When South Africa became the fifth member of the then Bric (Brazil, Russia, India and China) grouping of emerging economies – which thereafter became known as the Brics grouping – there were plenty of sceptics, both inside and outside the country. As SA is about to host the fifth Brics summit meeting next week in Durban, the picture has changed dramatically.
South African sceptics particularly had problems finding a positive answer to the ‘what’s-in-it-for-us’ question. The latest prognosis on developments on the global economic front not only highlights advantages of the Brics involvement – it also indicates that it may be vital to South Africa’s economic survival.
The United Kingdom Financial Times recently reported Goldman Sachs is forecasting that global gross domestic product will rise at an average annual rate of 4.1% while it has never exceeded 3.5% during the past three decades. This phenomenal growth, however, will be driven by the emerging economies and will largely leave behind what we know as the developed world.
Releasing a report under the title, “Looking to 2060: Long-term growth prospects for the world”, the secretary-general of the Organisation for Economic Development and Co-operation (OECD), Angel Gurría, said the balance of economic power is expected to shift dramatically over the next half century, with fast-growing emerging-market economies accounting for an ever increasing share of global output.
"The economic crisis we have been living with for the past five years will eventually be overcome, but the world our children and grandchildren inherit may be starkly different from ours," he said.
As the European Union continues to face the prospect of protracted stagnation and political turmoil not only from countries such as Italy, but also the ever present prospect of a breakup in the face of, among others, a possible UK withdrawal, note should be taken of a recent remark by South African Reserve Bank governor, Gill Marcus.
She pointed out that, for the moment, Europe still matters hugely to many emerging markets. For South Africa, it does not only have close historic ties to Europe, but the country also sends a massive 38% of its manufactured exports to European Union countries.
"We are seriously concerned about what is happening in Europe. Assuming nothing gets worse, Europe will still have a very long recovery time. It will become all the more imperative for emerging markets to diversify," she said.
It is exactly this opportunity to diversify that membership of Brics offers South Africa. And there have already been dividends. South Africa has benefited since it became part of Brics, trade and industry minister Rob Davies said recently when announcing the names of South Africa’s representatives to a newly formed Brics Business Council.
This is illustrated by the fact that South Africa has seen a reduction of its trade deficit with the other four member countries. “We have seen an increase in actual exports from South Africa to these countries,” Dr Davies said.
The formation of the Business Council itself is the latest in many initiatives by the Brics countries to promote their development and challenge the dominance of developed countries. The council, consisting of five top business leaders from each member state, will provide technical support and consultative advice, as well as facilitate the implementation of multilateral business projects among members.
The areas of focus will include promotion of trade and industry and business co-operation, technology transfer and development, and multilateral business.
In addition, it will have an advisory role and facilitate co-operation in manufacturing, financial services, the green economy, skills development, and small and medium enterprises, Davies said.
South Africa’s contribution
Indicative of the fact that South Africa is not only a beneficiary but also contributes value to the group, is the 34 000-kilometre long Brics undersea cable that will be the third longest undersea telecommunications cable in the world.
Expected to be completed next year, creating direct communication connectivity between the five members, it will also give the four original members of Brics a two-way avenue via South Africa to 21 African countries.
At the same time, it will not only enhance the scope of trade and economic ties between Brics and Africa, but it also confirms South Africa’s status as gateway to the African continent.
Also proving that South Africa is no mere proverbial passenger within the Brics grouping, it took the initiative with a T-5 (Tourism-5), expected to be announced in Durban. The T-5 will be a premier body of the five members to co-ordinate efforts on the tourism front.
It is to be based on the pattern of the T-20 within the G20 structure, in which South Africa played a key role. It is aimed at “promoting the value of tourism as a driver of job creation, economic growth and development within the G20 process and advocate for policies which are supportive of tourism growth”.
It is further expected that the launch of the proposed Brics development bank will be one of the centrepieces of the Durban summit. Such an institution could play a crucial role in the financing of infrastructure projects requiring a high-risk tolerance in member countries, without creating pressure on individual sovereign currencies.
In the meantime, South Africa has signalled its deeper involvement in the workings of the Brics structures with the announcement earlier this month that the Human Sciences Research Council has been appointed as an incubator for the country’s own Brics Think Tank. To date, South Africa has been the only member country without a dedicated Brics think tank.
The five member states of Brics represent almost three billion people, with a combined nominal gross domestic product of US$14.9-trillion, and an estimated US$4 trillion in combined foreign reserves. Intra-Brics trade is more than $300bn a year and is expected to reach the $500bn mark by 2015.
Many observers expect the grouping to expand in the not too distant future, to include other economically and strategically important emerging nations. Indonesia and Turkey are most widely regarded as the next additions to this grouping, as the face of global economic and power relations is fast changing.
But not everyone in South Africa is equally convinced of the merits of Brics and the staging of its fifth summit in Durban. A number of non-governmental organisations, including the Congress of South African Trade Unions (Cosatu), plan to stage their own ‘summit’ alongside the official one.
Cosatu communications manager Norman Mampane said last week it would hold its own "below the Brics" summit in Durban, while Patrick Bond, a professor in the University of KwaZulu-Natal’s School of Development, said his department – along with civil society organisations – would hold a “counter summit” and an “Occupy Brics” protest.