The BRIC countries – Brazil, Russia, India, and China – have garnered considerable attention since Jim O’Niell of Goldman Sachs coined the term in 2001. More than a mere acronym, the group of developing giants has become institutionalized and holds regular summits. Additionally, the countries announced plans to form a development bank earlier this March. Membership of such an organization carries with it both prestige and influence, and emerging countries such as Indonesia have voiced interest in joining. Debate is now stirring on whether it is time for the inclusion of more countries into the BRICS. It is for this reason interesting to take a closer look to the group’s latest addition – South Africa. Why BRICS?
There are several, including O’Niell, who argue that South Africa should not be included in the BRICs. When the original BRICs are compared to South Africa, striking differences emerge. South Africa is in many respects dwarfed by the other members. Its population of circa 50 million is tiny in comparison to India’s and China’s of over one billion, and smaller than Brazil’s and Russia’s who have 196 million and 142 million inhabitants, respectively. This is reflected by South Africa’s share of the blocs total GDP, which is at a mere 2.5 %.
In addition to its comparatively small population, South Africa’s economic growth is much slower than the group’s average. After a period of high growth, South Africa’s growth rate is now down to an anemic 2.5 % while the BRIC average, despite a recent slowdown, is over 6 %.
So why then does it make sense for South Africa to be a part of the BRICs? Is it just to keep the acronym intact (BRICN, or BRICI, are perhaps not as catchy), or are there other reasons?
Indeed there are several. Firstly, it is relevant to point out that the original BRIC countries weren’t particularly homogenous to begin with. For instance, the members’ political systems are wildly diverse. China and Russia are autocratic, while Brazil, India and South Africa are democracies. Furthermore, China is highly centralized while India is the opposite. And Brazil has a GDP per capita of almost $13,000 while India’s is just $1,500. The list goes on.
Perhaps the most potent explanation as to why South Africa was included in the BRICs is politics. As a political institution claiming to represent the emerging world and opposing the global status quo, it needed an African member for additional legitimacy. Why the role of African representative fell South Africa is straightforward; it was Africa’s largest economy at the time, and it wields considerable regional influence. The only other plausible candidate, Nigeria, which today has an economy larger than South Africa’s, was considered to have too unstable internal politics.
Economic arguments also played a role in South Africa’s membership. Resource hungry countries like China are keen on getting access to Africa’s huge reserves of minerals, diamonds and metals. South Africa is perfectly placed to act as a stepping stone for the BRICs into the African market. The country has relatively developed regulations and financial markets which make it a suitable base of operations for international companies. The BRICs now invest around 4.3 % of the group’s total FDI (Foreign Direct Investment) in Africa, up from close to 0% ten years ago. The economic importance of Africa for the BRICs was further emphasized during their latest summit in Durban, South Africa.
However, some question whether it is wise for South Africa to help increase BRIC involvement in the African economy. It will likely put further pressure on already exposed sectors, such South Africa’s textile industry. Moreover, Lamido Sanusi, head of Nigeria’s central bank, wrote an article in which he likened China’s involvement in Africa to Western colonialism.
While South Africa’s size may not have merited a place amongst the BRICs as originally defined by Jim O’Neill, the group has taken on an institutional form in which political and economic considerations trump technicalities. The BRICs needed an African member – and South Africa was the most suitable candidate. Perhaps the larger question is not whether South Africa should be part of the BRICs, but whether such a diverse group of emerging nations can make a lasting impact in an increasingly multi-polar world?