The 15th Brics summit, which was hosted in South Africa, was met with a decreased market index, moving from 3,816.83 on the 21 August to 3,792.01 on 22 August, which also happened to be the actual starting day of the Brics summit. (Delwyn Verasamy/M&G)
The Brics summit caught the attention of many in South Africa for multiple reasons, not least the development of the new Brics Development Bank.
There is also excitement around the prospects for job creation, because of the promising investments from the partnership with some of the world’s largest and emerging economies.
However, early indications are that such great expectations may end in disappointment. The stock markets, which could be the high benefiter of the group have, for instance, not been reactive. This raises the question of how impactful the Brics association has been and will continue to be.
When looking at trade, for example, South Africa’s top five import partners are China, the United States, Germany, India and the United Arab Emirates which account for a total of 50.3% of the country’s imports.
China and India, respectively, contribute 23.3% and 6.3% of the goods imported to South Africa according to its Revenue Services (Sars).
And even though India is part of the top five countries that South Africa imports from, this is not the case for exports, which consist of China, the US, the United Kingdom, Japan and Mozambique which account for a total of 36.6% of South Africa’s exports, with China representing 12.0% of that total figure.
A similar pattern can be seen when looking at South Africa’s top five trade partners from 2010 when it officially joined the former Bric. At the time, India, the US, Japan, Germany and China were its top five export partners in that respective order, making up a total contribution of 36.34%, with India and China respectively contributing 8.14% and 5.94% according to the MIT-based Observatory of Economic Complexity (OEC).
The top five countries that South Africa imported from were China, Germany, the US, the UK and Japan which constituted a total of 37.55% of the imports, with China being the highest contributor with a total of 12.3% of the imports according to the OEC.
Notably, Brazil and Russia have remained off of the top five of South Africa’s export and import countries regardless of the countries belonging to the Brics.
When looking at trade among South Africa and the other Brics countries, the figures are seen to fluctuate with SA-China trade export increasing by 45.88% from 2009 to 2010, by 134.5% between 2010 to 2011, having a brief drop by 2012 and having a brief drop in 2020 by 8%. Imports also increased between the years of 2009 to 2011, but unlike exports, South African imports from China remained consistent.
Additionally it can be noted that South Africa has a trade deficit that has grown by four times ever since it joined the group in 2010. This shows that even though trade between South Africa and the other Brics members has at other times increased, it has not been enough to balance South Africa’s exports to the other countries, thus bringing about a more favourable balance of trade.
Looking at the market response from back to when South Africa joined the Brics, it can be noted that there was no significant difference when looking at the Financial Times Stock Exchange (FTSE) South Africa Index.
There was no market response that can purely be pointed towards the Brics summit in the South African context. For example, when looking at the ranges of 2010 specifically on 14 April, the day before the beginning of the summit, the market range was at a positive 1,766.61 and it continued growing until 15 April, the day of the summit, before the market value of the index went down from 1,775.35 to 1,747.25 (a decline of 1.5%).
On 24 December in 2010, the date when South Africa became an official member of the Brics, the market opened with a decreased value of 1,949.03 from the previous day’s 1,953.39. The index began recovering from 28 December, which was days after the summit, but even the recovery, just like the decreases, were not significant.
During the time of the first Brics summit that was held on South African soil, the market index opened with an increased value of 2,372.32. The next day, the index had dropped to 2,367.50, regardless of the summit being one that promoted Brics and Africa’s integration as the theme of that year’s Brics summit — Brics and Africa Partnership for Development, Integration and Industrialisation).
The 11th Brics summit, titled Brics: Economic Growth For an Innovative Future, and which could have been viewed as being favourable to the market, barely caused a shift in the index, as the index opened with a decrease on 13 November at 3,440.00 and opened with a slight increase that placed it on 3,435.89 on 14 November, a not-so-significant increase especially when considering the previous drop to 3,422.02.
The 15th Brics summit, which was hosted in South Africa, was met with a decreased market index, moving from 3,816.83 on the 21 August to 3,792.01 on 22 August, which also happened to be the actual starting day of the Brics summit (and indeed opening with the Brics Business Council’s meeting).
This, however, changed as the index increased between 23 August and 24 August to 3,866.27. Nevertheless, following the end of the summit, the index dropped to 3,843.80 on the 25th.
Whatever trade has not been enough to get a favourable market reaction from the market. The FTSE South Africa Index has not reflected significant increases or decreases whenever Brics summits have occurred, regardless of the themes and what they might bring on.
For example, Brics integration should bring about a larger market for South African enterprises to work with thus bring about economic growth, this however does not seem to be as appealing to the South African market. The lack of market response shows dare I say the lack of faith that the market has on the group, or bloc as some consider it.
Could it be that the market, which could have the most favourable outcome with the growth of Brics, is not affected or hopeful for the (currently) five-country association to benefit from it?
This leads to the question of whether the group will ever truly live up to the expectations that many have of it, be they in favour or opposed to it, and what it represents.
Thando Mncwango is a researcher in the University of Johannesburg 4IR and Digital Policy Research Unit. Bhaso Ndzendze is an associate professor in the same institution.