South Africa has work cut out to reach BRIC goal
South African president Jacob Zuma wants to join the BRICs. The likely deluge of foreign investment from membership of the club representing the biggest fast-growing economies would bring huge benefits. But Zuma has plenty to prove — including that he can avoid the BRICs’ worst failings.
The BRIC concept coined by Goldman Sachs, referring to Brazil, Russia, India and China, has attracted heavy global investment flows. That has speeded the four countries’ growth — although sometimes, as in Russia in 2007, it has also produced dangerous bubbles. With 25 percent unemployment and one of the world’s biggest gaps between rich and poor, South Africa would greatly benefit from a similar surge in foreign investment to employ its people and improve their living standards.
South Africa is already included in an emerging market grouping known as the CIVETS — the first five being Colombia, Indonesia, Vietnam, Egypt and Turkey — and its economy is too small to fit comfortably among the far larger BRICs. South Africa also lacks the massive natural resource base of Russia or Brazil. However its literacy rate at 86 percent is much higher than India’s 61 percent and quite close to China’s 92 percent.
Qualitatively, at least, BRIC membership therefore seems plausible. But South Africa is not currently achieving BRIC-like economic growth rates — the Economist panel’s growth projections of 2.8 percent in 2010 and 3.7 percent in 2011 are well below its projections for the BRICs. To boost investment and growth, Zuma needs to improve South Africa’s investment climate. Ranked 55th in the world for corruption by Transparency International and 72nd for economic freedom by the Heritage Foundation, South Africa beats all four BRICs on both counts, so the potential is there. But Zuma can’t safely copy China’s overbearing state apparatus or Russia’s disregard for property rights.
Zuma’s efforts to build closer links with China will be helpful, given China has plenty of money and a thirst for natural resources. But to reduce poverty, South Africa needs investment in manufacturing and services as well. That points to a need for Western-style private sector investors also — and Zuma should align his polices to welcome them.