Научная статья на тему 'BRIC and South Africa: reality and future trends'

BRIC and South Africa: reality and future trends Текст научной статьи по специальности «Социальная и экономическая география»

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Ключевые слова
БРИК / ЮАР / ИНТЕГРАЦИЯ / СОТРУДНИЧЕСТВО / BRIC / SOUTH AFRICA / INTEGRATION / COOPERATION

Аннотация научной статьи по социальной и экономической географии, автор научной работы — Pelevina K. A.

The article consi ders such dynamic developing countries as BRIC. The author considers that South Africa recently joined to BRIC completely shares BRICs' principles and is interested in the development of cooperation. In the article it is concluded that entry of South Africa to the group of fast developing countries shows increasing international role of the country.

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Текст научной работы на тему «BRIC and South Africa: reality and future trends»

THE WORLD ECONOMY

удк 339.9 K.A. Pelevina

BRIC AND SOUTH AFRICA: REALITY AND FUTURE TRENDS

The article consi ders such dynamic developing countries as BRIC. The author considers that South Africa recently joined to BRIC completely shares BRICs' principles and is interested in the development of cooperation. In the article it is concluded that entry of South Africa to the group of fast developing countries shows increasing international role of the country.

Key words: BRIC, South Africa, integration, cooperation.

K.A. Пелевина

БРИК И ЮАР: РЕАЛИИ И ПЕРСПЕКТИВЫ

В статье рассмотрены динамично развивающиеся страны БРИК. Автор полагает, что недавно присоединившаяся к странам БРИК ЮАР полностью разделяет принципы БРИК и заинтересована в развитии сотрудничества. В статье сделан вывод о том, что включение ЮАР в группу быстроразвивающихся стран показывает растущую международную роль страны.

Ключевые слова: БРИК, ЮАР, интеграция, сотрудничество.

The role of developing countries has recently been increasing in the world economy and the countries of BRIC are the key ones here. Goldman Sachs analysts firstly used the term BRIC in 2001 to denote such fast-growing developing economies as Brazilian, Russian, Indian and Chinese [10, p. 10].

Each country within BRIC possesses its own characteristics which make it different to other countries of BRIC. The Russian Federation and Brazil are the biggest energy exporters. India is known for its achievements in industry and service sectors of economy China is a biggest economy among the developing countries and the top of all countries in population. For the last ten years Brasilia, India and China have turned into significant world exporters of technological innovations and services. In 2000-2008 the countries of BRIC gave about a half of world economy growth [9, p. 1].

According to the report of Goldman Sachs “Dreaming with BRIC's: The Path to 2050" the economies of the

four countries together will exceed the total economies of the USA, Japan, France, Germany, the UK and Italy in forty years (G6) [6]. By 2050 the USA and Japan will stay in top 6 of the biggest economies. During these fifty years GDP of G6 won't be growing faster than 2% a year as Goldman Sachs says. This will let India beat GDP of Japan by 2032, and China outrun GDP of the US by 2041 as well [12].

In early 2011 “The Independent” pointed out that the European countries should pay much more attention to the markets of BRIC. According to World Bank forecast for 2011-2012 GDP of BRIC will exceed the growth of the developed countries, while Russia is expected to show the weakest growth rates in BRIC (table 1).

Lately more and more countries express a desire to join BRIC. Mexico, the Republic of Korea, Turkey and Indonesia have the shortest way to BRIC. But the Republic of South Africa is the first country which has got approval to join BRIC.

T a b l e 1

GDP Global Prospects*

Country 2011 2012

Braz il +4,4 % +4,3 %

Russia +4,0 % +4,2 %

India +8,4 % +8,7 %

China +8,7 % +8,4 %

To compare

The USA +2,8 % —

Euro Zone + 1,4 % —

Japan + 1,8 % —

* Source: Geopolitical prospects of the Russian Federation in BRIC. URL: http://www.memoid.ru/node/Geopoliticheskie_ perspektivy_Rossii_v_ramkah_BRIK.

In 2010 the Government of the Republic of South Africa was officially asked to participate in summit of BRIC which took place in April 2011. Since then the group of economies has turned into BRICS (S - from English South Africa) [3, p. 21.] and included the Republic of South Africa in organization of the developing world powers in Asia, Latin America and Europe (table 2).

The Republic of South Africa completely shares the principles of BRIC and is concerned with developing innovations, space researches, mining operations and cultural and tourists exchanges. Entering BRIC South Africa defines the goal to enhance home economy significantly by reaching growth rate of 5-7%, decreasing unemployment rate from 25% in 2010 to 15% by 2020.

