Arthayuga ankit kawad_sibm_pune


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An attempt to analyze South Africa as a part of BRICS. Its position in BRICS.

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Arthayuga ankit kawad_sibm_pune

  1. 1. Name: Ankit Kawad College: SIBM Pune Specialization: Marketing Name: Vinit Gandhi College: SIBM Pune Specialization: Marketing Team : Born To Win Topic : South Africa a vital brick in BRICS
  2. 2. • ORIGIN AND EVOLUTION OF BRICS [BRAZIL, RUSSIA, INDIA, CHINA AND SOUTH AFRICA] • Jim O’Neill, then of Goldman Sachs, in his paper named “Building Better Global Economic BRICs” in 2001 coined the acronym BRIC to convey the fact that much of the world’s economic growth will come from Brazil, Russia, India and China • EXPANSION OF BRIC INTO BRICS • BRIC Foreign Ministers at their meeting in New York on 21st September 2010 agreed that South Africa may be invited to join BRIC. Accordingly, South Africa was invite to attend the 3rd BRICS Summit in Sanya on 14 April 2011. • The five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$16.039 trillion and an estimated US$4 trillion in combined foreign reserves • OBJECTIVES OF BRICS • To achieve regional balance • To remove trade barriers • Economic development • Optimum use of resources • Building relationship • BRIC(S) SUMMIT • Five Summits have been held so far; the first in Yekaterinburg, Russia, on June 16, 2009; second in Brasilia on 15 April 2010, the third in Sanya, China on 14 April 2011 and the fourth in New Delhi, India on 29 March 2012. BRICS Leaders have also met on the side-lines of other multilateral meetings. • BRICS is a platform for dialogue and cooperation amongst countries that represent 43% of the world’s population, for the promotion of peace, security and development in a multi-polar, inter-dependent and increasingly complex, globalizing world • What BRICS is not • It is not an international organization nor an economic bloc with a free commerce model much less a platform for building consensus on specific subject • There is no flag or any identity which is a fixed thing INTRODUCTION OF THE BRICS
  3. 3. BRICs : Projected versus delivered growth
  4. 4. •Greater voice and representation in international financial institutions •IMF should revise the basket of currencies used to value its financial products to include the Russian Ruble and Chinese Yuan. At the moment the currencies included are the dollar, euro, yen and sterling 2009, Russia •Iran and nuclear weapons •Closer cooperation in the field of energy and food security2010, Brazil •Inclusion of South Africa into the BRIC group •The importance of renewable and atomic energy • Establishing mutual credit lines denominated in their home currencies •Reform of international institutions like IMF 2011, China •Faltering recovery and Euro-crisis •Sustainable development and climate change •The unstable political scenario in the Middle East and North Africa •To enable emerging economies to attain Millennium Development Goals 2012, India •BRICS and Africa-Partnership for integration and industrialization •BRICS development bank, and as well as the related reserve currency fund. •Creation of permanent business council •BRICS crisis fund, the Contingent Reserve Arrangement with an initial pledge of US$100 billion 2013, South Africa Outcome Of BRICS Summits
  5. 5. Previous to SA joining BRICs • The BRIC group collectively accounted for approximately 11 percent of World Gross Domestic Product (GDP) in 1990 and this increased to about 25 percent in 2011. • Goldman projected the BRICs economies would be as large as the G7 by 2032, 7 years sooner than the initial forecasts in 2003. China was then forecasted to be as big as the US by 2027. Post SA entering the equation • The five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$16.039 trillion, and an estimated US$4 trillion in combined foreign reserves. • The BRICS economies are currently worth around $11-$12 trillion, while the figure for the United States is $15 trillion, O'Neill noted. By 2018, they will probably be bigger than the US. • According to the South African Institute of International Affairs (SAIIA), the BRICS countries collectively account for over a quarter of the world’s land area. • The BRICS are now Africa’s largest trading partners with trade expected to reach more than US $500 billion by 2015, with 60 per cent from China Quick Facts
