As the 15th BRICS Summit approaches, the increasing role of national currencies in trade among BRICS countries and with their partners, as well as the issue of de-dollarization, has been at the center of discussions.
This is seen as a response to the challenges facing the global financial architecture and its governance, which has been dominated by the US dollar and the Bretton Woods system since the end of World War II, according to Mikatekiso Kubayi, a researcher at the Institute for Global Dialogue in South Africa.
In an interview with Sputnik Africa, Kubayi said that the BRICS group of five emerging economies – Brazil, Russia, India, China and South Africa – was formed in 2009 to address these challenges and seek a fairer and more equitable solution to the governance of the global financial architecture.
"There was and still is a problem with the system as it stands. States have essentially been trading with one another via a third party, the dollar, in a system that they did not have a say in its design and choosing – the Bretton Woods system," the expert said.
The reliance on the dollar as an intermediary currency in international trade has resulted in high transaction costs and a lack of control by developing countries over their economies. This, along with other problems in the financial architecture, has created challenges for developing countries.
On the other hand, according to Kubayi, trade in local currencies comes with many opportunities, such as cheaper transaction costs, boost to local currency and associated benefits.
"Developing economies are now organically looking for an improved way of trading with better terms and opportunities. They are looking for a fairer and more just solution. BRICS has led the debate," said the South African academic.
Looking ahead to the outcomes of the BRICS summit that kicked off in the South African city of Johannesburg on Tuesday, Kubayi suggested that a more formal decision on trade using local currencies could be expected. Notably, this is already in practice between India and Russia, among others.
Furthermore, there are high expectations for a decision on a payment system, further reducing reliance on the dollar in international transactions.
Impact of De-Dollarization on Africa
In his article, Lavrov stated that Russia, together with a number of other countries, is decreasing its dependence on the dollar. Regarding the impact of de-dollarization on African countries, Kubayi highlighted the vulnerabilities that arise when relying on the US currency.
"The dominance of the dollar has consequences for the rest of the world, as demonstrated by the global financial crisis of 2008. Developing economies desire more stability and control of their own economic destiny and to not be as vulnerable to dollar-associated shocks, including commodity prices," he said. "Transaction costs and the freedom to trade with whomever they choose is also a consideration."
In addition, unilateral sanctions imposed by the US and other Western powers have had a negative economic and political impact on many developing economies in Africa.
However, Kubayi emphasized that the de-dollarization efforts within BRICS are not aimed at the demise of the dollar, but rather at giving developing economies greater independence and flexibility in choosing their trading partners.
"Intra-BRICS trade and trade with local currencies are not about the demise of the dollar. They are an organic gravitation towards what developing economies believe is a fairer and more just system," Kubayi explained.
While predicting that this shift could lead to increased trade volume, reduced costs, and enhanced flexibility for BRICS countries and their partners, he also noted the importance of caution during this transition period, acknowledging potential challenges and teething problems as the world adapts to new systems.
African Representation in the UN Security Council
As discussions surrounding African interests in the United Nations Security Council (UNSC) have recently gained prominence, Kubayi shed light on the current state of African representation and the potential benefits of amplifying its voice.
"There is little representation of African interests at the UNSC. You will recall the decision to attack Libya and kill its sitting head of state, despite calls by the African Union to leave the matter to the AU. Africa did not decide on the UNSC as it was designed," he said.
The expert added that most of the decisions regarding Africa at the UNSC "are taken there without its consent, but they have tended to bring severe consequences for its economy and politics."
According to the academic, this disparity has prompted longstanding arguments and proposals for greater African representation, yet progress has been limited over the decades.
Acknowledging the need for "a more meaningful voice and representation," Kubayi told Sputnik Africa that the potential benefits of increased African representation on the UN Security Council include "independence to advance local solutions to local problems" with a much more nuanced handling of internal issues.
"More significant and sustainable solutions can and will be achieved with such independence and genuine ownership of its choices and destiny," he concluded.
BRICS Summit
The 15th BRICS Summit kicked off on Tuesday in Johannesburg, South Africa, where leaders will consider expanding the group's membership to include other emerging economies, including Indonesia, Nigeria, Turkiye and Egypt. The move is expected to increase the group's diversity and influence in global affairs.
UN Secretary-General Antonio Guterres is also expected to take part in the BRICS summit in South Africa to discuss the importance of international cooperation, climate change and other issues.
The BRICS economic alliance, currently consisting of Brazil, Russia, India, China and South Africa, represents approximately 42% of the world's population, 31.5% of the world's GDP and 30% of the world's territory.
The bloc also has its own financial institutions, such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), which provide financing and support for infrastructure and sustainable development projects in BRICS and other developing countries.