SA’s ascent to the mighty Brics (Brazil, Russia, India, China and SA) grouping — which is meeting for the first time as a quintet this week — is at once a great achievement and a bewildering curiosity.
Its presence complicates an already odd mix of countries, which evidently don’t quite know what to do with this new entity, yet have a sense there is some kind of logic to their quasi-partnership.
Even before SA’s inclusion, the group constituted an eclectic mix, riven with old tensions and new trade disputes. China’s economic rise has taken place much faster than India’s, setting off a new economic rivalry between the neighbours, but also helping to fuel a fundamental economic reassessment within India. Still, China’s economy is now larger than the three others put together, never mind the pipsqueak newcomer.
Russia and China’s rivalry goes back much further but it has the feel of a competitiveness belonging to a previous generation. Yet the fundamental differences remain: China is a reformed communist state; Russia is a revolutionised communist state. Within that distinction sit myriad subtle differences.
Way on the other side of the world lies Brazil, with geography, history and traditions so different from the other three that it seems like the odd man out — except that they are all odd men out in some way. The whole grouping seems like something akin to Heisenberg’s uncertainty principle: the more you look for something, the less it’s there.
The conceptualisation of the group began in an economics paper published way back in 2001 by the economists of international banking group Goldman Sachs, titled Building Better Global Economic Brics. The group was headed by Jim O’Neill, now head of Goldman Sachs’s asset management division.
In it, the group predicted that by the end of the decade, the Brics economies would make up more than 10% of the world’s gross domestic product (GDP).
They were more correct than even their wildest expectations. By 2007 the Brics countries made up 15% of the global economy. By last year, China had overtaken not only Germany, as predicted, but also Japan. In a revision in 2007, the group brought forward the time when the Brics countries would overtake the Group of Seven countries from 2040 to 2032. With the recessions in the developed world, that number is now closer still.
It was a stunning insight with enormous global significance for the political and economic balance of power — except it didn’t quite work out. What the economics team was looking for was essentially the new "economic giants", a word that features prominently in the original papers. To be a "giant" apparently required three things: heft in terms of economic significance and population size; dramatic economic growth; and an existing "emerging market" status.
Hence, existing countries with significant economic heft such as Mexico and Korea were excluded because they were already too developed. Countries with significant population sizes such as Indonesia and Nigeria were excluded because their growth potential was deemed limited. And a host of other potential counties were excluded because they just weren’t big enough.
It’s worth questioning the assumption that size necessarily creates some additional economic advantage. Many small countries have per-capita GDP levels that are much higher than the aggregate levels in large countries. Many small countries are also able to grow faster than large countries. As a result, some of the fastest-growing countries escaped the attention of all the studies, notably Angola, the country that grew the fastest of all in the first decade of the new millennium, albeit from a tiny base.
On the other hand, while the growth record of the Brics nations collectively in the 2000- 10 period was fabulous, Brazil’s contribution was modest. Its average growth rate was 2,3% in 2000- 06 and it has not been much better since.
It’s interesting to read these old documents now just to see how weird the results of extrapolation can be: one document has the UK bigger than Germany in 2050; that seems very unlikely now. It also has Mexico larger than Russia by the same year, which makes you wonder why Mexico rather than Russia wasn’t an original Brics.
It’s also really surprising how the economic statistic that truly matters from a developmental point of view, per-capita GDP calculated on a purchasing-power parity basis, barely appears in the documents.
This was clearly an effort to identify "global leaders", the reflexive default of global investment bankers, rather than reaching inside economic verities. This was true even after the group identified the "N11" countries, the next 11, in 2005: Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam, which were considered interesting but not quite up to the Brics.
Whatever the inconsistencies and arbitrariness of how the global economic pie was cut, clearly the original four were pleased to have been singled out and with the way the concept took off. Yet, as it has taken off, so the criticism has increased, too. Some have argued Brics is just made up of the largest emerging market economies. Others say the grouping is incoherent: a petro-state with a declining population (Russia) paired with a resources boom state (Brazil) paired with a manufacturing economy (China) paired with a services economy (India).
US diplomat Henry Kissinger was typically scornful, saying the Brics nations had "no hope" of acting together as a coherent bloc in world affairs and any co-operation would be the result of forces acting on the individual nations.
Yet the grouping seems to have taken off, not as a bloc but as a club. The meeting this week will be the third formal summit and the first in which SA takes part.
SA’s participation makes this particularly interesting. By almost every criterion posed by Brics’s conceivers, SA is hopelessly short of qualifying. It was not even one of the N11.
O’Neill was unequivocal that SA should not belong to the group, and said recently SA had no realistic hope of ever joining. He was clearly inwardly apoplectic, and hinted darkly about what Nigerians might think about being usurped this way.
Well, according to Dianna Games, CE of Africa @ Work, Nigerians aren’t so negative as one might assume. "Nigeria definitely has the potential to be part of the group, but we are talking about a country which only generates about 4MW of electricity. In a sober moment, they would probably concede SA deserves to be there ahead of them."
The problem, she says, is that people outside Africa are looking for a country that can stand as a proxy for the continent. This gives SA the opportunity to put up its hand. Yet African countries themselves don’t really see SA in the same way, and SA needs to do much more to demonstrate that it is in fact a "gateway into the continent", she says.
It seems the Brics countries, as we should now call them, are motivated by two desires slightly beyond the originators’ conception: to create a new political axis and to increase trade outside of traditional patterns, sometimes called south-south trade. In both these efforts, SA fits. It has the instinctive anti- western inclinations of the others. Its influence in Africa is helpful to China, which needs resources, and compatible with Brazil, which has a comparable economy, if not in size then in make-up. In a sense, Africa is the new Brics. SA just holds the seat.
By Tim Cohen, Business Day