Today the economy of South Africa is the 27th, Brasilia's - the 8th, India's - the 11th, Russia's - the 12th in the global economy. A number of experts say that South Africa can't be compared with other countries of BRIC due to its small population (50 millions) and slow growth rate which is less than 3% [4, p. 1]. However the GDP per capita in South Africa exceeds the same figures in China and India and is a bit less than in Brazil. Besides the South Africa takes the 39the rating of the top comfortable countries to make business that mostly determines positive scenarios for future economic growth [5]. South Africa is a leading economy on the continent. Although the country counts only 6% of population of the whole continent, it gives 18% of total African GDP. The Republic produces 45% of mineral mining, and 50% of purchasing power on continent is based in South Africa. In 2010 GDP growth reached 2.8%. In upcoming years the pace of growth is supposed to be in the range of 3.5-4%.

Nowadays South Africa is developing innovative projects and science. Highly developed advanced manufacturing mineral industry inspires vast prospects.

It's also important to mention huge mineral wealth in South Africa. According to 2009 data the share of proven oil

resources in Africa is 9.5%, oil export - 15.7%, natural gas reserves - 8.32%, world diamond reserves - 60%, world gold reserves - 40%, and world arable land is about 13%. The population of Africa beats 1 billion people and is expected to double by 2050. At the same time the total GDP of African countries is 1446 billion dollars which is only 4% of Global GDP based on purchasing power parity There is also a great potential of economic growth of South Africa and development of cooperation on a par with all countries within BRIC.

The South African economy is diversified unlike to its cross-border countries. Thus, metal mining industry's share is only 2.3% of labor and 3% of GDP (in 1984 -14%). The second biggest state item (after platinum) is still gold despite of that China has become the biggest world gold miner after more than a century South African leadership in this sector. In 2010 the country earned 8.2 billion dollars on gold export. Except precious metals mining, South Africa keeps leading positions in manganese, chromium and vanadium production as well as it takes the 4th place in diamond production and the 5th place in coal mining. The major diamond company De Beers goes on being South Africa and BHP Billiton along with Anglo Americana are the biggest metal mining companies headquartered in London have branches in the Republic of South Africa.

Service is an important sector of the national economy which gives 2/3 of GDP. The national government hopes to develop tourism which is expected to create new jobs. The number of tourists has raised from 3.7 million in 1994 to 11.2 million people in 2010. The share of agriculture in the labor market is 5.1% and 2.2% in GDP as well. Besides South Africa is a big exporter of vine, wool and fruits to the world market. The share of industry in the labor market is relatively small - 13.3% and 15% in GDP. Labor costs are visibly lower here than in the developed countries but higher than in fast growing economies of Asia [12].

Distant geographical location from major digital dat-aways raises telecommunication service tariffs in South Africa. However, brand new high-speed fiber-optics wires are planned to be put into operation in 2011. This will speed up greatly data exchange with the rest of the world. Infrastructure development (both transport and energy) is crucial for further growth of South Africa and regional integration on the continent. Africa could become the gates for companies from South Africa and cross border countries to the global market. To be a member of BRIC for South Africa means to reach goals faster. Besides, there is the sea port in Durban which has very good location especially for Indian and Chinese companies.

According to Global Economic Forum South Africa's ranking is 45 out of 133 most competitive countries. The

T a b l e 2

BRICS growth figures in 2010*

Country GDP, $ billions GDP Growth Rate, % G DP per ca pita, $ thousands GDP Structure, % Turnover, $ billions

Agreecu lture Ind ustry Services Export Import

Brazil 2 194 7,5 10,9 6,1 26,4 67,5 199,7 187,7

Russia 2 229 3,8 15,9 4,2 33,8 62,0 376,7 237,3

India 4 046 8,3 3,4 16,1 28,6 55,3 201,0 327,0

China 9 872 10,3 7,4 9,6 46,8 43,6 1 506 1307

South Africa 527,5 3,0 10,7 3,0 31,2 65,8 76,86 77,04

Globe 74 480 4,7 11,2 5,7 30,7 63,6 14 950 12 430

*Compiled by: Factbook. URL: http://www.cia.gov.

