enhancing agricultural productivity and reducing the impact of food insecurity. The success of the Brazilian agricultural model is mainly due to the vertical integration of the sector, the strong support of the state and high levels of mechanisation. Fostering agriculture in Africa will be a major development tool to eradicate poverty and hunger over the long term. In that context, sharing the experience of the BRICS would boost Africa’s agricultural productivity.