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BRICS Summit Talks Trade, Africa Potential

The five nations committed to strengthening their partnership for development, integration and industrialization.

JOHANNESBURG — The fifth BRICS summit ended Wednesday with the signing of the eThekwini Declaration and Action Plan reaffirming the five-nation bloc’s commitment to strengthening their partnership for development, integration and industrialization.

This story first appeared in the March 28, 2013 issue of WWD.  Subscribe Today.

Unlocking Africa’s potential was a major theme of the summit, with the leaders of the five emerging powers Brazil, Russia, India, China and South Africa underlining their support for African countries “in their industrialization process through stimulating foreign direct investment, knowledge exchange, capacity building and diversification of imports from Africa.”

On Tuesday, the South African Minister of Trade and Industry, Rob Davies, said that the partnerships members would be able to develop in supporting productive capacity were as vital to the success of BRICS as the amount of increased trade among member nations. According to Davies, the trade ministers had in earlier discussions agreed to support regional integration and industrialization measures between their countries.

South Africa, arguably the nation with the weakest economy in the BRICS bloc, was positioned as an important gateway to the rest of Africa. It is believed that the country could provide strong legal and financial support as well as act as a potential business partner to companies from other BRICS nations wishing to invest in Africa. Georgy Petrov, vice president of the Russian Chamber of Commerce and Industry, said South Africa could play a key role in driving investment in Africa as the “locomotive” of growth. “I would say Russian business is returning to Africa, and South Africa is becoming a gateway to the African continent for Russian people,” said Petrov.

The declaration also reaffirmed BRICS support for an open, transparent and rules-based multilateral trading system, saying, “We will continue in our efforts for the successful conclusion of the Doha round, based on the principles of transparency, inclusiveness and multilateralism.” Moreover, it noted that the process was under way for the selection of a new director general of the World Trade Organization this year and recommended that he or she “should be a representative of a developing country.”

Citing the fundamental role played by small and medium-sized enterprises, or SMEs, in their economies as major creators of jobs and wealth, the five nations pledged to “explore opportunities for cooperating in the field of SMEs and recognize the need for promoting dialogue among the respective ministries and agencies in charge of the theme, particularly with a view to promoting their international exchange and cooperation and fostering innovation, research and development.”

Complementing this pledge is the BRICS Business Council, whose formation was revealed Wednesday by South African president Jacob Zuma. Largely a private-sector initiative, the council, which will meet twice a year, will serve as a platform to strengthen and promote economic, business, trade and investment ties between the business communities of the respective member nations. It would also focus on strengthening trade relations, technology transfer and cooperation in the areas of skills development, banking, the green economy, manufacturing and industrialization. Zuma named South African mining billionaire Patrice Motsepe as the chairman of the council.

Analysts are hoping that South Africa’s beleaguered textile industry could benefit from industrial and manufacturing cooperation with the other BRICS nations, particularly China and India, which have strong textile industries.

Mark Ingham of Ingham Analytics remained skeptical. “The summit was a lot of highly politicized grandstanding,” he remarked, “which does bring together a clutch of countries that have different political systems, are at varying stages of economic development, with varying levels of wealth distribution between rich and poor. But at this stage it is all embryonic, it’s difficult to gauge what kind of impact it would have. Bear in mind also that these countries compete with each other, and these countries tend to be mercantilist — China being the most mercantilist of all — and therefore protectionist towards their own industries first and foremost.” Ingham said that “one shouldn’t be too optimistic that this is the white knight that will save the rag trade.”

Patrice Rassou, head of equities at Sanlam Investment Management, was more hopeful. He felt that the South African textile industry could get a boost if “some kind of incentive were to be put into place whereby fabric could be brought into the country through this new partnership agreement, so that garments could be completed locally.”

The success of Zara, he added, made retailers aware of the need to manage the supply chain closer to home and be more responsive to the market. “Some policy measures along those lines would really help tilt the balance.”