Brics currency proposal: A misguided venture doomed to fail

Source: Pixabay

Shared currencies can help to facilitate international trade. That is why the US dollar has aided one of the most prosperous periods of human history, and the British pound sterling helped facilitate the second most prosperous period during the Victorian era.

But the reason that the US dollar has led to so much shared prosperity is because it is backed by a global economic superpower, and used by everyone. A Brics currency would be used only by its members and is very unlikely to be adopted by any but the most minor economies.

A concerted adoption of a Brics currency would lock South Africa out of trade with some of our biggest and most profitable trade partners. The European Union, United Kingdom and United States are unlikely to look kindly on such an unnecessary project, as the cost of trading in an arbitrarily formed new international currency would not be worth their time.

Giving up the rand to adopt a cross-national currency would also surrender much of our monetary sovereignty. Currencies are a tool that allow governments to defend and stimulate many aspects of their local economy. While I would caution a government from toying with their local currency, and rather let the free market determine much of a currency’s value, it is still important to retain control over a national currency so to prevent meddling from possibly hostile powers.

#BRICS2023: Putin's pledge: A path to food security in Africa

Katja Hamilton  23 Aug 2023

In the hands of China, for instance, our local currency could be manipulated to devalue local goods, flood our market with Chinese goods, or even cause mass inflation. We should not risk this. While I do not trust the Reserve Bank to be completely competent in the governance of our monetary affairs, I trust them far more than I trust any of our Brics partners.

Even if we could trust a unified currency to not be manipulated by hostile powers, a united currency still doesn’t make sense.

The euro makes sense because the EU is a comparatively small region with huge amounts of internal trade, travel, migration and business. The euro makes sense because Europe is effectively a single economy broken up into more localised economies. The same could be said of the US dollar, which is used by all states in the USA for the same reason.

SADC currency logic

It would make more sense for the SADC (Southern African Development Community) to have a unified currency, due to the geographical proximity of these states. In practice, many of these countries already use the rand, or have their currency pegged to the rand. Integration with our neighbours and African trade partners makes far more sense than further allegiance with Brics.

But what unity is there among Brics economies? China floods markets with cheap goods while using bribes to try break into immature economies and steal their natural resources. India is doing fine without any of its partners, while being actively engaged in a cold war with China over border disputes.

Brazil doesn’t seem to realise that it’s a part of Brics while it simultaneously hits below and above its weight due to being an economic powerhouse in its region that fails to reach its potential due to petty politics. All the while Russia is actively engaged in an arguably genocidal war of conquest and is desperate to unite the world against its perceived enemies.

South Africa has nothing to gain from aligning ourselves with these countries. We are a market for their surplus goods at best, and a region to be exploited at worst. Our trade balance with most of Brics is dismal, while we clearly profit from trade with the EU, US and UK.

It is good that we have not engaged further on a unified Brics currency. Let’s keep it that way. Better yet, let’s do away with Brics altogether. It’s an irrational alliance which serves more to stroke the egos of Russia and China than to serve any real economic benefit.

Our economy and people would be better served by leaving Brics and embracing more profitable trade with our neighbours and the West.