How to position Africa as the Brics challenge US dollar hegenomy
Officials, including Chinese President Xi Jinping, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, attend the Brics summit in Kazan, Russia October 23, 2024.
Yes, the US dollar is accepted in the international market, but in most cases, the dominance of the US currency has been disadvantageous to many developing countries.
US President-elect Donald Trump has threatened the Brics (an intergovernmental organisation comprising nine countries - Brazil, Russia, India, China, South Africa) + other countries, warning that any attempt to move away from the dollar in international trade will result in 100 percent tariffs. Such a move would not only hurt Brics but also the US, which depends on China for certain products.
Although the US has been trying to decouple from Beijing, it’s unlikely to succeed, as the Covid-19 crisis highlighted America’s dependence on China for critical medical supplies.
On the other hand, for more than 15 years, Beijing has followed a strategy of reducing its reliance on foreign technology and resources.
This strategy is set to continue for another 15 years, allowing China to withstand punitive tariffs, such as those suggested by Trump, without suffering significant setbacks.
During his first term, Trump was alarmed by China's rapid rise and pushed Beijing to abandon its "Made in China 2025" plan.
However, China’s resilience indicates that Brics could challenge dollar hegemony. While Brics currencies are not widely accepted, their internal use could liberalise the global market and end the unilateralism promoted by Trump.
The "Made in China 2025" plan, launched in 2015, aimed to reduce China’s dependence on foreign technology, a goal that many Chinese scholars believe has already been largely achieved. Over the past two decades, China has attracted upstream players and, and by 2010, overtook the US to become the world's largest value-added manufacturer, accounting for 28 percent of global production by 2018.
It is overly simplistic to assume that the US economy is irreplaceable while ignoring the power of Brics countries.
Currently, Brics countries collectively boast a GDP of over $60 trillion, surpassing that of the G7 countries, with investable wealth of $45 trillion. These emerging economies, which represent 45 percent of the global population and control 45 percent of global oil production, cannot be easily disregarded.
Africa, in particular, has been the biggest casualty of dollar dominance in international trade. Countries influenced by the "big boy syndrome" of the US often face sanctions if they fail to conform to Washington’s demands, resulting in severe economic consequences.
The current financial system, supported by Western nations, imposes higher interest rates on developing countries while granting themselves low rates, fostering development in rich nations while stifling growth in Africa.
However, Brics presents a viable agenda for enabling trade among its members without relying on the dollar.
This move could benefit African countries, which are vulnerable to dollar fluctuations. If all African countries joined Brics and adopted a common currency, de-dollarisation would reduce their exposure to external economic shocks caused by dollar fluctuations. Additionally, a shared currency would alleviate the pressure African nations face when importing goods and reduce the frequency of US sanctions.
The writer is a communication consultant and a journalist
