South Africa invited to form ‘BRICS’ Grouping - Ruth Collins
11/05/11
By Ruth Collins
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Following its successful hosting of the FIFA World Cup 2010 last summer, South Africa has had much to celebrate. In December, the coveted BRIC group opened its doors to South Africa and invited the country to a meeting in Hainan in April. The decision has been met with some criticism, but the invitation to become the ‘S’ in ‘BRICS’ highlights the country’s growing importance on the world stage.
Although the country successfully hosted the Rugby World Cup in 1995 and the ICC Cricket World Cup in 2003, there were many concerns over security, as well as the capacity of the country’s infrastructure and transport system to cope with a large-scale sporting event. Although the World Cup proved a crowning success in global terms, the country’s final bill stood at around R38bn (US$5.5bn), according to government figures. It spent more or less the same amount on hosting the event, including spending R11.7bn (US$1.7bn) on building and improving ten world cup stadiums and R11.2bn (US$1.7bn) improving and extending the rail network.
In spite of this success, the invitation to become a member of the BRICS group came as somewhat of a surprise. South Africa’s economic growth and GDP pales into comparison when set alongside the original BRIC members Brazil, Russia, India and China. Peter Leon, a partner at Webber Wentzel in Johannesburg and Co-Chair of the IBA Mining Law Committee, says there is a clear strategy behind the invitation: ‘I think that China’s invitation to South Africa was mainly driven by the fact that we are by far the largest economy in Africa and that this is really all about mineral resources. South Africa has the largest in situ mineral resources in the world and is by far Africa’s biggest minerals producer. Inviting South Africa to join the BRICS was a shrewd calculation by China to provide it with better access to Africa’s largest economy and biggest minerals producer.’
According to recent estimates by the Standard Bank Group, bilateral trade between China and Africa is set to exceed US$110bn in 2011 and reach some US$300bn by 2015. With US$373bn GDP, South Africa is by far Africa’s largest economy and is an obvious choice for the BRIC group to gain a foothold in Africa and further expand its global footprint. Leon believes there is no mistaking why the country has been chosen as the next pit stop on the emerging market trail. He says, ‘South Africa is obviously also a gateway to the South African Development Community common market and to Africa in general.’
Although there may be some scepticism over the decision, the invitation does signal an important shift for the BRIC group and its intentions for the future. At the beginning of May, Ernst & Young published its first ‘Africa attractiveness survey’ which predicts that the average African economy will outperform its counterpart in Asia and that foreign direct investment in Africa could reach US$150bn by 2015.
South Africa may still have a long way to go before it is considered a true member of the BRIC group. However, as a key foothold in Africa and an important economy in its own right, the BRIC invitation is a strong indication of its future potential. It remains to be seen what benefits the membership will bring to South Africa itself, but there are hopes that the boost to trade links could also help reduce the 25 per cent unemployment rate and strengthen the country’s economy as a whole.