NOTHINGSACRED

BRIC WALL: Lit­tle SA is an eco­nomic min­now, not­with­stand­ing its pos­tur­ing on the world stage

Finweek English Edition - - COLUMN - STEPHEN MULHOLLAND

It would ap­pear the BRIC crowd are keen to

have SA as a mem­ber as po­lit­i­cal lever­age for ac­cess into Africa as a whole rather than for what we can bring to the ta­ble in

terms of eco­nomic

mus­cle

SOME LIGHT NEEDS to be shed on South Africa’s pro­posed en­try into the BRIC group of na­tions, cur­rently com­pris­ing Brazil, Rus­sia, In­dia and China in a loose ar­range­ment. Of course, there will be rep­u­ta­tional and im­age ad­van­tages for the likes of Ja­cob Zuma. He clearly en­joys hob­nob­bing with world lead­ers and flit­ting around the globe in the height of lux­ury on the pres­i­den­tial jet to gath­er­ings where he raises laugh­ter by declar­ing he loves all his wives – and, pre­sum­ably, his fi­ancée and girl­friends – equally.

And then, of course, there are the hordes of hang­ers-on all clam­our­ing to climb aboard the gravy jet, their pock­ets stuffed with for­eign ex­change, cour­tesy of South Africa’s tax­pay­ers. They have their snouts in the trough and they’re en­joy­ing it deeply with no in­ten­tion to ever give it up. Un­less, of course, as Zuma has re­marked, there’s a Sec­ond Com­ing. And per­haps a Third and a Fourth. And he should know.

The BRIC acro­nym arose from an anal­y­sis by Wall Street econ­o­mist Jim O’Neill, of Gold­man Sachs, in which he pre­dicted in 2001 that by 2050 the coun­tries he in­cluded would ex­ceed in size the com­bined economies of the United States and Europe.

O’Neill has now up­dated his study to con­clude that re­ver­sal of eco­nomic power will hap­pen much faster than he orig­i­nally es­ti­mated. Also, in his update, O’Neill links the BRIC crowd with the economies of Mex­ico, South Korea, In­done­sia and Turkey un­der the ti­tle “Growth mar­kets”.

O’Neill has been el­e­vated to chair­man of Gold­man Sachs As­set Man­age­ment (GSAM) fol­low­ing suc­cess­ful eq­uity in­vest­ing in BRIC coun­tries on be­half of clients by the firm along his line of rea­son­ing.

Af­ter the re­cent Wall Street dis­as­ters, banks in the US are now re­stricted in deal­ing as prin­ci­pals and can no longer make vast bets with de­pos­i­tors’ and share­hold­ers’ money in the de­riv­a­tives casino.

Thus the fa­ther of BRIC, whose Amer­i­can idea the mem­ber na­tions have ea­gerly latched on to, doesn’t be­lieve lit­tle SA be­longs in that league. From a strictly nu­mer­i­cal view, he’s right. We are an eco­nomic min­now, not­with­stand­ing our pos­tur­ing on the world stage.

For ex­am­ple, ac­cord­ing to a re­cent anal­y­sis by The Econ­o­mist com­par­ing coun­tries with the states in the US, we’re ranked level with Mary­land in gross do­mes­tic prod­uct terms at around US$300bn. Mary­land has 5,8m res­i­dents; we have 50m. Mary­land’s me­dian in­come per capita is $71 000, while ours is $10 000.

I could go on, but it would ap­pear the BRIC crowd – led by China – are keen to have SA as a mem­ber as po­lit­i­cal lever­age for ac­cess into Africa as a whole rather than for what we can bring to the ta­ble in terms of eco­nomic mus­cle (very lit­tle).

O’Neill’s first choice for ad­di­tion to BRIC is Mex­ico, with a GDP more than five times the size of ours, as is that of South Korea, a coun­try with vir­tu­ally no nat­u­ral re­sources aside from their work ethic and en­tre­pre­neur­ial spirit.

South Korea is cur­rently quite concerned about its un­em­ploy­ment rate, which has risen to 3,6%, whereas SA’s is more than seven times higher, while we’re in­tro­duc­ing in­creas­ingly re­stric­tive labour laws that ef­fec­tively dis­cour­age busi­ness from em­ploy­ing staff. Fur­ther, we dis­cour­age risk­tak­ing by in­sist­ing all busi­nesses be sub­jected to the de­mands of black eco­nomic em­pow­er­ment, be graded by spe­cial­ist agen­cies and be pun­ished if they fail to achieve State-im­posed de­mo­graph­ics in their share­hold­ers, di­rec­tors, staff and so on.

Even In­done­sia is more than three times SA’s size, while our growth prospects are hardly rosy with 26% un­em­ploy­ment, heav­ily bur­dened tax­pay­ers, de­cay­ing in­fra­struc­ture, un­cer­tain power sup­ply, too many civil ser­vants and all the rest of the ANC plague that’s been vis­ited upon us.

We can take com­fort in the fact that we’ll be sit­ting at the ta­ble with some of the world’s grow­ing eco­nomic giants – but keep­ing such close com­pany with re­pres­sive regimes such as those of Rus­sia and China won’t bur­nish our lib­er­a­tion cre­den­tials.

stephenm@fin­week.co.za

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.