How BRICS Membership Benefits South Africa

The BRICS partnership has been in the pipeline for a number of years, and the recent BRICS Summit has already had an impact on the economic status of South Africa. Specialists are hopeful that the partnership will positively impact South Africa economically, politically and socially and thus bring about transformation for the country. In the blog below, New Horizon Freight Solutions takes a look at how BRICS membership benefits South Africa…

Importing and Exporting to Emerging Markets

Exporting to and importing from emerging markets can be less competitive, reduce costs and reduce risk through diversification of investment, meaning all of one’s proverbial eggs are not in one basket.

An emerging market such as South Africa is attractive to interested parties because of its potential for growth across many markets. Unfortunately, South Africa poses political risks to investors as corruption is abundant, as well as legal risks, as the regulatory quality of South African law is not high.
However, our potential for growth in the wholesale and retail, food and Agri-processing, health care, financial services, light manufacturing, and construction sectors are welcoming enough to investors to negate a fair portion of risk.

Improved Reputation and Investor Exposure

Since South Africa’s admission to the BRICS group in 2011, the numerous high-profile summits have generated many opportunities for South Africa and the African continent altogether. BRICS membership has catalysed a more positive position for South Africa within the global marketplace, placing the country in the eyeline of global investors.

With our increased access to the global market – and therefore capital – foreign investment is much more likely. It is estimated that South African government debt is 51.7% of the Gross Domestic Product, which means that most of the country’s budget is spent servicing said debt.

This position in the forefront of the investment rat race has already impacted the private sector by kick-starting job creation which has long been in demand. Increased foreign investment would allow the government to direct more of the budget towards job creation as well. South Africa should aim to create a wide variety of jobs in varying skill levels as lower skill jobs are accessible to the majority of the workforce whilst high skilled work makes for a more attractive investment opportunity.

Furthermore, Chinese President Xi Jinping encouraged his country’s enterprises and financial institutions to invest in South Africa’s priority areas during his meeting with then President Jacob Zuma, prior to the BRICS summit. This has drawn attention to South Africa’s mining, infrastructure, energy and automotive industry sectors. It is possible that BRICS membership benefits South Africa in a political as well as financial way.

Export Trade Has Grown Already

Before South Africa was invited to join the BRICS grouping, the country’s export trade with BRICS countries totalled just 6.2% of total exports, a rather low percentage. Since joining the BRICS grouping in 2011, this number grew to 16.8% of total exports in the same year, indicating an immediate and drastic increase in export trade. BRICS membership benefits South Africa already and promises to deliver on many more fronts.

Increasing Balance of Global Power

During the 2015 BRICS Summit in Russia, Zuma said that the balance of power is progressively shifting towards the BRICS regions. On the intentions of BRICS regions, he said, “Our economies are also involved in developing co-operation in high-technology sectors of the economy; modernising various branches of industry; implementing projects aimed at developing transport logistics, information communications and infrastructure; raising the economic competitiveness; and improving the living standards of citizens in our member countries.”

The formation of BRICS may not solve South Africa’s many problems in a flash, but the potential is surely there to capitalise on this positive exposure. If government and private sector stakeholders take the necessary steps and designate government spending in critical areas as investment flows, BRICS membership benefits South Africa in the political, economic and social spheres. If not, it may be a sorely missed opportunity. New Horizon Freight Solutions believes that with good effort, South African trade could skyrocket with RBICS, and bring about the economic transformation that millions desperately seek.