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30 Oct 2012 12:20
President Jacob Zuma and prime minister of India Manmohan Singh shake hands after a bilateral meeting in New Delhi. Photo: AFP/HO/PIB
In 2001, the giant investment bank, Goldman Sachs, coined a term for the largest, most influential emerging markets in the world. Brazil, Russia, India and China would increasingly often be referred to as the "Bric" countries.
According to the bank, these countries could, by mid-century, prove to be among the world's most powerful economies.
It was not until 2006, however, that the four countries first met to discuss ways of improving economic, financial and trade cooperation among themselves, and how to boost their influence on global affairs.
A full-scale diplomatic meeting was held in 2008 in Yekaterinburg, deep in Russia, some 1 660km east of Moscow. It was symbolic for its position on the eastern slopes of the Ural mountains on the border between Europe and Asia, and would become the venue for the first formal summit meeting of Bric heads of state on June 16 2009, when Dmitry Medvedev of Russia hosted Luiz Inácio Lula da Silva of Brazil, Manmohan Singh of India and Hu Jintao of China.
The global backdrop to the formation of Bric is key to understanding its purpose. Looming over the birth of the Bric economic bloc was not only the member countries' increasing clout in global markets, but the financial crisis of 2008 that struck the United States and Europe, with spillover effects felt worldwide.
Among the key discussion points were how to speed up reform of the international financial system and how to make transnational institutions, such as the International Monetary Fund (IMF), more responsive to the needs of developing countries.
The member states wanted more say in the operations of such institutions, and more power at the United Nations. A constant subtext was an emerging loss of faith in the US dollar as the world's reserve currency and the growing belief that the US would, within the foreseeable future, lose its dominant status in global economic affairs.
The member states' political vision of the future was that of a multipolar world governed by a collective leadership in which developing countries would play an increasingly powerful role.
Other global problems that the first Bric summit discussed included international terrorism and crime, environmental affairs and climate change, food security and energy. The rapport between member countries was strengthened by meetings between regional authorities and public institutions.
It was not until a year later that South Africa began to lobby for entry into this exclusive club of emerging economies, to turn Bric into Brics. This proposal was not without its controversies. On one hand — and despite the growing importance of countries such as Nigeria, Egypt and Kenya — South Africa was the continent's economic powerhouse and primary gateway. On one hand — and despite the growing importance of countries such as Nigeria, Egypt and Kenya — South Africa was the continent's economic powerhouse and primary gateway. On the other, it was tiny by comparison with the Bric countries.
For context, consider the most obvious two measures: population and gross domestic product (GDP). China tops the world's population ranking, with 1.35-billion people. India is second, with 1.2-billion. Brazil has 194-million people, ranking fifth in the world, and Russia's 143-million population gives it the ninth place. South Africa, by contrast, is only 24th in the world, with just over 50-million people. The Bric countries together account for 41% of the world's population. The addition of South Africa is not enough to get it to 42%.
By nominal GDP, the picture is even more stark. Combined, the Bric countries account for just over $13.5-trillion of the world's total output of $70-trillion.
China again leads the pack, with $7.32-trillion. Despite India's large population, Brazil and Russia both edge its nominal GDP of $1.85-trillion, with $2.48-trillion and $1.86-trillion respectively. They rank second, sixth, ninth and tenth on the global list and together fall just short of the US's nominal GDP of $15.1-trillion. (Excluded from this ranking is the combined European Union, which accounts for $17.5-trillion in GDP.)
Again, in stark contrast, South Africa ranks 27th, with a nominal GDP measured not in trillions, but in billions. China accounts for over 10% of the world's GDP, while Brazil, Russia and India make up 3.5%, 2.7% and 2.6% each. At $408-billion, South Africa adds a mere 0.6% to the world's GDP, or 3% of the combined Bric contribution.
Besides paling by comparison with the Bric countries, South Africa also trails other important emerging economies, such as Mexico, South Korea, Indonesia, Turkey, Poland and Argentina.
Global bond traders dismissed the idea as aggrandisement on the part of South Africa, declaring its economy to be insignificant and vulnerable to manipulation, and swore — probably truthfully — not to let the parochial politics of a small country distract them from their focus on the big four in Bric.
Despite these misgivings, however, the existing Bric countries invited South Africa to become a full member in 2010. The move was hailed by leaders at home, who had long hoped for a more prominent global role for South Africa. Some international political observers also approved.
Foreign Policy Journal at the time wrote: "The addition of South Africa was a deft political move that further enhances Brics' power and status. The new member possesses Africa's largest economy … but African credentials are important geopolitically, giving Brics a four-continent breadth, influence and trade opportunities. China is South Africa's largest trading partner, and India wants to increase commercial ties to Africa."
This was not enough to drown out the critics, however. In an interview with the Mail & Guardian earlier this year, Jim O'Neill, the chairman of Goldman Sachs Asset Management who coined the term Bric, said: "It's just wrong. South Africa doesn't belong in Brics. South Africa has too small an economy. There are not many similarities with the other four countries in terms of the numbers. In fact, South Africa's inclusion has somewhat weakened the group's power."
This may be valid criticism, but the converse is not true. South Africa's presence in Brics does not drag South Africa down. It is scheduled to host the group's fifth annual summit meeting in Durban in March 2013, which is to be attended by the present heads of state, Jintao of China, Singh of India, Vladimir Putin in place of Medvedev of Russia, and Dilma Rousseff in place of Lula da Silva of Brazil.
The significance of this summit meeting will be in whether or not the group's ambitious talk can be translated into mutual agreement and action. It has, to date, achieved little of any significance.
Among the most prominent ideas to emerge from Brics is the promise of a $75-billion loan to the International Monetary Fund (IMF) to improve that body's lending power to emerging nations in the aftermath of the financial crisis. However, the loan is conditional on whether the global body, formed at the Bretton Woods conference at the end of World War Two and traditionally led by a European appointee, is willing to change its voting structure to give Brics countries a bigger say, proportional to their GDP and forex reserves.
Another key initiative is the formation of a development bank along the lines of the World Bank, dedicated to the needs of developing countries. If such a bank is formed, it will significantly change the influence that Brics countries — particularly China — have in emerging markets.
Lacking formal power at the United Nations, the World Bank and the IMF, the true value of the Brics bloc remains a matter of debate. Some commentators have dismissed it as nothing but a grouping of malcontents, complaining about the economic strenght and monopoly power of the West.
However, if Brics does succeed at establishing developing-country parallels to the IMF and the World Bank, or even creates a globally accepted currency reserve as an alternative to the devaluing dollar in international trade, the potential that Goldman Sachs saw — of emerging economies leading the world's recovery and growth by mid-century, independent of the financial crises, monetary policies and development finance choices of today's rich world – may well be realised.
The Durban summit next year will prove whether Brics is just another toothless talkshop, or an emerging power in global finance and trade. If it is to be the latter, even the smallest of the Brics will earn South Africa global visibility, outsized influence, targeted development finance and preferential trade agreements that can only boost economic growth and employment at home.
Ivo Vegter is a freelance columnist and the author of Extreme Environment
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