South Africa

BRICS has little economic benefit for South Africa – FirstRand CEO

Alan Pullinger, CEO of South Africa’s most valuable financial services group, has said it is not clear what South Africa gains from being a member of BRICS and has raised concerns about the members set to be added to the group. 

Pullinger made these comments following the release of FirstRand’s financial results for the year ended 30 June. FirstRand owns banks such as FNB, RMB, and WesBank. 

The company’s basic headline earnings per share grew by 12% to 655.3 cents per share, while basic earnings per share increased by 11% to 648.7 cents per share.

“If you stand back and look at it through hard economic eyes, I’m not sure the BRICS construct makes a ton of sense for us,” Pullinger said. 

Pullinger is also concerned about South Africa’s reputation as an investible economy due to its membership in the geopolitical grouping. 

In particular, he is worried about South Africa’s support of the addition of new members such as Saudi Arabia, Iran, and the United Arab Emirates (UAE). 

Iran has been blacklisted by the Financial Action Task Force (FATF), while the UAE is on the greylist with South Africa. 

South Africa’s association with these states also raises questions about its desire to get off FATF’s greylist, said Pullinger. 

This “seems to show at a general government level, excluding the Treasury and the Reserve Bank, that people are not prepared to do the hard yards to get us off the greylist”, Pullinger said. 

The National Treasury is set to meet with the Financial Action Task Force (FATF)  soon to update the organisation about the country’s progress on the 22 recommended actions to get off the grey list. 

FirstRand CEO, Alan Pullinger

South Africa not benefitting from BRICS

South Africa has not tangibly benefitted from its BRICS membership, as no trade agreements or treaties have emerged from the global grouping. 

Old Mutual Wealth investment strategist Izak Odendaal said 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 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. 

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. 

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. 


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