Analysts sceptical over Bric invite
The decision this week by the Chinese government to invite SA to join the Bric (Brazil, Russia, India and China) group of emerging countries has caught many analysts off-guard.
According to Chinese Foreign Ministry spokesman Jiang Yu, Chinese President Hu Jintao has invited President Jacob Zuma to attend the third Bric leaders' meeting to be held in Beijing this year.
Yet many analysts are sceptical about SA's suitability as Bric material.
First, the country's economy is only a quarter the size of the next-smallest Bric economy, Russia; second, SA's growth rate is pedestrian compared with the Bric average; and third, SA does not have the population of the other members.
"It's not a natural fit," said Razia Khan, Africa head of research at Standard Chartered.
Goldman Sachs Asset Management's chairman, Jim O'Neill, who coined the Bric phrase earlier this decade, was reported to have said: "While this is clearly good news for SA, it is not entirely obvious to me why the Bric countries should have agreed to ask SA to join.
"How can SA be regarded as a big economy? And, by the way, they happen to be struggling as well."
Lyal White, director at the Centre for Dynamic Markets at the Gordon Institute for Business Science (GIBS), was even more doubtful about the benefits of Bric membership.
"SA must not misunderstand the nature of Bric - it is an acronym dreamt up by orthodox banks based in the global north. Bric does not have development initiatives emanating from it, unlike the Ibsa (India, Brazil and SA) forum; rather it is a grouping about market and economic access.
"The reality is that there is very little consensus within Bric. For example, each country has a different growth path or policy, and there is no political will to deal with global issues such as the ensuing currency war.
"SA should realise that Africa is the future. We should focus on our competitive strengths and position ourselves as the 'gateway country' in Africa," he said.
Politicians, however, are adamant that SA's ascension to the big league of emerging markets is a portend of the new world order that is unfolding in the wake of the severe recession of recent years.
The SA government believes the decision is the key to unlocking further investments into the local economy, as well as solidifying the country's ambitions to be a central player in the emerging global landscape.
Department of International Relations and Co-operation Minister Maite Nkoana-Mashabane said: "The rationale for SA's approach was in consideration of a matter of crucial importance to Bric member states, namely the role of emerging economies in advancing the restructuring of the global political, economic and financial architecture into one that is more equitable, balanced and rests on the important pillar of multilateralism."
On Wednesday, Russian foreign minister Sergey Lavrov justified the decision saying: "The entry of SA, an active participant in the G20 and the largest economic power in Africa, will not only increase the total economic weight of our association, but also will help build opportunities for mutually beneficial co-operation within Bric."
The decision clearly makes more sense politically than economically. For SA it is seemingly part of a larger plan to join key global decision-making bodies, with the UN Security Council being the ultimate prize.
Dawie Roodt, chief economist at the Efficient Group, said: "China is after the country's resources, but another thing the Chinese covet is SA's political clout - the country, due to its history and its transition, commands a lot of global respect. SA definitely punches above its weight and this ascension to Bric will definitely add to SA's growing political clout.
"Bric represents the second tier of the most important countries. SA and Russia represent the commodity-producing countries, China is the manufacturing centre of the world, Brazil is the agricultural giant and India is the software and IT specialist. Therefore the countries each have their unique competitive advantages," he said.
Marvin Zonis, professor emeritus at the University of Chicago Booth School of Business said: "It is smart on the part of China to do this and it is also good for SA. It legitimises SA as a future global power and as an investable country."
Economically, the impact is already being felt in view of the significant strengthening of the local currency since the Chinese announcement.
The rand touched three-year highs against the US dollar on Thursday morning, trading below R6.60 to the US dollar. This brings its total gains against the dollar to over 30% since the beginning of 2009.