In DepthColumnsThe South heads North


Posted on Tuesday, 29 January 2013 12:03

The South heads North

Patrick Smith

South Africa is preparing to host what could prove to be a critical summit for the future of the continent.

In mid-March, the leaders of key emerging economies – Brazil, Russia, India, China and South Africa (BRICS) – will descend on Durban to discuss strategy against the backdrop of slow recovery in the United States and a European economy that is still in intensive care.

Although scepticism about ineluctable shifts of world power is merited, it is evident that economies in the BRICS group have hugely increased their share of world income, trade and investment, and are wielding more influence over international institutions.

This may not produce the global convergence that sunnier economists have predicted, but it is evident that much of the South is heading North.

Where does this leave Africa? Above all, African states have to manage radical change in their trade and investment strategies.

South Africa's hosting of the BRICS summit in March provides an ideal location to launch a new agenda on global economic cooperation – one in which Africa can play a key role

Although they are still Africa's largest market by a narrow margin, European Union countries face several more years of low growth and austerity, while Africa's trade with China is reckoned to have exceeded $200bn in 2012.

As African  states re-orient their trade and investment strategies towards Asia and Latin America, some big policy questions are emerging.

What can produce the 60m new jobs each year just to maintain current employment levels?

How can Africa's economies start again to industrialise and boost their bargaining power?

Can Africa's cities deal with surging migration and still fast-growing populations?

Some of the answers will be in the deals that Africa's leaders strike with BRICS countries.

But the bargaining will be hard and much of the responsibility falls on South Africa as a member of the BRICS and the Group of 20 that shapes policy at the World Bank and IMF.

Given the diversity of the continent's 54 countries, it would make more sense to coordinate Africa's interests under the aegis of the African Union (AU) and African Development Bank (AfDB).

Of course, this should not be at the cost of diluting South Africa's critical approach to the trading practices of big economies in Asia and the policymakers at the Bank and IMF.

Africa is not benefiting enough from these power shifts.

True, it is getting more concessional loans from the IMF, but it has little role in shaping its policies or in judging their success.

Although on paper the World Trade Organisation has a more representative structure, African states have won only marginal benefits from its stalled Doha round of negotiations.

Their power is undermined by their generally small trade missions and inadequate access to legal and technical advice – all of which a bigger role for the AfDB and the AU could help.

Climate change negotiations have also fallen far short of what Africa requires, given that it is the continent hardest hit by the phenomenon.

Although South Africa hosted the last round of climate talks in December 2011, Africa did not secure the legally binding framework that it wanted on climate change mitigation, nor did it win clear pledges of finance to allow its economies to adapt.

New ideas and new alliances are required for Africa to improve its position on the new economic axis.

More African states are classed as middle income, although there are still grave inequities within their economies.

This has prompted moves to reframe the arguments for resource flows and aid transfers into the wider context of global economic cooperation.

As outlined by Andy Sumner and Richard Mallett(*) this idea rests on three principles: that economic aid should be designed specifically "to end aid", with much more focus on domestic taxation systems; that when countries no longer need official development assistance, those sums should be reallocated to global causes such as addressing climate change; that access to research and reciprocal knowledge transfer should be boosted hugely.

The BRICS summit in March could provide an ideal location to launch such a new agenda on global economic cooperation and one in which Africa could play a lead role●

Patrick Smith

Patrick Smith

Patrick Smith is Editor-in-Chief of The Africa Report. He has edited the political and economic insider newsletter Africa Confidential since 1992 and was associate producer on a documentary about the 2004 coup attempt in Equatorial Guinea commissioned by Britain's Channel 4 television.


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