South Africa has joined the league of the top performing economies in the world, commonly known as BRIC (Brazil, Russia, India, and China) effective as of January 2011. This group of countries has been receiving much attention due to their economic growth prospects and the role that they are positioning themselves to play in the global economy. Among other shifts in the wake of the global financial crisis, which commenced in 2008, these emerging market economies (EMEs) have been receiving huge capital inflows which has resulted in debate on the currency values around the world.
This CAI discussion paper seeks to analyse the significance of this partnership and opportunities which can be obtained among these countries. In this analysis, attention is drawn to the mutual benefits that can be shared by South Africa and its fellow BRICS members.
Background and context
The term “BRIC” was initiated by the Goldman Sachs economist Jim O’Neil in 2001 to describe the growing influence of these large emerging economies which accounted for about half of global economic growth between 2000 and 2008 and expected to account for 61% of global growth in 2014 according to the International Monetary Fund (IMF). South Africa received a formal invitation to join the Brazil, Russia, India and China (BRIC) group of large emerging economies in December 2010. China extended the invitation in its capacity as rotating chairperson of the BRIC formation based on the agreement reached by the BRIC member states.(2) With South Africa’s membership, the group became known as “BRICS.” This grouping has become more recognisable due to the role of emerging economies in promoting the reconstruction of the global political, economic and financial landscape into one that is more equitable and balanced. All BRICS countries belong to the United Nations Security Council as permanent (China and Russia) or non-permanent (Brazil, India and South Africa) members which enhances its influence on global matters.
In terms of relative size, South Africa does not measure up to its fellow BRICS counterparts. Its population of 49 million is a fraction of other BRIC countries’ populations, which range from Russia’s 143 million to China’s 1.34 billion people. However, in terms of representing world regions, South Africa is a good fit as it is the largest economy in Africa, accounting for about a third of the total gross domestic product in sub-Sahara. In addition, the country has a lot to offer to its fellow BRICS members and as such to serve as a platform for additional opportunity for Africa’s economic development.
Despite the robust economic prospects of South Africa, its admittance to BRICS has been met with a number of reservations.(3) For instance, the average growth of the other members is expected to be above the modest 3% predicted for South Africa in 2011, and its GDP well below that of the rest of the BRICS’ countries. In addition, South Africa’s membership has diverse consequences to the rest of the African continent especially when it comes to resource exploitation. Some commentators strongly suggest that only time will tell of the real answers as to what the BRIC members expect in return for welcoming South Africa into the grouping.(4) However, a closer glance suggests that there are mutual benefits that can be shared among the countries in this group – and thus arguments for South Africa’s inclusion.
Mutually beneficial relationship
As Africa’s most “developed” economy, South Africa’s membership presents an opportunity for the African continent to benefit in terms of international trade, investment and infrastructure projects that can accelerate employment creation and ultimately help alleviate poverty while promoting Africa’s economic development. On balance, given South Africa and Africa’s resource abundance and BRICS’ investment propensity, it seems to suggests that this could be a case of “a friendship of convenience,” where each member of the grouping seeks to benefit from the existence of the other. There are mutual benefits in terms of trade, productive investment, industrialization, value addition in productive export business and helping in accelerating employment creation.
As a case in point, the South African Government views this as an opportunity to promote its economic growth and job creation priorities. On the one hand, the BRICS grouping offers a lucrative market for South Africa’s goods and services. It also offers opportunities for cooperation in the realms of finance, agriculture, statistics, justice development finance, business development and exchange. Additional areas of collaboration also include science and technology, culture, sport, climate change and energy.(5) Apart from the natural resources and financial sectors, tourism (6) is also one of the key sectors that can benefit directly from this relationship. Shared academic research programs on poverty alleviation and economic growth are also areas that will bring benefits within the BRICS grouping. Given the economic prospects of the fellow BRICS countries, South Africa can be used as both a point of entry and as a gateway to the African continent and act as a conduit to channel their aspirations in the continent. South Africa has a lot to gain and also offer in this relationship given its abundance of mineral and labour resources, credible regulatory environment, prudent monetary policies, transparent fiscal policies, and well-functioning and efficient financial markets. South Africa seeks to attract more foreign direct investment from its BRICS partners, while at the same time building upon the BRICS platform to enable South African companies to also invest abroad.
