South Africa joins the BRIC countries
Joe Sarling 11th April 2011
In 2001, Jim O’Neill of Goldman Sachs created the concept of BRIC and described it as "large developing countries with the potential, over the next few decades, to become a much larger force in the world economy". Originally, this group consisted of Brazil, Russia, India and China but now we have a new member – South Africa.
It is thought that the invitation to South Africa to join this informal bloc would made it ‘more representative’ of the emerging markets claiming to drive global growth post-financial crisis.
Having said this, South Africa’s economic growth rate is 4.4% with a jobless rate of around one in four. This growth rate is far lower than that of China and India at 9.8% and 8.2%, respectively and has a larger jobless rate than the BRIC average of 6.5%.
Clearly a major reason for the invitation is to expand this informal bloc into the African continent. South Africa has the largest real GDP in Sub-Saharan Africa ($183bn) and which is 40% of the total for the area.
South African companies and research institutes need to make the most of this opportunity. It could trigger further inward investment into the country not only from other BRICS members but could also give further legitimacy to nations around the world. Furthermore, they can also benefit from preferential trade relations and extensive knowledge transfer through collaboration in R&D.
There is no doubt that South Africa will sell its position to the bloc members as being the gateway to Africa. The inward investment has the potential to have spillover effects into the rest of Sub-Saharan Africa and could form the basis for further trade and expertise links. This could be an area which other bloc members are interested in – the potential to invest in infrastructure through public-private partnerships in order to gain the raw materials that high growth economies require. China would certainly look to invest further as their influence grows in the region.
Moreover, one of the most interesting aspects to this bloc is its growing influence not only in driving economic growth after the financial crisis but now politically. While it has no formal recognition, politically sensitive issues could see the emerging markets gaining in influence. Only last year did Brazil and Turkey (another potential target for bloc invitation) back the Iranian regime with regards to nuclear energy while four of the five BRICS members abstained from the vote on the intervention in Libya (South Africa voted for intervention but were not a bloc member at the time).
Under either the bloc’s economic or financial remit, it is clear that their influence will grow larger. They are currently focussed on their consultative role within the global financial governance agenda but this will expand as they try to reform the World Bank and the UN Security Council.
There are clearly mutual benefits for South African membership; BRICS nations can further increase their investment into South Africa in return for the raw materials (and certain services) it possesses while South Africa has joined a bloc which has the potential for key global political influence.
As western states struggle to grow out of the recession, the world is looking eastwards. Now the economic benefits will go hand-in-hand with political influence.