Commercial focus: BRICS and the new world order
LAST week, Top Companies South Africa (TCSA) celebrated the gathering of the most important emerging economies in South Africa under the BRICS banner.
The nations involved were hoping to strengthen trade between themselves and to find a way of growing collectively within a global economic climate that has tended to favour the economies of the Euro-Atlantic region and Japan.
With President Ramaphosa calling for investment in South Africa, which equates to about a third of the size of the current economy in terms of gross domestic product (GDP), there is an underlying message in this that current players will need to prepare for a different competitive landscape and a different way of doing business.
South Africa has been searching for the past 20 years for a catalyst for economic growth and has now reached a point where it realises that such growth will not be possible in a business-as-usual environment.
The BRICS summit presented an opportunity for existing players to also increase their investment in the economy. It is a reality that with the Chinese president announcing last Wednesday that they were committing to an initial investment of $14.7 billion (R193.6bn), such investment will take advantage of technology to improve product and service quality as well as price.
TCSA expects that the type of investor that will respond to the call made by President Ramaphosa will at this stage not be as risk averse as local investors, and that they will be quite aggressive in efforts to capture market share.
Financial services, telecommunications, hospitality, manufacturing, retail and other sectors have in recent years experienced substantial changes in the market share of some of the previous industry leaders.
A successful BRICS summit was likely to only accelerate the competitiveness of industries previously dominated by a few established players. BRICS was also an opportunity for economic transformation to be accelerated.
There are specific characteristics of the way in which China, as the leading economy in BRICS, does business that is a major feature of the TCSA measurement criteria.
One such dimension is vision and leadership, which is the ability of a company to take advantage of market opportunities, such as the ones in BRICS.
China has a reputation for efficient mass outturn of products at competitive prices and demonstrates leadership that is visionary in nature.
Some private South African companies are at present confronted by questions around their governance and responsible business practices. As with Brazil and South Africa, as countries, it is also true for private business that a questionable governance profile directly stunts investment.
Russia is a sophisticated energy superpower and a manufacturer of defence systems and hardware.
With the attractive GDP outputs of its BRICS counterparts, South Africa is left with a challenging question around defining what it seeks to have as its most important products and services.