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Are we moving towards a bipolar world?

Posted by Flux on 

4 December 2023

What’s trending?

A bipolar world, in the context of international relations and geopolitics, refers to a situation where global power and influence are primarily concentrated in the hands of two major superpowers or blocs, with each holding significant sway over international affairs. This was the situation during the Cold War between the West and the USSR, from the late 1940s to the early 1990s when the USSR collapsed. Since then we have seen a multipolar world with the rise of other major powers like China, Russia, and the European Union, which introduced a more complex and diverse global power structure. But now, it appears as if we are moving towards a bipolar world once again. Nations are either looking to become self-sufficient or are aligning themselves with one of two groupings. We have the United States and its allies on the one side and Russia and China on the other. The BRICS nations – Brazil, Russia, India, China and South Africa – recently convened in Johannesburg during which the Beijing vs Washington consensus was discussed. At the conference, it was also announced that more countries would join the BRICS grouping, including the United Arab Emirates and Egypt. This signals a shift away from the United States as the dominant player on the global stage. 

Why is it important?

A geopolitically fractured world has major ramifications for the business world. Aligning with a major superpower can provide security guarantees and economic benefits for allies, as well as fostering cooperation and stability within these alliances. But running up against a major power can have negative outcomes. South Africa’s trade with the  United States, for example, could be hampered by our perceived support of Russia over the Russia/Ukraine war. Our solidarity with Palestine could  further strain the relationship as the US has pledged strong support for Israel. The United States is one of our biggest trading partners and the country can’t afford to jeopardise the tax advantages it receives under Agoa (the African Growth and Opportunity Act). Losing our Agoa status would have a huge impact on the economy, especially on exporters. It could also result in the rand significantly depreciating against the dollar.

What can businesses do about it?

Reduce overreliance on a single market or supplier. Diversify your supply chain and customer base to minimise exposure to geopolitical risks. Pay attention to the changing geopolitical landscape and make sure that any shifts are considered when making business decisions.  Develop scenario plans that account for different geopolitical outcomes. Consider best-case and worst-case scenarios to assess potential impacts on your business. Continuously monitor and assess political and geopolitical risks in the regions where you operate. This includes staying informed about trade tensions, sanctions, and evolving regulations. Engage in industry advocacy and lobbying efforts to influence policy decisions that may affect your business. Invest in market intelligence to stay updated on geopolitical developments and their potential impacts on your industry.

By Faeeza Khan

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Image credit: ThisisEngineering RAEng

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