South Africa has not tangibly benefitted from its BRICS membership, as no trade agreements or treaties have emerged from the global grouping. However, the country has significant opportunities if it can access the Indian and Chinese markets.
Old Mutual Wealth investment strategist Izak Odendaal told SABC that the BRICS grouping is still a fairly informal collection of states without a founding treaty or free trade agreement.
This ‘loose’ cooperation has made it “hard to point to tangible benefits that we have gotten from being part of BRICS”, Odendaal said.
“So far, it has been mainly symbolic that we get to play on the same stage as economies that are much larger than ours.”
South Africa is by far the smallest economy in the BRICS grouping as the only member not to have a trillion-dollar economy.
However, the country is vital to the grouping because of its rich mineral resources, allowing the growing economies of China and India to access sufficient quantities of essential commodities for their industries.
If trade can increase among the BRICS nations, the global economy will benefit, Odendaal said.
“Of late, the world has become increasingly hostile towards free trade deals and greater integration”, with the West prioritising supply chain stability over economic efficiency.
This retreat from globalisation threatens to stifle the growth of emerging economies reliant on demand from wealthier nations in the West for commodities and manufactured goods.
For South Africa to benefit from BRICS, it must gain access to the large Chinese and Indian markets through free trade agreements.
This will help the country diversify its exports and earn vital foreign currency.
The Chinese and Indian economies are set to become the world’s two largest economies in the coming decades, according to Goldman Sachs.
India, in particular, is growing rapidly and exhibiting many characteristics China had when it grew to become the world’s second-largest economy.
However, Odendaal cautioned that India still has at least a couple of decades before it will consume South African commodities in the same volume as China.
Despite the Chinese economy facing significant challenges, including a property bubble, an ageing population, and growing public debt, it will remain a vital market for South African exports.
“South Africa should not be worried about who is number one and number two in the world. The main thing is that we can participate in trade with China and India,” Odendaal said.
The country is well-placed to benefit from the tremendous growth of the Chinese and Indian economies if it can capitalise on its historical ties to the nations and gain access to their markets.