South Africa – BRIC or briquette?

South Africa’s invitation to join the BRIC (Brazil, Russia, India and China) group of emerging economies has been controversial, with many analysts suggesting that countries such as Indonesia, Vietnam or Turkey would have been more suitable candidates.

Outside the Johannesburg Stock Exchange building. South Africa has one of the most developed capital markets in Africa.

Outside the Johannesburg Stock Exchange building. South Africa has the most developed capital markets in Africa.

Lyal White, director of the Centre for Dynamic Markets (CDM) at South Africa’s Gordon Institute for Business Science (GIBS) says the country was chosen because it is seen as a gateway into the rest of the African continent.

“South Africa was chosen because of Africa and because of its geographical location. This was not an award for any type of economic accomplishments on South Africa’s behalf. It was not even a reward . . . for South Africa’s superior connectivity with the African continent. It was just the fact that South Africa [is] on the tip of Africa. [Outside Africa] it is recognised quite widely . . . as a representative of a vast continent,” White explained during a recent conference in Cape Town.

He, however, highlighted that BRIC is far from a formal economic bloc and that South Africa was merely invited to join a meeting of BRIC nations set to take place in China this month.

Jim O’Neill, chairman of Goldman Sachs Asset Management, first coined the term BRIC in 2001 based on the fact that the four countries all shared large populations, underdeveloped economies and governments willing to embrace the global market. O’Neill predicted that BRIC nations would experience strong and sustainable economic growth for a number of decades.

Responding to the news of South Africa’s invitation, O’Neill wrote in an opinion piece that it is not entirely obvious to him why the other BRIC nations should have agreed to the inclusion of South Africa in the grouping. “As far as the economics are concerned, South Africa is one of the more wealthy nations in Africa, and is currently the largest in US$ terms at around $350 billion. However, this is quite small by not only BRIC standards, but compared to some others. For example, Russia is around $1,600 billion, nearly 5 times larger than South Africa. And, India is currently similar in size to Russia. Brazil is currently closer to $2,000 billion in size, while China is considerably larger at around $5,500 billion,” O’Neill explained.

He said that there are other emerging economies that are much bigger than South Africa, these include Indonesia, Mexico, Turkey and South Korea. “It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries,” O’Neill wrote.

White said that while there is probably little chance that the rest of Africa would have chosen South Africa to represent the continent, the country does have a number of attributes that make it very important for the rest Africa. “It is the country with the most sophisticated private sector. Capital markets are well developed and are truly the exception on the African continent. South Africa is the ideal platform for economic development on the African continent,” he noted.

“This is the first time since 1994 . . . that South Africa has been pushed ahead to punch above its weight on a forum of global significance. It will challenge government and the private sector to pursue a common agenda across the African continent. I believe it is very important and very significant for us both politically and commercially, and it is something we should embrace,” White added.