Delinking South Africa’s economy from trade with its largest partners, industrial countries, to Brics (Brazil, Russia, India and China) — as many populists and other, more well-meaning but naive individuals want — will collapse the economy and plunge the rand into free fall and the country into chaos. Possibly a dreaded failed state.
As a group, the EU, US and Japan are South Africa’s biggest trading partners. They are part of the Group of Seven (G7) large industrialised economies, which include the UK, Germany, France, Italy and Canada, and account for 62% of the global economy. Brics account for 26%.
South Africa’s trade with Russia, Brazil and India is far less than that with the US and EU. Though China is South Africa’s largest single trading partner, this is not diversified and excludes soft trade such as development aid or knowledge trade.
Trade with the US and EU is diversified, and in addition to traditional trade, these countries provide development aid and soft trade, such as cultural exchange, whether this be our music being exported, the use of patents, or scientific knowledge transfer.
Many industrial countries invest in manufacturing here, creating jobs and reducing poverty. If they don’t, South Africa has the power to negotiate manufacturing investment — if its leadership has sufficient political will, capacity and strategic nous.
It is more strategic for South Africa, as one of the world’s most diverse societies, to not only partner with Brics, but also with the West, the Commonwealth, Africa and a wide variety of developing countries
China’s global investment strategy has not prioritised transferring local manufacturing in the countries in which it invests, Vietnam being a notable exception.
There, Chinese investment prioritised local manufacturing transfer. In African countries, Chinese companies often bring their own labour or demand their businesses be exempt from local labour and human rights laws.
South Africa is a constitutional democracy and its industrial country partners bring democratic “trade” — partnership, collaboration and mutual transfer between democratic institutions and civil society organisations.
The dollar underpins global trade. No Brics currencies can, in the short term, replace the dollar as the global reserve currency because none have the globally credible market institutions, transparency and trust necessary to underpin such a currency. This means South Africa cannot delink from the dollar.
Western development aid to provide public and social services, and support civil society organisations, is critical for this country. China, India, Brazil and Russia do not provide it at similar levels to industrial countries.
In South Africa, foreign development aid-funded public and social services, and civil society groups, provide jobs for close to a million people. The latter employs more people than construction, transport and financial services.
All the Brics countries, despite their high growth rates, are inherently unstable and do not have the depth of democratic institutions or societal cohesion to keep them stable in major economic, political or social shocks.
Even the Chinese Communist Party, though seemingly impregnable in power, is holding on to such through authoritarian means and when there is a severe economic crisis, it is highly likely the ruling party will fall.
Russia, after its invasion of Ukraine, and because of the impact of Western sanctions against it, will have a diminished economy.
Many leaders and supporters of the ANC, EFF and smaller populist black parties wrongly argue that South Africa’s salvation lies in delinking from industrial country trading partners and prioritising its relationships with Brazil, Russia, India and China.
Obviously a big part of this incorrect belief that the country should delink from the West is based on an outdated, Cold War view of the world, where there is a battle between the US-led West and the old Soviet Union-led bloc, with the latter having been replaced by Brics.
There is mass economic illiteracy among a large majority of South Africans who have a poor understanding of the mechanics of the domestic and global economy, markets and trade. South Africa's levels of economic illiteracy are among the highest of any competing emerging market.
Many proponents of delinking from Western trade do not understand how the South African economy, business and trade are integrated into the global economy, particularly the US, EU and Japan, which is dominated by industrial countries such as these.
Perhaps the most vivid illustration of this was in 2017, when then-cabinet minister Nomvula Mokonyane said the ANC leadership did not care about the fall of the rand because it would pick it up again. This showed a poor understanding of the impact of the currency’s fall on the economy, prices and employment.
It is more strategic for South Africa, as one of the world’s most diverse societies, to not only partner with Brics, but also with the West, the Commonwealth, Africa and a wide variety of developing countries.
•William Gumede is associate professor in the School of Governance, University of the Witwatersrand, and author of 'South Africa in Brics' (Tafelberg)
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