Will BRICS become ASCRIBES? Either way, business needs to prepare for it now

It has felt like months that discussions over the BRICS summit have been ongoing. Since the debacle surrounding the Lady R, debate has been intense in South Africa around whether South Africa would still indeed host the BRICS summit, whether Russian president Vladimir Putin would be allowed to attend, whether he would be arrested if he sets foot in the country, and what the blowback would be from our Western partners. We have also seen an increase in requests from our EICN members, wishing to understand what the economic impact of the BRICS may mean for their business. This week, the summit arrived, and the area around the Economist’s offices reminded me of the streets at the time of the 2010 Football World Cup. A heavy police presence, clean streets, and activity in the business district that has shrunk since the onset of the COVID-19 pandemic.

The 2023 edition of the BRICS summit has come at a significant time for the global economy. The 2020s have largely been characterized by heightened geopolitical tensions between the West and the East. At the time of writing (which coincided with the final day of the summit), all the talk had centered around the increased role of the BRICS nations and their potential expansion. Up until the final day, there was little information available on who the potential countries vying for a part of the bloc may be.

The Economist newspaper conducted a study of potential applicants and developed a method of assessing applicants based on meeting one of three criteria to be able to join. First, the applicant country was on record saying it had applied to join the bloc. Second, South African officials had mentioned the country had applied, and third, whether the foreign minister of the interested country had attended a pre-BRICS summit in Cape Town. Based on these criteria, 18 countries were identified as potential bloc members (see the map below). If the 18 countries were to join, it would make for an interesting economic power. The bloc would rise to 58% of the world’s population (The G7 accounts for around 10% of the global population globally). World share of trade would rise nearly 10 percentage points to 27%. 

The BRICS summit has been important for South Africa, too. The past year South Africa has faced a tricky balancing act, attempting to maintain a perceived neutral status on the war in Ukraine, while trying to preserve favorable America Growth and Opportunity Act (AGOA) access. I have written previously in my Viewsletters around the South Africa-Russia relationship, as well as the value of AGOA. The locally-hosted BRICS summit presents an opportunity for South Africa to position itself as a leader of this expanding bloc, and currently the only African country represented. Aligning with the BRICS bloc will allow it a freer hand to participate in closer economic ties with Russia and China (through the guise of the BRICS), without compromising its relationship with the West. As the bloc expands and grows in economic influence, expect South Africa to lean even closer. 

What does this mean for business?

The discussions held during the summit have suggested that the BRICS nations are looking to exert more influence over the global economic order than more than a decade ago, when South Africa joined. Given that Russia and China remain two of its most significant members, it would appear that the BRICS nations are aiming to position themselves in contrast and as a viable alternative to the Western-led order including the United States, European Union, and NATO, although with fewer conditions on access. In the current climate of geopolitical tension, expect limited access to key raw materials, new trading arrangements excluding Western or Eastern partners, and an alternative form of globalisation. Any business that relies on imported machinery, raw materials, ingredients or similar may find themselves locked out of existing markets. Conversely, closer alignment with the BRICS may open up new territories and markets. Either way, business needs to start evaluating supply chains and expand their thinking around new potential risks. 

I was challenged earlier this week by our global chief economist to come up with a new name for the BRICS bloc. At the time of writing, it was just announced that six new nations would join the BRICS, namely Argentina, Ethiopia, Egypt, Iran, Saudi Arabia, and the United Arab Emirates. The best I could come up with was ASCRIBES, and United Arab Emirates lends the Emirates part to the new bloc.

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