By Peter Draper and Andreas Freytag 

Roughly 10 years ago, Africa started to reappear on the radar screen. It has moved from the hopeless continent it was lamented to be in 1999, to a hopeful continent as "The Economist" calls it today. There are hopes that the continent is not only selling more primary goods but also increasingly integrating itself into the global economy and thereby, if you wish as a by-product, improving its governance structures. There are indeed signs of institutional change and some significant reform steps in some countries have been made, other countries - not surprisingly - still lag behind.

Part of this positive trend is due to the emergence of formerly developing and communist countries that, due to their extraordinary development, demand high quantities of natural resources. A particularly important role is played by the so-called BRICS, i.e. Brazil, Russia, India, China, and South Africa, of which in particular India and China have a high demand for resources. The youngest BRICS member is of special relevance for the African continent, since it regards itself as the "gateway to Africa", mainly Sub-Saharan Africa. Therefore, it is sensible and important to analyze, if and to what extent BRICS can exert a positive influence on the sub-continent's development beyond the region's role as a supplier of natural resources for emerging as well as developed economies.

BRICS changing role in the world economy

The so-called developing world has caught up remarkably in the last three decades. Many countries may now well be called "emerging economies". Within this group, India and China have been particularly visible for their outstanding growth rates. Russia is traditionally a political power, and the Brazilians finally have reached the stature one would expect given their enormous potential.

As a consequence, the BRICS have recently gained in self-esteem and have increasingly begun to question Western (or Northern) dominance in international policy arenas. For instance, the tradition of having a European chair the International Monetary Fund (IMF) and an American head the World Bank has been put to question. Given, the latest two nominations at these institutions at least formally followed the tradition. They are also discussing the question of why development assistance should remain a Western domain. The result of these two thrusts is the agreement within the BRICS to found a BRICS-led Development Bank.

However, this self-assurance does not match the latest economic performance of the BRICS economies, which are still heavily dependent on the US and European economies; nor is it backed by strong coordination to match their expressed intention to change the world governance system. Whereas they have agreed in principle on the BRICS-led Development Bank, it has not been founded yet and the details regarding location and funding are far from agreed upon. To their credit the BRICS have agreed to establish a USD 100 billion currency swap mechanism modeled on the Chiang Mai initiative. That agreement was sealed at the G20's recent St Petersburg summit. Interestingly we suspect that it will contain conditions, the precise content of which is not clear at this stage, which will mirror IMF conditions. If true, this would suggest that at least some of the revisionist talk emanating from certain quarters in the BRICS is subject to old-fashioned domestic interest and concerns, i.e. that tax-payer fund loaned to foreign countries are wisely invested. Apart from these initiatives the BRICS summit in Durban earlier this year did not offer any additional support for the world economy.

Another indication is that during the recent G20 summit single BRICS members, particularly Russia and China, played a major role in the search for a diplomatic solution for Syria. The BRICS as a group did not make an impression, though. China and Russia as status quo powers obviously do not support the IBSA's (India, Brazil and South Africa) case for permanent membership in an enlarged United Nations Security Council (UNSC). Therefore, it would be premature to think that global governance is already shifting from the North-West to the South-East.

BRICS in Africa: Challenges and opportunities

So far, the BRICS engagement in Africa seems to be driven by a demand for natural resources. According to the African Development Bank (AfDB), " in 2010, for example, the BRICS' share in FDI inward stock and FDI inflows to Africa reached 14 per cent and 25 per cent, respectively". The AfDB additionally argues that agriculture and market seeking are important motives for this foreign direct investment. At the moment, this statement may reflect wishful thinking rather than reality.

