Why joining BRICS makes sense for Zimbabwe

Persistence Gwanyanya

ZIMBABWE’S approval as a new member of the BRICS New Development Bank (NDB) will de-risk concentration dependency on traditional funders and open alternative avenues for lines of credit and funding, analysts have said.

The country, together with Argentina and Saudi Arabia, was recently approved as a new member of the NDB and will be officially announced in August at the BRICS summit to be held in South Africa.

The BRICS bloc consists of countries such as Brazil, Russia, India, China and South Africa, which are expanding and building a new economic architecture to challenge the dominance of the U dollar.

In addition to the five BRICS nations, other member countries are Bangladesh, the United Arab Emirates and Egypt. Uruguay is in the process of joining.

Economist and member of the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee, Mr Persistence Gwanyanya, told The Sunday Mail Business that joining the BRICS bank is a positive direction for the country as the upcoming new world order is friendlier to Zimbabwe.

“It is important to understand the changing global economic and financial dynamic characterised by the global de-dollarisation and efforts by BRICS to reduce their dependency on the United States and the US dollar.

“We are likely to see that also supporting Zimbabwe, which is currently sanctioned by the West, which has resulted in failure to access funding and new lines of credit,” he said.

Mr Gwanyanya said the reason for de-dollarisation is also mainly to do with the weaponisation of the dollar by the US.

He said joining BRICS is a positive development, “although we may not see the results today or tomorrow. It points in a positive direction for the country”.

“The upcoming world order seems to be more friendly to Zimbabwe compared to the US. Therefore, we are likely to see the fortunes of Zimbabwe changing over time.

“As previously highlighted, due to the reduced power and influence of the West in global financial institutions, there is a need to look East for capital and external lines of credit,” said Mr Gwanyanya.

He noted that Zimbabwe has to make efforts to reduce some dues with the developing and emerging economies in order to give hope to raising new capital.

In March 2023, the NDB inaugurated its new chief executive, Dilma Rousseff, who highlighted the approval of membership for the three countries.

“NDB leadership okayed these countries’ membership request, and the decision will officially be announced in August at the summit of BRICS heads of state, which will tentatively be held in South Africa,” she said.

Investment analyst Mr Enock Rukarwa said the admission definitely de-risks concentration dependency on the World Bank.

“However, access to credit facilities from the New Development Bank will be a function of capacity and obtaining terms and conditions that are not yet known,” he said.

Mr Rukarwa said fundamentally, the high gearing of the Zimbabwean economy in the form of external debt will have an impact on unlocking funding, irrespective of the creditor. The country’s total debt, estimated at US$17,5 billion, including arrears, has seen foreign investors and funders perceive the country as high risk.

Economist Dr Prosper Chitambara said there is going to be an improvement in access to funding, but the country’s arrears may affect the capacity to access the potential funding.

“We need to have a powerful plan so that we can unlock fresh capital and credit into the economy,” he said.

According to Rousseff, the NDB’s goals are to finance “infrastructure investments” and “help members combat poverty, create jobs, and promote environmentally sustainable development.

Finance and Economic Development Minister Professor Mthuli Ncube recently revealed that Zimbabwe intends to join the NDB.

“We have made contact with the management, and we have made contact with the current shareholders for us to progress that initiative,” Minister Ncube said in a recent interview.

He said by joining BRICS, the country is trying to expand sources of capital for development financing.

Plans by BRICS to replace the US dollar in international trade are set to reach a new high when discussions on the feasibility of introducing a common currency take place at the summit to be held in South Africa later this year.

South Africa’s representative to BRICS, Ambassador Anil Sooklal, recently hinted that the grouping is set to grow bigger this year, with more than 30 countries having formally and informally applied to join the alliance. – Sunday Mail