DOUGLAS RASBASH
In the first part of the series, we looked at the context, rationale and prerequisites for a successful currency. In the second part, we considered how the new currency would work, referring to the last major attempt at ‘de-dollarisation’ with the Euro. In this final part, we consider whether Botswana should join the BRICS grouping.
Interested countries
The countries that have shown specific interest to join the BRICS alliance ahead of the South African summit are Afghanistan, Algeria, Argentina, Bahrain, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Saudi Arabia,
Senegal, Sudan, Syria, the United Arab Emirates, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe.
Belarus is the first country in Eastern Europe that expressed interest to accept the new BRICS currency. On the other hand, France has also shown its interest to attend the next BRICS summit in South Africa. Additionally, many countries in Africa remain on the sidelines and could announce their support for the BRICS currency after its launch.
Kenya has urged African nations to stop using the US Dollar and to trade with native currencies within the continent. So what should Botswana do? As President Cyril Ramaphosa is the chair of the forthcoming BRICS summit this month and has invited over 60 countries, including Botswana and 53 other African nations, he must surely recognise huge challenges of harmonisation and cooperation ahead for which heavy investment in diplomacy will be necessary. The BRICS nations have diverse political systems and economic ideologies, ranging from capitalism to communism.
Because the challenges of establishing a common currency among such disparate nations can be significant, it will be important for Botswana to set out clear prerequisites for consideration before it can join.
Prerequisites
Consensus Building: The success of a common currency would require a high level of consensus and cooperation among the nations. They would need to address their political differences and find common ground on key economic and monetary policies. This process would require effective communication, negotiation, and compromises to accommodate the interests of all member countries.
Economic Convergence: A crucial aspect of a successful currency union is economic convergence among member nations. This involves aligning macroeconomic fundamentals such as inflation rates, fiscal policies and economic stability. Despite their ideological differences, the BRICS nations will need to work towards harmonising their economic structures and policies to create a stable foundation for a common currency.
Governance and Institutions: Establishing robust governance structures and institutions will be essential for managing a shared currency effectively. This will involve designing mechanisms for decision-making, policy coordination and dispute resolution.
Transparency, accountability, and trust-building measures will be crucial to overcome political differences and ensure effective governance of the currency.
Flexibility and Adaptability: Given the political and economic diversity within the BRICS group, it may be necessary to design a flexible currency framework that accommodates different economic systems and allows for adjustments over time. Gradual implementation, allowing for pilot projects and testing, could help identify challenges and make the necessary adaptations to ensure the currency’s viability.
Gradual Integration: Instead of immediately adopting a fully-fledged common currency, the BRICS nations could consider a gradual integration process.
They could start with closer economic cooperation, such as harmonising trade and investment policies, reducing trade barriers, and promoting regional financial integration. This incremental approach would allow them to build trust, address challenges, and gain experience before fully committing to a shared currency.
External Influences: It is crucial for the BRICS nations to consider external factors that could affect their common currency. This includes the impact of global economic trends, international trade dynamics and potential geopolitical pressures. A robust and resilient
currency framework would need to account for external factors and develop strategies to mitigate risks.
Success of common currency In summary, the success of a common currency for the BRICS nations will depend on their ability to overcome political differences, achieve economic convergence, establish effective governance structures, and design a flexible
framework. It will require a long-term commitment to cooperation, gradual integration, and the ability to adapt to changing circumstances.
The BRICS group has primarily focused on economic cooperation, trade and coordination on various global issues. While they have explored initiatives such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA) to enhance
financial cooperation, the adoption of a common currency has not been a prominent agenda item.
However, it is important to note that economic and political circumstances can evolve, and new proposals or discussions that I am not aware of may have emerged. I recommend consulting up-to-date sources or news outlets to obtain the latest information on any recent developments related to the BRICS nations’ currency cooperation.
When considering joining the BRICS group and potentially adopting a common currency, such as in the case of Botswana, each country should carefully assess several factors. Here are some key considerations:
Economic Alignment: Evaluate the level of economic alignment between Botswana and the existing BRICS members. Assess the compatibility of Botswana’s economic structure, growth patterns, and policy priorities with those of the BRICS nations. This evaluation should consider factors such as the composition of exports, industrial base and trade patterns.
Trade and Investment Opportunities: Analyse the potential trade and investment benefits of joining the BRICS group. Assess the size of the BRICS markets, trade preferences, and the potential for increased trade flows. Consider the investment opportunities and potential for technology transfer and collaboration within the BRICS framework.
Economic Diversification: Consider Botswana’s heavy dependence on diamond exports and the diamond market,which is dollar-based and dollar-denominated, and evaluate how joiningthe BRICS group might impact its diversification efforts. Assess whether a BRICS membership could provide new avenues for economic diversification, technological development, and expanding into other sectors beyond diamonds.
Currency Considerations: Examine the implications of adopting a common currency within the BRICS framework. Evaluate the potential benefits and risks associated with using a shared currency, such as reducing currency exchange costs and transactional barriers, as well as potential challenges related to currency stability, monetary policy coordination, and economic convergence.
Regional Integration: Assess the potential for increased regional integration and cooperation within the BRICS framework. Evaluate how joining the group could strengthen Botswana’s regional influence and provide opportunities for cooperation in areas such as infrastructure development, energy, agriculture and financial integration.
Political and Governance Factors: Consider the political dynamics and governance structures within the BRICS group. Evaluate the level of consensusbuilding, decision-making mechanisms, and the ability to influence policies and agenda-setting. Assess the compatibility of Botswana’s governance practices and institutions with those of the
BRICS nations.
Risk Assessment: Conduct a comprehensive risk assessment, considering both internal and external factors. Analyse potential risks such as economic volatility, geopolitical considerations, possible conflicts of interest, and the potential impact on domestic industries, employment and social dynamics.
Long-Term Commitment: Assess the long-term commitment and readiness to participate in the BRICS group. Consider the implications of aligning with a specific group’s policies and objectives, as well as the potential challenges that may arise from maintaining consensus and managing divergent interests within the group.
It is crucial to note that joining the BRICS group and adopting a common currency involve complex considerations, and that each country’s situation is unique. A thorough analysis of these factors, along with a comprehensive evaluation of the potential benefits and risks, will be essential before deciding. The dollar-rated diamond market Due to Botswana’s heavy dependence on the dollar-rated diamond market and its relations with Anglo American Corporation as well as Western-based tourism together with its close links to the USA and the EU, BRICS does not seem to provide much benefit and may even
pose additional economic and political risks.
Botswana is also committed to the AfCFTA, which was set up for Africa to integrate within the continent and not beyond it, and this should influence the thinking of Pan-Africanistas. The China-dominated BRICS and its currency would almost certainly undermine the integrity of AfCTFA. Moreover, a RNB dominated BRIC will probably be a case of from the frying pan and into the fire. Instead of becoming a BRIC in the Great Wall of China, let Africa establish its own currency – like the EU has done.