Omens are good that Brics can deliver its enormous potential
Siyabonga Gama
AS WE prepare for the Brics behemoth to roll into town, it is imperative that the family of nations that comprise Brics – Brazil, Russia, India, China and South Africa – remain sentient to the enormous potential that the association has, both to deliver to its people and to ensure that it remains a bulwark against the drift towards lack of direction and of delivery. The omens are good. The five Brics countries represent more than 3.6 billion people, or about 41 percent of the world population. The five nations have a combined gross domestic product (GDP) of $16.6 trillion, equivalent to 22 percent of the gross world product. They also have an estimated $4 trillion in combined foreign reserves. Overall, the Brics countries are forecasted to expand about 5.3 percent in 2018, from an estimated growth of 3.9 percent in 2017.
According to an International Monetary Fund (IMF) report earlier this year, Brazil has surprised by how robust its economy has performed despite a series of internal contretemps the country is undergoing.
Russia has exceeded expectations both in terms of growth and low inflation, while India has started to recover from the high-denomination rupee withdrawal of late 2016, which caused so much of the upheaval in the Indian economy. China, which official estimates pitched growth at 6.5 percent, actually grew by 6.9 percent in 2017.
The generally positive global economic outlook for 2018, especially for emerging markets, is good news for the world – and the Brics countries in particular.
To throw a grubby spanner in the works, however, Goldman Sachs has confounded us all by publishing a report that states that many emerging market economies have now begun to resemble developed markets, as inflation rates fall and the risk of currency crises recedes.
Emerging market monetary policy in many of the emerging markets now resembles developed-market policy in some important respects. Specifically, emerging market central banks now focus much more on output and inflation gaps than on GDP growth or the exchange rate, according to the report, which analysed 15 central banks – including that of all the Brics countries.
While we need to remain vigilant in ensuring that we do not fall victim to prevailing diktats and unilateral orthodoxies, the Goldman Sachs review does pose interesting challenges about the direction of the global economy, especially emerging markets and, by adjunction, the Brics countries.
In our own country, the sentiment brought about by winds of change blowing through our political corridors has resulted in a revision of our growth forecasts. The International Monetary Fund has recently published its April World Economic Outlook for 2018, highlighting a change in fortunes for South Africa – which it attributes to the recent changes in leadership. In its report, the IMF raised its growth forecast for South Africa from 0.9 percent in 2018 and 2019 to 1.5 percent and 1.7 percent, respectively.
However, the business confidence index is yet to reflect the new sentiment. Economically, we are off to a good start. Our president has appointed a special global economics team to attract $100 billion of investment to our shores. His recent trip to the UK yielded R857 million of new funding for the next four years to help South Africa improve its business environment to make it more attractive to investors.
The fund, according to Downing Street, “will be used to help identify and dismantle barriers to trade within Africa and beyond”.
This is an arresting comment, especially considering its source. It shows that the trade barriers we grapple with have a wider acknowledgement and reach. As an African nation, we are inextricably linked first and foremost to our brothers and sisters on the continent.
The risks we face, however, have global implications and are being confronted by the whole world. They include a diverse range of disruptive influences – poverty, climate change, a growing shortage of economic and ecological resources, the perceived threat of automation and AI, and political upheavals. Our problems, however, are neither implacable nor unsolvable.
By working together the Brics countries can improve infrastructure, reduce barriers to market entry, promote innovation and reduce policy uncertainty. These objectives remain key to attracting private investment, raising productivity across the economy, and promoting job creation.
In the coming months ahead, these certitudes will become even more important if the Brics nations are to work together as a cohesive and supportive team. It will require all our noble efforts, hard work and dedication. We must, however, do as Zacchaeus did and “make haste!”
Siyabonga Gama is a member of the Brics Business Council. He is also the group chief executive of Transnet.