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Bric becomes Brics, but will this be good for South Africa?

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Bric becomes Brics, but will this be good for South Africa?

14th January 2011

By: Keith Campbell
Creamer Media Senior Deputy Editor

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Late last month, it was announced that South Africa had been invited to join the Bric grouping of Brazil, Russia, India and China. On December 23, Chinese Foreign Minister Yang Jiechi telephoned his South African counterpart, Maite Nkoana-Mashabane, (China currently chairs Bric) and conveyed the invitation to her, adding that a letter to President Jacob Zuma had been dispatched by Chinese President Hu Jintao, inviting South Africa’s leader to the third Bric summit, to be held in China this year. Yang also indicated that the group would now be known as Brics.

“We believe that South Africa’s accession will promote the development of Bric and enhance cooperation between emerging economies,” said Chinese Foreign Ministry spokesperson Jiang Yu. The Russian Foreign Ministry stated that South Africa’s admittance to the group was “in line with sustainable trends of global development, including the emergence of a polycentric international system. The entry of [South Africa], an active participant in the G20 and the largest economic power in Africa, will not only increase the total economic weight of our association but also will help build up opportunities for mutually beneficial practical cooperation within Bric.”

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Likewise, the Brazilian Foreign Ministry affirmed that "South Africa will bring an important contribution to the group because of its economic relevance and its constructive political action, and its commitment to issues concerning Africa and the international agenda." India has also welcomed South Africa’s accession.

Nkoana-Mashabane, on releasing the news, argued that the “rationale for South Africa’s approach [to join Bric] was in consideration of a matter of crucial importance to Brics member states, namely the role of emerging economies in advancing the the restructuring of the global political, economic and financial architecture into one that is more equitable, balanced and rests on the important pillar of multilateralism.”

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As is well known, the concept of the BRIC countries was developed by Jim O’Neill of Goldman Sachs in 2001. He and his team forecast that these four countries, because of their large (in the case of China and India, enormous) populations and rapidly growing and diversifying economies, would come to dominate the global economy within a few decades. The original forecast date for the completion of this transformation was 2041, subsequently revised to 2039, and now standing at 2032, or just 21 years form now. Of the top five world economies in 2001, only one – the US – would remain by this date, with a likely ranking of China, the US, India, Brazil and Russia.

Brazil, Russia, India and China, inspired by the attention O’Neill’s BRIC concept had received, and impelled by the global economic crisis (which they were and are riding out rather well) held the first BRIC summit in June 2009, in Russia. The second followed in 2010, in Brazil.

Strikingly, South Africa raised the possibility of joining BRIC in a series of letters to her BRIC counterparts in 2009. And President Zuma met separately with all the BRIC leaders during 2010. Clearly, South Africa was eager to get involved.

But how does this country compare to the BRIC four? Currently, using purchasing power parity calculations, the Central Intelligence Agency’s excellent World Factbook (available online) ranks China as the second largest economy in the world (after the US) with a gross domestic product (GDP) of more than $8,8-trillion, with India in fourth place (nearly $3,7-trillion), Russia seventh (just over $2,1-trillion) and Brazil ninth (a little over $2-trillion). (All figures are estimates for 2009.) South Africa ranks 25th with a GDP of $504,6-billion – about one quarter of the Brazilian figure and one-sixteenth of that for China.

China has a population of more than 1,3-billion, India has nearly 1,2-billion people, the Brazilian population numbers slightly more than 201-million and that of Russia, just over 139-million (these are all estimates for July 2010). The South African population is just over 49-million.

Given the huge disparity between South Africa and the BRIC quartet (whose economies are also much faster growing than South Africa’s) it is little wonder that O’Neill says that this country cannot be grouped with the Bric states.

Morever, what exactly has South Africa joined? An economic bloc? No. A political alliance? No. A defence pact? No. Currently, Bric (and now, Brics) is basically a talk shop. And an informal talk shop, at that – no head office and no secretariat. Just a series of meetings.

Some observers hope that turning Bric in Brics will heighten South Africa’s international profile and highlight the country’s advantages and opportunities. Perhaps so.

But, on the other hand, exposed to comparison to the big and hard charging Bric economies, perhaps what will be highlighted to international investors will be South Africa’s disadvantages and lack of opportunities, in comparison to the other four. Becoming the fifth member of Brics, South Africa could shift its global image away from that of being the largest and most developed economy in Africa to one of being by far the smallest and slowest growing economy in Brics. A whole country that is equivalent to only a province or state (and not the richest province or state, at that) in any of the other four members.

It could lead to international economists, analysts and investment advisers routinely and explicitly using such phrases as “except South Africa” or “exclude South Africa” or even “avoid South Africa” from their analyses of the Brics countries and economies. Emerging market fund managers will not automatically group South Africa with the Bric four just because the Bric leaders have.

Nor will joining the group improve South Africa’s trade prospects with these emerging global economic drivers. Stimulating mutual trade and investment with these powers was well in hand long before South Africa joined Bric. Partially stimulated by the creation of the India Brazil South Africa (Ibsa) Dialogue Forum in 2003, South Africa has already negotiated a preferrential trade agreement with the South American trade bloc Mercosur (the core members of which are Argentina, Brazil, Paraguay and Uruguay) and is busy negotiating a PTA with India.

Russia has granted South African exports preferential access to its market under the Generalised System of Preferences, meaning that South African products can enter Russia at reduced or zero tariffs. And China is already South Africa’s number one trading partner, ranking number one in regard of both exports and imports, taking 11% of the country’s exports and providing 13,7% of imports.

Moreover, there is the danger that becoming one of the five Brics could cause South Africa to neglect Ibsa, which has developed concrete cooperation programmes ranging from the trilateral IBSAMar naval exercises to the Ibsa satellite programme. In her statement on the country joining BRICS, Nkoana-Mashabane did assure that “[w]e remain convinced that South Africa’s diversified foreign policy objectives and interests allow for both groupings (Ibsa and Brics) to coexist. It is our belief that the mandates of Brics and Ibsa are highly complementary.” Let us hope so.

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