No Brics excitement from analysts

But although SA would be punching above its weight economically, there could be political benefits, writes René Vollgraaff

South Africa's proposed joining of the Bric group of emerging countries ensured that the country made more headlines than usual at this week's World Economic Forum (WEF) in Davos.

But despite local media focusing on SA "joining" the Bric (Brazil, Russia, India and China) group, some local analysts still say the country is punching above its weight.

The biggest criticism of SA being considered one of the emerging market powerhouses is that the country's population and economy are dwarfed by those of the four current Bric countries.

"In terms of size, SA is not a Bric. It might be a briquette," Grant Hatch, senior executive of strategy at Accenture South Africa said at the Gordon Institute of Business Science (Gibs) this week.

Standard Bank research analysts Simon Freemantle and Jeremy Stevens said in a report this week that SA was not a Bric in economic terms.

While the country's $330-billion economy might be large in Africa, it is dwarfed by the $9-trillion combined economies of the Bric bloc, they say. And while SA has a population of less than 50 million, China and India each has a population of more than one billion.

The Bric concept was a term coined by Goldman Sachs chief economist Jim O'Neill in 2001, and it was based on the countries' superior growth potentials, population size and rapid growth of income per capita.

Although Bric started out as an acronym in a report, it helped to direct attention to the growing opportunities in these markets.

The first gathering of heads of state of the four Bric countries took place in Russia in June 2009. According to Freemantle and Stevens, this gathering unhinged the Bric grouping from the purely economic rationale which underpinned its formation and gave rise to a new, overtly political entity.

The group met again in Brasilia last June. After a telephonic invitation from China's foreign affairs minister, Yang Jiechi, to SA's Minister of International Relations and Co-operation, Maite Nkoane-Mashabane, on December 24, SA will attend the next meeting of the Bric heads of state in Beijing in April.

After news of the invitation, O'Neill said in an opinion piece that although SA was one of the wealthiest countries in Africa, it was quite small by Bric standards and compared with countries like Indonesia, Mexico, Turkey and South Korea.

"It is tough to see how South Africa matches up to these ... countries, never mind the Bric countries," O'Neill wrote.

Colin Coleman, MD of Goldman Sachs in SA, said at Gibs this week that O'Neill was correct in saying SA was not a Bric. But he said it could be an important leverage point for strategic diplomatic and political alliances.

But the political benefits will not be only for SA.

Freemantle and Stevens say SA's inclusion would clearly serve political ends.

"The Bric's political voice has positioned the group on a platform for representing emerging markets.

"Africa has long been the most notably absent cog in the Bric's claim to represent the emerging world. Moreover, having direct participation from an African country in the overall Bric movement assists in dispelling neo-colonial tensions."

At the WEF in Davos this week, Minister of Trade and Industry Rob Davies dispelled notions that SA had been invited to Bric as a token African country.

He said SA's close connections to the continent allowed the country to punch above its weight by its links to hundreds of millions of consumers.

According to Jean-Philippe Stijns, an economist at the Development Centre of the Organisation for Economic Co-operation and Development (OECD), SA stands to benefit from preferential trade and co-operation agreements.

"The challenge for the government will be to prove sceptics wrong by showing that it has a purposeful plan to engage with Bric countries and maximise development benefits for SA," Stijn said.