Debutante S.Africa adds political cement to BRICS
JOHANNESBURG, April 13
JOHANNESBURG, April 13 (Reuters) - In terms of its economic might, South Africa hardly deserves a seat at the table when the leaders of the BRIC group of major emerging economies meet this week in China.
But the country, which is making its debut at the summit, has earned a spot politically as the stepping stone to the quickly emerging states of sub-Saharan Africa, which helps expand the geographic reach of the original BRIC states -- Brazil Russia, India and China.
"This is a diplomatic achievement for South Africa, not an economic one," said Anne Fruhauf, an analyst for Africa for the Eurasia Group.
South Africa, with a $285 billion economy, a much smaller population and tepid growth of about 3 percent, pales in comparison to the four emerging market giants.
Its economy is less than a quarter of the size of Russia's, which is the smallest in the original grouping. While it may be the largest in Africa, it is only a bit bigger than China's sixth-richest province.
South Africa lobbied China, its biggest trade partner and one of the most influential states in southern Africa, for entry into the grouping, seeing an invitation to the club as a way to distinguish itself from the pack of second-tier emerging economies.
"It is a historic moment for South Africa," President Jacob Zuma said on Wednesday when he arrived in China for the summit.
Jim O'Neill, the chairman of Goldman Sachs Asset Management who coined the BRIC concept in 2001, has said South Africa does not belong in the grouping, while others have suggested that Indonesia, South Korea or Turkey, all with larger economies than South Africa, would be a better fit.
But South Africa helps bridge "South-South" trade and expand the grouping's influence as a counterbalance to the established Group of Seven major economies that mostly represent North America and Europe.
"What the G7 was for the old world, BRICS is for the new and to make it more representative, of course there has to be an African economy there to speak for the developing world," said Martyn Davies, a specialist on Africa-China economic relations and chief executive of Frontier Advisory.
South Africa and southern Africa also offer the original BRIC states something that they desperately need -- commodities to feed their economic engines.
India, Brazil and China have been working hard to increase trade with Africa. Brazil mining giant Vale plans to invest $15-$20 billion within the next five years in Africa and its oil company Petrobras plans to invest $3 billion in Africa through 2013.
China forged partnerships with many African states decades ago in their liberation struggles to end colonial rule and later invested in roads, schools, power plants and infrastructure to help the countries grow -- helping it import more minerals.
As Africa has grown, so has trade with China, which leapt to $126.9 billion in 2010 from about $10 billion in 2000, China's state news agency Xinhua reported.
But major BRIC fund managers appear not to have bought into the idea that South Africa belongs in the grouping. None of them has allocated significant assets from their portfolios into the country after it was invited to join the grouping in December of 2010.
Andre Roux, the co-head of Fixed Income at Investec Asset management, said South Africa is not of the same class of the original BRIC states in terms of an investment opportunity.
"What we are beginning to see is the evolution of an emerging market block," Roux said, adding the group will eventually include states such as Indonesia, Turkey and Mexico and will seek common views on economic policy issues.
One advantage South Africa offers for the BRICS comes from its strong links to the economies of the regional group SADC -- the Southern African Development Community -- which is made of 15 states with a total GDP of $471 billion and a population of 257 million.
It includes fast growing economies such as Angola, one of Africa's biggest oil producers, Botswana, the world's biggest diamond producer, Mozambique, home to some of the world's largest untapped coal reserves and Zambia, the continent's biggest copper producer.
"South Africa's entry has definitely given the BRICS a voice in the African continent," B.R. Deepak, a professor of Chinese Studies at India's Doon University wrote in a note for the South Asia Analysis Group. (Editing by Alex Richardson)
- Putin dissolves state news agency, tightens grip on Russia media
- North Korea says Kim's powerful uncle dismissed for 'criminal acts'
- Thai PM calls snap election, protesters want power now |
- Cold, ice grip U.S. as more snow to blanket East
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'