The gateway to Africa
South Africa’s membership in the BRICS grouping makes sense when it comes to its own relationship with Africa. BRICS provides a link with the African continent and strengthens South Africa’s position as a gateway to Africa. South Africa’s foreign policy prioritises the affairs of the African continent through, for example, humanitarian aid and conflict resolutions in conflict zones. South Africa serves as a vital gateway to the African continent as well as a valuable conduit between other developing African and the developed countries. The country is uniquely placed to bring the African perspective to the BRICS agenda, considering the fact that it is the largest investor in a number of developing countries in Africa.
Although South Africa has established strong economic relations with all BRIC countries, China and India are at the top of the list. Other BRICS’s members, such as Brazil and Russia are likely to follow suit. These two Asian countries have already established strong ties in different parts of Africa through trade, investment and economic cooperation. China has invested aggressively across the African continent to secure access to natural resources needed to sustain its rapid economic growth target of around 10% (although this is likely to slow). Chinese companies view Africa’s potential economic development as an opportunity to develop their businesses by helping to build infrastructure such as roads, power plants, telecom systems, industries, hospitals, and schools, among other things.(7)
The road ahead
Through South Africa’s membership in the BRICS grouping, an African voice can be heard in pressing global issues. With South Africa’s membership, Africa is now in a better position to voice its aspirations in global affairs especially when it comes to institutions like the IMF, the G-20, the World Bank and the United Nations Security Council. For instance, most recently, the BRICS countries have been vocal with regard to the position of the IMF Head, suggesting that the top job should be taken by someone from the developing world countries. This has the potential of effecting changes in the way of doing things at high level global institutions, whose existence has been dictated by the developed world counterparts. With continued cooperation among BRICS, this many result in a new world order unfolding in global economics and politics, with the BRICS countries increasingly visible in its transition.
The partnership with the BRICS countries has the potential of placing Africa in the path of genuine benefit from trade and investment opportunities. It is therefore left for other African countries to learn from South Africa’s influence in several groupings and its involvement in global affairs. The emanating power from BRICS will continue to change the economic and political landscape.
The emergence of BRICS is earmarked to change global economic order that can benefit the African continent through deeper cooperation and investment. Currently, the economic performance of the BRICS countries is leading the shift of global economic power away from the developed countries towards the developing countries. However, emerging economies need to remain vigilant of the risks that they may be exposed to, on the backdrop of the recent widespread global economic crisis. This may help in sustaining their attractiveness as investment destinations around the world.
In order to achieve their goals through this partnership, there is need for extended cooperation among the BRICS countries to impact global affairs. This has the potential of facilitating the idea of speaking with one voice when it comes to international affairs in attempts to promote global economic growth and development. Through global economic cooperation, there could be expansion of markets, promotion of international trade and investment, as well as facilitation of efficient and effective allocation of resources. Infrastructural development and investment in natural resources has the potential of ensuring that the BRICS countries continue to function as powerful engines for global economic growth. This commitment can help to realise and sustain the economic development and political clout that (South) Africa and its BRICS partners seek.
This article is republished with permission from Consultancy Africa Intelligence (CAI), a South African-based research and strategy firm with a focus on social, health, political and economic trends and developments in Africa. For more information, see http://www.consultancyafrica.com.
(2) Mail & Guardian, ‘South Africa invited to join Bric group’, 24 December 2010, http://www.mg.co.za.
(3) Mail & Guardian, ‘Creating more walls than Brics’, 7 January 2011, Johannesburg, http://www.mg.co.za.
(4) SAIIA, ‘South Africa and the BRICs: A Crisis of Identity in Foreign Policy’, January 2010, http://www.saiia.org.za.
(5) The Presidency, ‘Reply by President Jacob Zuma, on questions posed in the National Assembly for oral reply’, 17 March 2011. http://www.info.gov.za.
(6) Africanglobe, ‘BRICS membership ‘to stimulate tourism’, http://www.africanglobe.net.
(7) Global Sherpa, ‘China in Africa: South Africa joins BRICs Summit’, 26 April 2011, http://www.globalsherpa.org.
Written by Anthony M Makwiramiti (1)