Forum reports about the ambiguous character of the South African economy. On one hand, there are figures which tell about high achievements of financial markets (Johannesburg stock exchange global ranking is 15), defense of investors, high rate auditing and accounting, effective corporate management and stable banking system. On the other hand, there is a clear picture of low ratio of the labor market flexibility, low education standards (particularly in mathematics and natural sciences) and business security costs. The above-mentioned led to low foreign investment and reached only 6.8 billion dollars in 2009. In 2010 direct foreign investment supposed to recover to pre-crisis 2008 level up to 9 billion dollars.

International companies have a rich choice of high investment competitive countries to invest, so it's no wonder why South Africa often stands aside with all its vast market prospects.

Many of the factors mentioned above played their role that South Africa became a BRIC member. In addition South Africa and BRIC were successfully developing relationships for the last several years. From 1993 till 2008 BRIC's foreign trade share with Africa raised from 4.6% to more than 19%. From 1998 till 2008 BRIC increased their export to the African continent from 7.9% to 18.5%. Starting from 2003 till 2009 BRIC turned into the 4th biggest investor in Africa after Europe, Middle East and the Northern America.

There is one more aspect that made South Africa join BRIC easier: that is membership in three powers alliance - IBSA (India, Brazil and South Africa). Structurally IBSA resembles BRIC but with a longer history. It started when three fast growing economies took a decision of building an alliance as a counterbalance to G8 in 2003.

No doubt, South African joining BRIC will widen possibilities of the alliance in whole as well as it will give more opportunities for member-countries to enter African enormous market. We should mention that South Africa is a very respectable country on the continent and is involved in solving various problems in Africa. Peacemaking forces of South Africa participate in a number of “hot spots”. Needless to say about rich experience of South Africa in cooperating with some global universal organizations. Both political and economical resources of South Africa will definitely help BRIC work harder on the continent.

The major advantages for South Africa as a member of BRIC are investment diversification. Some African companies are planned to get more opportunities to work in member-country markets to bring a new way of growth into the national economy. More tourists from the USA and Europe as well as from other countries and regions are expected to visit South Africa. Companies from developing countries with their experience of doing business under tough conditions could come to South Africa and become an alternative source of investments. All these things could become the basis on which the authorities of South Africa intend to call businesses from BRIC to invest.

Having signed an agreement of 20% cut import tariffs in 2009, South Africa made one more step ahead to cooperate with BRIC. It is necessary to mention that foreign trade share of South Africa with BRIC is 70%. As the UN reports says due to this agreement turnover with BRIC could increase up to 8 billion dollars [2, c. 7].

Today South Africa develops deep bilateral relations with BRIC member-countries. Thereupon Russian experts forecast closer economic, scientific and technical cooper-

ation between the Russian Federation and the Republic of South Africa. Trading volume between Russia and South Africa rose by 60% in 2005-2009 but figures are still low -$ 550 million (2/3 - Russian export and 1/3 - import)

Thanks to cooperation with African countries Russia is definitely capable to take leading position in the three strategic markets (natural gas, platinum metals and diamonds) by volume production and setting priorities in further development of these markets. Uranium reserves in Africa are very important for Rosatom (Russian state-owned corporation) as it makes a claim to become a world-leading vertically integrated company. Taking into account that atom and gas energy consumption continue to increase Russian-African cooperation in power energy production tends to be more significant.

Cooperation in other mining industry sectors (oil production, nonferrous metals production and etc.) is also considered important for Russia as it enhances the role of energy exporting country in the world. Russia needs to widen product markets in Africa particularly for goods of military and technical purposes, satellite communication equipment and services, some innovations in energy, geological exploration, and etc. All these opportunities could be easily used under the right flexible foreign affair policy. The key role here is to pay more attention to credit assistance of Russian export machines and equipment [8, p. 132].

There is a number of Russian-African joint ventures (mostly in metal mining - “Renova Holding”, “Norilsky Ni-kel”, “Evraz Holding”) but some South African corporations invest in Russia (engineering companies such as Bateman Group, Shaft Sinkers). Russia successfully cooperates with South Africa in space technology. Two countries jointly have been fulfilling the project of making remote earth exploring system since 2008.

In 2009 China took the lead over the USA, Japan, Germany, and the UK and became the major trade partner to South Africa. China is a key strategic partner for South Africa. Turnover between the two countries reached $15.5 billion that was ten times bigger than in 1998 when diplomatic relations were established. Twelve agreements of energy cooperation, investments and railway transportation were signed. «Cell C» the third biggest cell operator in South Africa and China Development bank reached a €240 million credit agreement. Nowadays South Africa export 25-28 of crude oil to China. By 2045 this export is supposed to reach 45% [7, c. 34]. Apart from natural resources production there is a way to deepen cooperation in energy, informational technologies, and infrastructure development. China invested $ 7 billion in South Africa since 1998 [2, p. 7].