In particular, China has undertaken major efforts to gain access to raw materials on the continent. The Chinese approach has often been labeled as one with "no strings attached", implying that Chinese state-owned investor companies do not waste time negotiating about human rights and humanitarian values. Moreover, Chinese foreign direct investment is seen critically, since it does not contribute to local employment and wealth in many instances. Rather, Chinese firms build infrastructure with Chinese workers. Zambia is a case in point; during the election campaign in 2011 several Chinese shopkeepers were killed in xenophobic riots. Ghana recently sent Chinese workers home, apparently at the general approval of the Ghanaian population. However, the record is mixed; other instances show that host countries are happy with Chinese FDI. Having said this, it may well be questioned whether or not the BRICS countries' engagement in Africa has to be seen that critically. Even if a foreign investor does not consider the autocratic nature of the host country's ruler, infrastructure is at least built. This may well lead to increasing income and wealth in the region, which then creates a middle class and reduces opportunity costs of the struggle for political rights and individual freedom. As a positive side effect, the autocratic regime that personally benefits from the Chinese engagement might be weakened through these forces. From this perspective, the Western critique sometimes appears a bit myopic, especially against the backdrop of Western governments paying mainly lip service to human rights, in their eagerness to exploit resources. There is a challenge related to the value addition that takes place in Africa. As long as foreign investors focus on raw materials, the development process may be slow. Therefore, it is important for African economies to at- tract more investment in the manufacturing sectors as well as in agriculture beyond the simple purchase of land. It is crucial for African development to be included in global value chains (GVC), i.e. to move up the value chain. The creation of regional value chains within Africa may help to meet this challenge. This challenge, however, is first and foremost one for the African nations themselves. Key issues in this respect are education, governance, combating corruption, and infrastructure development, to name a few. African governments should make their countries attractive for infrastructure and manufacturing investments from abroad.

There is no need to undersell Africa. In particular, the African nations should not be too generous with their natural resources. Rather, they should insist on market access to BRICS as well as OECD markets, and reasonable taxation of raw materials exports to support often fragile government finances.

This leads to a broader view. Interest in Africa does not come from BRICS countries exclusively. OECD countries have also expressed more interest in Africa and African business opportunities. The African governments have the chance to utilize the renewed interest in Africa by offering attractive investment opportunities, building in appropriate safeguards that ensure sufficient revenue is raised domestically from such investment while not undermining the particular investment case, and subsequently growing markets for producers from all over the world.

The special role of South Africa

South Africa can be crucial in this process. The country has one of the most well developed financial sectors in the world; it hosts several high tech industries, and it is home to world-class educational institutions. One way to look at the issue is by means of the gateway analogy: South Africa may well become the gateway through which investors from all over the world and especially the BRICS countries channel at least parts of their investments into the African continent. Several arguments can be seen in favor of the gateway story: Firstly, South African companies have gathered valuable expertise in investing in other African countries. Foreign investors who would rather buy shares of South African companies than invest directly in the countries themselves would profit from their (the South African companies') knowledge of the host countries' conditions and productivity. Secondly, the well-developed South African financial sector is also well connected to other African capital markets, mitigating the risks associated with investments in Africa. Thirdly, the cultural distance between primarily English speaking African investment destinations and South African investors may be smaller than the distance between African investment destinations and non-African investors, leading to a better performance for the investor. Finally, the political distance between African governments is declining due to increasing efforts for regional integration, a process actively supported by South Africa and increasingly driven by the South African chair of the African Union (AU). The closer the continent moves, the better the chances to channel business into and out of Africa through South Africa.

More chances than risks for the hopeful continent

There can be no doubt that the emergence of BRICS and other formerly developing nations has contributed significantly to the surge of interest in Africa, which can be observed in the last decade or so. This interest - although mainly focused on natural resources - has given Africa the chance to become economically more prosperous and politically more stable. Some countries have indeed taken the chance whereas others are not much better off than 10 years ago.

If African governments have learned from this experience, they have also noted that the continent's upswing has spurred interest in OECD countries. This knowledge should be utilized in a way distinct from former African relationships with Europe and the Western world. Instead of demanding more official development assistance and special preferences for their goods and services, African nations now should offer better investment conditions (e.g. via better education and good governance) for all. There lies the chance for sustainable development in Africa.