28 March 2012
This week, South Africa marks its first full year as a member of BRICS – the Brazil, Russia, India, China and South Africa group. Why does South Africa believe this is important?
Firstly we must acknowledge that we live in a multipolar world where economic and political influence is increasingly widely distributed. While the European financial crisis continues and the United States’ economic recovery remains fragile, the world is looking to the developing world and particularly the BRICS markets for growth.
The relative decline of the West’s traditional political and economic power has coincided with the rising global stature of many emerging nations and is changing the way the world understands and relates to itself.
The BRICS grouping is the most concrete and rapidly evolving example of this phenomenon. In just four years, the formal agenda for cooperation and consultation between the countries has expanded quickly and now encompasses issues ranging from finance, agriculture, health, science and technology, academic exchanges, business links and developmental issues, to international terrorism and sometimes even common policy positions.
Platform for collective action
Naturally, while the BRICS countries will not agree on all issues, they can adopt common positions. And so what started as an economist’s category has evolved into a platform for collective action.
For instance, South Africa strongly supports the comprehensive reform of global governance, including the UN system and the Bretton Woods Institutions – the International Monetary Fund and the World Bank -to make them more effective, legitimate, and responsive to the needs of the developing world and Africa. Our BRICS counterparts concur.
Last month at the G20 meeting in Mexico, the BRICS finance ministers agreed that the leadership of global finance institutions positions should be open to candidates from all countries. We can see no good reason why a post-World War II consensus, which saw the presidency of the World Bank being filled by an American nominee while a European headed up the International Monetary Fund (IMF), should continue unquestioned in this day and age.
The recent announcement that the United States was, for the first time, nominating a non-America for the World Bank’s top job suggests this view is gaining increasing traction.
South Africa believes the BRICS offers such opportunities to advance the strategic interests of developing nations and Africa when considering issues such as the reform of global governance, the work of the G20, international trade, development, energy and climate change.
Shifting trade and investment patterns
Just as global decision-making no longer simply flows outwards from the West, so too trade and investment patterns are broadening.
The BRICS nations, while occasional competitors, also offer each other great opportunities. Russia is famous as a commodity exporter, Brazil exports commodities but also autos and aircraft, India exports services and textiles, while China exports electronics, textiles and garments and imports massive amounts of commodities.
South Africa, as the newest member of the group is well known for its vast mineral deposits, but actually has a highly diverse economy, exporting for instance automobiles while boasting an advanced financial and professional services capacity.
Joining BRICS has opened the door to enormous opportunities for trade and investment within and through all five member countries. Already, China is South Africa’s biggest single-nation export market, while South Africa is China’s biggest trade partner on the continent. Likewise, India-South Africa bilateral trade is expected to reach US$15-billion by 2015, up from $11-billion last year.
Enabling investment in BRICS economies
The nature of BRICS’ interaction is becoming increasingly sophisticated, and aims to make it easier to invest in one another’s economies.
Last year, at the World Federation of Exchanges’ annual meeting held at the Johannesburg Stock Exchange, the BRICS exchanges announced plans to cross-list their respective indices and jointly develop new products. By June 2012, investors worldwide will have easier access to benchmark equity index derivatives, which will be offered in local currency on these exchanges. The seven exchanges represent a combined listed market capitalisation of more than $9-trillion and 9 481 listed companies.
As a member of BRICS, we do not regard ourselves as participating only in our own interest. South Africa recognises itself as an integral part of the African continent and works to increase its stability, unity, prosperity and international influence.
The world is rapidly realising the rising importance and extraordinary opportunities in Africa. According to the IMF, between 2000 and 2010, six of the ten fastest-growing economies in the world were from Sub-Saharan Africa, and they estimate that, between 2010 and 2015, seven will be.
Driving African integration efforts
Consequently, we are at the forefront of driving Africa’s regional integration efforts. We have taken responsibility for developing continental north-south rail and road links, and have been championing infrastructure investment, skills development and the enabling regulatory environment – a single free-trade zone.
In June last year, 26 African countries agreed to create a free trade area for more than half of Africa. By June 2014, nearly 60% of the economy of Africa will be a single free trade area covering Southern, Eastern and Central Africa, and will enable an easier and more efficient flow of goods, people and investments.
This pending $1-trillion free trade area and enabling infrastructure will effectively expand South Africa’s market from 50-million to 600-million – placing it in the same ball park its BRICS partners in terms of market size and access.
However, South Africa offers the BRICS countries much more than simply a convenient access point to its own and the region’s raw materials and markets. In a turbulent world, our macroeconomic fundamentals are sound and are based upon prudent fiscal policy and a credible monetary policy framework.
Deal-making hub for Sub-Saharan Africa
While confidence in financial markets may have been eroded in many other parts of the world, South Africa’s financial market development was ranked in 4th place globally in the 2011/12 World Economic Forum’s (WEF) Global Competitiveness Index. Likewise, the WEF rates us number one in the world for both the regulation of securities exchanges and the strength of our auditing and reporting standards; and second for both the soundness of banks and the efficacy of corporate boards.
The list of excellent rankings in these areas goes on, but collectively they make one powerful statement: South Africa has a sophisticated and highly competitive financial and professional services industry which positions the country as a deal-making and services hub for the region. This capacity has been a source of increasing interaction with BRICS nations, which we expect to continue.
One year after joining BRICS, we are glad to see the deepening of relationships between the nations. Trade and cultural interaction is increasing and common positions are being formed – where our interests and views coincide. BRICS is proving to be a relationship which can make our countries more competitive and more effective in the international arena.
We would like to see this process continue during this year’s summit in New Delhi, and look forward to welcoming our partners to South Africa in 2013 when we host the 5th BRICS summit.
Miller Matola is chief executive officer of Brand South Africa
