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Beyond Brics

A LOT of fuss this week about Brics, as our leaders basked in the warm glow of shaking hands and having pictures taken with the leaders of economies many times our size.

Personally, I’m not mad about the whole Brics thing. Good for some egos and some large commercial interests, I’m sure, but really, does it do South Africa as a whole substantial good?

A talk by Dr Adrian Saville a while ago added ammunition to my feelings. Dr Saville, chief investment officer at Cannon Asset managers and visiting professor at the Gordon Institute of Business, was speaking at Busara Leadership Partner’s Economic and Political Outlook Seminar, held in Sandton on March 14.

First of all, forget the traditional global north, he told the audience, meaning essentially Europe and the USA: these countries are likely to remain stagnant for 15 years.

“From a strategic perspective, we should settle down and accept that the advanced world will be struggling for a long time,” he said.

Instead, we should be looking closely at our neighbours. Africa is doing a whole lot better than Europe – as a continent, it’s experiencing about 6% growth, dream territory for Europeans.

And here’s a kicker: if you remove South Africa from the equation and recalculate the growth percentage, it goes up by as much as a full percentage point.

Dr Saville suggested we look at countries like Rwanda – growth rate of 8.6% in 2011 and a predicted growth of around 7% till 2016 – and figure out what they’re doing right in order to up our own game: working consistently on institutional structures, collaborating with neighbours, recognising potential and identifying possibilities, creating very inclusive polices. 

Looking outside Africa, he referred to Chile as an example of inclusive policies.

If you bring Chile a proposal for a business startup, wherever you come from, and they like the look of it, you’ll get $50 000, a 50% discount on any building you purchase and 30% off wages paid to locals for the first three years. (I may be wrong on the number of years, but it was significant.)

They want you to commit to Chile and employ her people, and frankly, that sounds like a plan to me.

He also suggested that more and more countries in Africa are doing better because, as happened in Southeast Asia, they are “starting to find each other as neighbours” – something that South Africans are not always good at.

While some pioneering companies (like Shoprite) have taken the plunge and ventured into greater Africa, many of us have been clinging to an idea that the North is the only market worth being in.

That’s not surprising, given a) our colonial and linguistic ties and b) the fact that Europe and the USA have for decades been our biggest markets.

And then we extended ourselves to see Brazil, Russia, India and China as possible economic friends – the emerging markets with the most clout and satisfyingly rapid growth (still outside Africa, though).

But Bric growth may be slowing, for natural reasons  – and meanwhile, a second tier of emerging countries is catching up fast.

An Ernst & Young press release on its Globalisation Index, published on January 21 2013, notes that there is life beyond the global North, and beyond Brics:

“The Index highlights that non-Bric rapid-growth markets are emerging as hot spots for global business, thanks to a perception of being more globally integrated on a range of trade, investment, cultural and technological criteria than the Brics.

“These markets also show consistently high economic growth close to that of the leading Brics. Turkey, Mexico and Indonesia closely shadow China and India in terms of GDP growth from 2000 through 2015.

"Peru, Colombia, Venezuela, Malaysia and Vietnam, as well as several countries and regions in Africa are all shaping up to be among the most dynamic parts of the world for investment.

“The number of executives questioned who view rapid-growth markets, other than the Brics, as the most important source of new revenue nearly doubles from 26% today to 45% in three years time.

"And they are planning accordingly with South Africa, Indonesia, Mexico and Turkey reported to be the most competitive locations.

“Executives from all geographies expect to increase investment in these markets – 82% plan to do so, and four in 10 expect to increase it by more than 10%.” 

Mark Mobius (punted as an emerging markets guru) is backing Africa: :Mobius estimates that Africa will grow more than 7% annually over the next 20 years. Already, Africa has seen torrid growth in the last decade, with six of the 10 fastest-growing countries located on the continent.

“Citing three key factors - better governance, youthful demographics and a boom in commodity prices - Mobius believes that the time is just right to bet on the continent” (investopedia, June 22 2012).

We’re not one of those fastest-growing countries: “… investors are shifting their focus to Kenya, Nigeria, Ghana and Ethiopia which have had higher growth than the continent’s largest economy, South Africa.” (BusinessDaily, March 3 2013)

Maybe being neighbourly would serve our goals better than being a brick?

- Fin24

*Mandi Smallhorne is a versatile journalist and editor. Views expressed are her own. Follow her on twitter.


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