South Africa Vaults into Elite BRIC Club: South Africa Has Won the Race to Become the Latest Member of the Exclusive Emerging Market Group and Now Joins the Other Members, Brazil, Russia, India and China. but the Invitation to the Country Has Left Many Observers Scratching Their Heads in Amazement. Tom Nevin Reports
Nevin, Tom, African Business
China's Christmas Eve invitation to South Africa to become the fifth member of BRIC, the coterie of 'super' emerging nations, came as a surprise to most South Africans and a disappointment to Nigeria and Egypt - both had hoped to be the chosen African continental representative.
BRIC currently comprises Brazil, Russia, India and China, and will be renamed BRICS on South Africa's formal induction at the leaders' summit in Beijing in April. However, BRIC, concocted by US financial group Goldman Sachs to describe shifting economic power in global markets, has taken on another life as member countries try to use the grouping for greater international political clout.
Just a month before the winner was announced, analysts, investors and asset managers were punting Nigeria as "a more probable African contender". Other countries mooted as prospective BRIC family members are Turkey, Mexico and Indonesia through their impact on and growth in the global economy in recent years. Africa, however, elbowed its way to the front of the queue by showing the fastest growth and by forcing the investment focus on itself, especially in the period following the 2008/09 economic meltdown.
The industrialised nations' stuttering recovery shifted investor attention to emerging markets, where the financial dive had caused less damage and which were showing greater resilience.
The problem, according to some analysts and economists, is that South Africa doesn't belong in the BRIC group. Economist Jim O'Neill of Goldman Sachs, maintains that, "While this is clearly good news for South Africa, it is not entirely obvious to me as to why the BRIC countries should have agreed." South Africa's economy is only a quarter of the size of Russia's, the next smallest of the group. However, on several other indicators, including productivity, ease of doing business, transparency and so on, South Africa emerges the stronger. Part of the South African media, which tends to take a more sceptical view of the country's progress, believes the real reason is that South Africa is the fulcrum for industrialised nations wanting to leverage their way into the potentially wealthy African market and resources trove. It is close to first-world standard, with all the mod cons of a comfortable base from which to launch economic safaris into the rest of the continent. Size of GDP, population and square-mileage don't figure.
"South Africa has a relatively small population of about 50m, an economy worth $489bn and growth of only about 3% last year - far from scorching," says O'Neill. "There are many other emerging markets that would better fit the BRIC grouping, including South Korea, Turkey, Mexico and Indonesia, all of which have GDPs that are two or three times bigger than that of South Africa, and much larger populations."
The pro-South Africa lobby counters, why not? It is the largest economy on the African continent with by far the most developed infrastructure, communications sector and social environment. It has a strong financial structure and its mining and agricultural capabilities are the envy of the continent. In terms of per capita income it competes aggressively with the current four BRIC members. It also demonstrates remarkably high levels of IT (cellphone) penetration that stand in strong contrast to its social problems.
But perhaps the best argument going for South Africa is the geopolitical one. Missing from the BRIC formulae is representation from the African continent, which is arguably one of the world's largest untapped and underexploited markets.
"BRIC's future standing could be greatly enhanced by taking early advantage of Africa's perceived growth potential," says Frans Cronje, deputy CEO of the South African Institute of Race Relations. "Here, however, South Africa needs to realise that it will face significant competition from the likes of Angola, Nigeria and Ghana, who might equally claim a place as BRIC's gateway to sub-Saharan Africa. …