India is also an Asian key partner for South Africa. Trade volume has been increasing since 1994. Trade relations are based on common historical events. Besides in some regions of the continent there is a very influential but not numerous diaspora which descends from colonial times. Indian immigrants turned out to be vanguard for the UK entry to Eastern Africa and still play important roles in local economies (particularly in Uganda and Kenya).

For the last five years Indian trade volume with African countries increased 6 times and reached $39 billion. It is planned to beat $70 billion by 2014. Today relationships between India and South Africa are built on new economic ties (developing joint ventures and government cooperation). South Africa exports metals (copper, lead, phosphates

♦------------------------------------------------------------

and silver) and mining equipment to India. Representatives of thelargest South African corporations such as De Beers, Goldfields, Gencor, Iscor, Amcoal, Tavistock visited India to learn about local market and opportunities for double-sided cooperation in sea dock infrastructure, road building, electricity devices control installation, and auto components selling. De Beers finds profitable to explore diamond resources in such regions of India as Madhya Pradesh, Orissa and Andhra Pradesh.

Widening economic cooperation with Africa is the crucial issue of the Brazilian foreign policy. Brazil claims to keep peculiar relationships with African countries due to their certain cultural and historical identity and considers this region as a high-capacity manufactured product, and technical, and engineering service market. Nevertheless, a lot of cultural, social and economical problems still remain unsolved.

Since the middle 1990s Brazil has been on the way to enhance its foreign economic activity in Africa for several reasons. First, Africa is the market with great potential where Brazilian goods could be competitive. Second, African countries are the consumers of the first export group of goods such as vehicles, auto components, and farming machines. Export as the major factor of economic growth has let Brazil deepen foreign trade relations with the countries on the continent of Africa.

Brazil is the key trade partner of South Africa in Latin America. The list of goods in turnover is pretty short. We can hardly find agricultural products that are exported to Africa. Sugar, meat and tobacco are tiny exported. Vehicles have 21% of total export to Africa. In its turn South Africa trades coal, jewels and raw materials to Brazil.

There is a number of issues which are paid much attention to in BRICS. The success of alliance depends on whether the member-countries reach the consensus on the topics. The most topical subjects are a new network format system, development of world financial relations, cooperation in environmental control and climate fluctuation, energy safety, joint innovative project development and science researches, trade and production relations in the frames of new format.

The great expectations of South Africa are investments which could come once the African country joins BRIC. If this happens and investors from China and other countries find the way to South Africa, it could strongly revive the growth of the local economy which is relatively small and has never widened at the pace of China. BRIC corporations have experience to work under tough conditions and are able to become an alternative source of investments. Indian companies do their business in conditions of lack of transport infrastructure. And Brazilian companies are very closely familiar with criminal resistance to their business activity. Taking into account all this South Africa could attract investors from member-countries that are not so feared by local business conditions as American and European businessmen. Besides South Africa is not the worst place on the continent of Africa to do business, so it is very likely to provoke interest among the BRIC countries to invest here.

South Africa, as a member of BRICS, witnesses its growing global role. Besides, membership assists the country to widen its opportunities in Africa. Investments and trade prospects are expected to come as it happened with other four countries of BRICS.

Along with economic cooperation South Africa is going to be favorable to coordinate cooperation within BRIC on such subjects as climate fluctuation, UN reforms, struggle with poverty, and other vital global and local problems. Besides this, the African republic can definitely contribute to a better and more balanced international political system. Starting from 2011 Russia, China, India, Brazil and South Africa will do their coordinated job in Security Council to deepen financial and economic relations on global topical issues.

We would like to hope that BRIC together with South Africa are going to be an influential power in the global economy. There is an opinion in the world that global and regional problems can't be solved by one country but only in teamwork as the challenges are common. All mentioned above makes us believe that BRICS will have tomorrow.

Experts forecast that total GDP of BRICS will exceed US GDP four times by 2050. They say that this is the very place where the most consumer activity is expected after the crisis. This is the reason why other countries intend to join the alliance through various joint projects. These countries improve their macroeconomic figures and profit from such cooperation. Today it looks like South Africa falls behind the BRIC countries so far, but by 2020 it is expected to catch up with. So it gives a promising future picture for BRICS.

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