De-dollarisation needs more debate

The BRICS summit week can be realistically said to have been very successful under the circumstances, says the writer. Picture: Itumeleng English / African News Agency (ANA)

The BRICS summit week can be realistically said to have been very successful under the circumstances, says the writer. Picture: Itumeleng English / African News Agency (ANA)

Published Aug 26, 2023


By Prof Bonke Dumisa

The BRICS economic grouping, currently comprising Brazil, Russia, India, China, and South Africa, concluded its three-day annual gathering on Thursday, in Sandton.

These annual gatherings are held on a rotational basis and hosted by different member countries every year and the Head of State of the designated host country automatically becomes the chairperson of BRICS for that year leading up to the next annual gathering.

President Cyril Ramaphosa was the chairperson of this year’s BRICS Summit of Heads of State, by virtue of South Africa being the host country.

It was therefore not unexpected that the International Criminal Court, to which the US is conspicuously not part of the signatories of its Rome statute, was quick to issue the international arrest warrant for Russian

President Vladimir Putin, knowing very well that South Africa was going to be under pressure to arrest Putin if he physically attended this annual gathering in Johannesburg. This is because South Africa was an enthusiastic signatory to the Rome statute, and second because the South African courts had already ruled, on the Omar al Bashir case, that the country is bound to arrest anyone that the ICC issues a warrant of arrest against. The same cannot happen to US citizens as it is not a signatory to the Rome Statute.

The lesson here is that it is sometimes not advisable to bind yourself to some good noble ideals that those who do not bind themselves to such good ideals can opportunistically use against you for their selfish ends.

I have spent almost half of this opinion piece not talking about BRICS but discussing other distractions because the focus leading to the BRICS summit has been more on the Russian invasion of Ukraine, instead of what BRICS stands for. It is against this background that Putin pragmatically agreed not to physically visit South Africa for the summit.

The BRICS summit week can be realistically said to have been very successful under the circumstances, although the real attention of the media was still not more on the many “breakaway” sector/constituency-focused meetings that discussed how the BRICS member countries can benefit from such membership.

There were separate meetings focusing on business-to-business relations, the youth participation in BRICS activities and other sectors. Those who actively participated in such “breakaway” sessions had much to say about how the states can enhance and optimise their BRICS membership. Many people have unfortunately not paid any particular attention to such serious deliberations, hence I will not say much about them.

Do you know that the BRICS membership accounts for 37% of the world’s total GDP, which is more than the total GDP of the G7’s richest countries? I am not sure if the fact that the BRICS countries account for 46% of the total world population is a positive or a negative; but one thing is for sure: BRICS could be a really good vehicle for the economic development of member countries if all its members took it seriously. The question is whether BRICS members take it seriously. Or is it just another annual stokvel booze-cruise meeting for photoshoot opportunities?

Leading up to this summit, there was a lot of speculation about the possible launch of the BRICS currency. I am one of those who are not convinced that, at this particular moment, a BRICS currency will be a viable option. There is definitely a great push for de-dollarisation, given that most countries are by now irritated by the extent to which the US dollar has been highly weaponised to bully anyone who dares think differently from the US. Do you remember how significantly the South African rand plunged from far below the R19 psychological barrier levels against the US dollar before May 12 to far above the R19 psychological barrier levels thereafter?

All it took was for the US Ambassador to South Africa Reuben Brigety to make reckless allegations that South Africa sold or is selling arms to Russia, and the weaponisation of the US dollar immediately kicked in and the rand plunged.

It is against such subjective considerations that there is such a global push for de-dollarisation. But this debate is mostly held on an emotional basis, without necessarily taking into consideration the factors that are taken into consideration when considering the strength of each currency. Other than the ordinary trade-related factors, the issues of political certainty and economic certainty come into play when people make decisions on foreign currencies.

This is where the US dollar scores very high, despite the US drowning in global debts. Most people know that there is political certainty in the US regardless of whether you have the Republicans or the Democrats in power.

Second, the US economy has shown itself to be very resilient regardless of the global economic jitters.

Unfortunately the same cannot be said about the currently geographically spread countries, with different political ideologies, and with different economic philosophies, that comprise BRICS. I believe that it is precisely on these grounds that we have not heard more about where BRICS members stand on the issue of the proposed BRICS currency.

The BRICS group of five nations will now be expanded to 11 with the inclusion of six more countries with effect from January 1 2024. These new BRICS members will be Argentina, Ethiopia, Saudi Arabia, Egypt, Iran and the United Arab Emirates. The human rights records of some of these new countries leave a lot to be desired. Is this the type of company South Africa wants?

I leave that question to you and your conscience.

* Prof Bonke Dumisa is an independent economic analyst.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.