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Apr 20, 2011

Business and govt alignment key to reaping benefits of Brics

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Panel of experts analysis on how South African business can take advantage of the enabling political environment that came with the country joining the Brics grouping. Camerawork: Nicholas Boyd, Editing: Darlene Creamer.
 
 
 
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The South African government and business community need to closer align themselves to fully leverage the economic opportunities that come with belonging to the Brazil, Russia, India, China, and South Africa (Brics) bloc of emerging economies, a panel of experts said at a Frontier Advisory post-Brics summit discussion.

South African Institute for International Affairs (Saiia) CEO Elizabeth Sidiropoulos said that South African business and government needed to start working as a united force, much like the other Brics members, to position itself as a competitive, but also a cooperative, force in the global market, especially in the growing African market.

“We need to really work on developing SA Inc, to increase our competitiveness and improve productivity. Only then can we achieve objectives set out by the South African government to reduce unemployment in the country.”

Almost a decade after Goldman Sachs economist Jim O'Neil coined the term Bric, based on the size, population and current and forecast economic growth of these countries, South Africa was invited to join this exclusive club, or as Frontier Advisory CEO Dr Martyn Davies now refers to them, the E5 (emerging five).

Many commentators, including O’Neil, did not agree with South Africa’s inclusion in this grouping, but Webber Wentzel partner Peter Leon believed that South Africa’s invitation was “all about the minerals”.

“South Africa is sitting on the world’s biggest set of mineral resource with reserves worth $2,3-trillion. Further, in the context of the rest of mineral-rich Africa, South Africa has the most developed infrastructure and the deepest capital markets.

“As far as an appropriate springboard into Africa goes, South Africa is the only game in town,” said Leon.

However, he emphasised that if the country really wanted to leverage its position as a gateway to the rest of the continent, it seriously needed to consider eliminating exchange and capital controls.

“Issues such as trade liberalisation, and even free trade agreements, between other members of the Brics, as well as other African countries need to come to fruition.”

Davies said that while South Africa, and the rest of Africa, would greatly benefit from additional investment and trade from the other Brics members, African countries also needed to start trading in and among themselves.

“Trade between African countries is currently at an average of about 15%, and often only in the single digits, whereas trade between Asian countries stands at around 60%, while Europe also intra-trades at a rate of about 60%.”

He added that the ‘s’ in Brics, should not just be allocated to South Africa alone, but should really be seen as the whole Southern African Development Community, which boasts a population of half-a-billion people. Even beyond that, Davies said that South Africa should be the voice of Africa as far as the Brics grouping and other economic groupings went.

From 2001 to 2010, trade among the Brics member countries grew at a yearly rate of 28% to reach nearly $230-billion.

The five economies also performed outstandingly during the global financial crisis with their combined gross domestic product (GDP) growth accounting for 18% of the global GDP in 2010.

Deloitte director Mark Casey said that these economies would be the engine rooms for growth going into the future. It was predicted that Brazil, China, India, Russia, Germany and the US would form the top six economies by 2050.

“This presents a great opportunity for South Africa, as part of the four strongest growing economies in the world, to take advantage of this opportunity through cooperation and collaboration with the other Brics members.”
 

Edited by: Mariaan Webb
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