BLOC: Leaders of the Brics countries, from left, Brazilian President Michel Temer, Russia’s Vladimir Putin, India’s Narendra Modi, Chinese President Xi Jinping and South African President Jacob Zuma at a summit in India last year. Picture: AP
As with the Bretton Woods institutions or the International Criminal Court, Africa must do more than just howl about injustice. Corrupt leaders and their apparatchiks in Africa like to blame our colonial past to shield their incompetence and impropriety. They must not do the same with the planned Brics credit rating agency.

South Africa, a leading economy on the continent, has been downgraded to junk status. The last time it was sub-investment grade was when Nelson Mandela was president. With Standard & Poor’s downgrading the country, followed by Fitch, defenders of mediocrity have chosen to attack the agencies for their bias towards America and how betrothed they are to owners of capital. Granted, Standard & Poor’s, Moody’s and Fitch – all American – have been found wanting for missing more blatant sovereign and systemic risks in the past. For their omissions and oversights, these agencies have been fined billions of dollars. Will the Brics agency be any different, though? The Brics member countries – Brazil, Russia, India, China and South Africa – have been talking about creating their own rating agency to rival the big three.

Speaking in October, Prime Minister of India Narendra Modi expected this rating agency to “further bridge the gap in the global financial architecture”.

Along with the Brics Bank and its initial $100 billion capital injection, the rating agency is a necessary cog in the new world order – which is increasingly being dominated by developing economies. The importance of having pro-development investors, banks and related agencies is undisputed. There are two problems with this line of thinking, however, which Brics and Africa must resolve upfront to deliver the intended impact.

The first risk is mistaking pro-development for lack of standards. Although pro-development could mean being more sensitive to the needs of the developing world, it could also imply more stringent criteria for ratings and lending. It is not uncommon to hear of development financial institutions being described as “just like commercial banks” when assessing applications for funding. What else can a lender – development finance institution or commercial bank – do but minimise the risk of default?

Lending money – be it for development impact or financial return – requires vigilance in uncovering any risk the borrower will fail to repay the loan. If the risk is higher than the possible development impact and/or desired financial return, no money will change hands. Any expectation that the Brics development bank will somehow lend money to projects that are not viable or not packaged properly must be managed.

This applies to the Brics rating agency too. Those opposed to the big three rating agencies are going sound as if they expect poor governance and sovereign risk in developing countries, including Africa, to be overlooked by the alternate rating agency – if and when it takes off. They will not be overlooked. In fact, some sub-investment grade countries could find themselves in the same situation under the Brics agency.

The second risk is the disproportionate role of the non-African members of the Brics bloc. South Africa is the only representative of the continent. Whether South Africa can sufficiently represent the interests of its 53 fellow African countries without prejudice is debatable. Being the smallest and slowest-growing economy of the Brics countries, South Africa’s influence ought to be anchored in its ability to harness the African collective behind its participation in the bloc. So far, its stance at Brics has not been pan-African enough. Even if it consults with the AU before Brics meetings, it has not done a great job communicating that.

Plagued by persistent perceptions and incidents of Afro-phobia; poor economic growth; unemployment; sub-standard education; political ructions within the ruling party and the downgrade by the big rating agencies, South Africa is not as well positioned to represent the aspirations of Africa as it was 10 years ago. The consequence of this is China, Russia, India and Brazil will do to Africa what Western countries have been doing all along. They will do this behind the cover of Brics. Proceed with caution!

Victor Kgomoeswana is the author of Africa is Open for Business and weekly columnist for Sunday Independent. Twitter Handle: @VictorAfrica.