Brics offers limited benefit to SA – for now

What does SA stand to gain from its new membership of the Brics (Brazil, Russia, India, China, SA) grouping? Little, some readers suggested to FTW, expressing the fear that the willingness of the four giant economies to accept what is, in comparison, the economic midget of SA, could be for their own agendas. One thing, talk of SA enjoying tariff concessions is totally erroneous. Bric as it was first formed was not a formal trade agreement. Rather, said the global finance concern, Goldman Sachs, the “four Bric countries have been seeking to form a ‘political club’ or ‘alliance’”, and thereby converting “their growing economic power into greater geopolitical clout”. And economic power it does have. Goldman Sachs argued that the economic potential of Brazil, Russia, India and China is such that they could become among the four most dominant economies by the year 2050. Returning to the definition of the Brics alliance, no text has yet been made public of any formal agreement to which all the Brics states are signatories. Not that that excludes the countries having reached a multitude of bilateral or even multilateral agreements. Evidence of agreements of this type is abundant, and available on the government websites of each of the four countries. And trilateral agreements and frameworks made among the Brics include the Shanghai co-operation organisation (member states include Russia and China, observers include India) and the IBSA trilateral forum, which unites Brazil, India, and SA in annual dialogues. Also important to note is the G-20 coalition of developing states which includes all the Brics. But the question still remains: Where does SA stand in this mighty muscled grouping. According to Goldman Sachs’ global economist, Jim O’Neill, who originally coined the Bric term, Africa’s combined current gross domestic product is reasonably similar to that of Brazil and Russia, and slightly above that of India. He expressed surprise last December when SA joined Bric, since its economy is a quarter of the size of Russia’s (the least economically powerful Bric nation). And, although SA is Africa’s largest economy, as number 31 in global GDP economies, it is far behind its new partners. O’Neill was quoted as saying that he believed that the potential was there, but did not anticipate inclusion of SA at this stage. But Martyn Davies, a South African emerging markets expert, shone some light on the possible reason. He argued that the decision to invite SA made little commercial sense but was politically astute – given Chinese and Indian attempts to establish a foothold in Africa. One of the primary aims is the strong focus on acquiring basic production commodities – of which Africa is a veritable treasure-house. And SA is a seen as a gateway to southern Africa and Africa in general. Apart from that, African credentials are seen as being important geopolitically, and the SA/African link has given Brics a four-continent breadth, influence and trade opportunities. SA’s addition is, therefore, considered to be a deft political move. But, excluding it gaining a louder political voice, there would appear to be little else in the Brics deal as it stands at the moment. There is also no reason to deny the possibility that the Brics may eventually organise themselves into an economic bloc, or a formal trading association which this move signifies. Given that, the promise may be there.