  6. 6. Strategic Significance – Strongest economy in fastest growing continent Advanced – Legal + energy + financial + communications + transportation sectors with Excellent infrastructure Resource Advantage : Rich in Minerals. Largest producer of platinum, chrome, vanadium and manganese Booming Financial Market indicator of capital stability and growth Banks and Financial institutions are rated as on of the strongest and most robust International Linkages : Largely favored by China, Only sub-Saharan country in G20 Why South Africa : Strategic Importance
  7. 7. Why South Africa : Trade Synergies The imports and exports of South Africa overlap with other BRIC Country requirements Country Imports Exports BRAZIL Machinery, electrical & transport equipment, chemical products, oil, automotive parts, electronics Transport equipment, iron ore, soybeans, footwear, coffee, autos RUSSIA Machinery, vehicles, pharma products, meat, fruits and nuts, optical and medical instruments, iron, steel Petroleum & allied products, natural gas, metals, chemicals, civilian and military manufactures INDIA Crude oil and related products, machinery, electronic goods, gold and silver. Petroleum products, pharmaceuticals, gems and jewelry, agricultural products, iron ore. CHINA oil and mineral fuels, optical & medical equipment, metal ores, plastics, organic chemicals Electrical and other machinery, apparel, textiles, iron and steel, optical and medical equipment SOUTH AFRICA Petrochemicals, Car components, Petroleum Oils. (Opportunity for China, Russia and Brazil) Gold, Diamonds, Metals, Minerals, Cars and Machineries (Opportunity for India, China and Russia)
  8. 8. Why South Africa : Demographic Synergies Demographics of South Africa fall in range of other BRIC nations.
  9. 9. Why South Africa : Core Competence Synergies They have a unique position in global economy which can be leveraged internally incrementally in BRICS
  10. 10. • Widely believed as the main supporter of inclusion of South Africa in BRIC • Number of joint ventures have been developed e.g. Standard bank sold 20% of its stake to International Commercial Bank of China(ICBC) • Both have signed 38 bilateral agreements. Major Chinese companies such as ZTE and Huawei are investing big time in South Africa • The increased demand for oil in China has led it to increase its presence in the African continent in order to secure oil resources. • China is also South Africa's largest trading partner. In the past few years the trade balance between the two countries has favored China. According to the Gateway house, the Chinese Yuan has kept South Africa afloat during the recession BRICS : Effect of South Africa on China
  11. 11. • Brazil’s trade in Africa has increased six-fold from US $ 4.2 billion in 2000 to US $ 25.9 billion • Minerals and oil account for more than 80% import for brazil • Third largest trading partner of Africa • Brazil has provided military assistance to South Africa in the form of warfare training and logistics • South Africa is part of the IBSA Dialogue Forum, alongside Brazil and India • South Africa’s top five exports to Brazil include anthracite (coal), precious metals, plastics, aluminium and car engines. The top 5 imports from Brazil include vehicles, meat, sweets and confectionaries, machinery and ore. • For Brazil, South Africa and for that matter whole of Africa is a major trading partner according to its south-south policy BRICS : Effect of South Africa on Brazil
  12. 12. • Total intra-trade is constantly increasing shooting to $ 517 million in 2012 • Russia doesn’t need the natural resources that South Africa can offer but it need it as a strategic partner to increase its export to the rest of Africa • The major Russian exports comprise chemical and agro-industrial products, precious and base metals, coking coal, fertilisers, machinery, equipment, vehicles, tools, textiles, footwear and mineral products. Russia's imports from South Africa were dominated by fruits, mineral products, machinery, equipment, vehicles, chemical products, precious and base metals, raw hides, textiles and footwear • co-ordination of approaches to combat drug trafficking; • co-operation to ensure international information security, to fight against cyber-terrorism and cybercrime • Relaxing visa regimes amongst each other and hence facilitating free flow of labour force both skilled and un- skilled BRICS : Effect of South Africa on Russia BRICS : Effect of South Africa on India • Companies like Tata, Mahindra, JSW energy, Reliance, Bharti, etc. are doing both brownfield and greenfield investment in South Africa and companies like SABMiller and First rand have invested in India • Airports company of South Africa won a lucrative deal to rehabilitate the Mumbai airport • South Africa does primary exports while India does value added exports for e.g. India imported 1.4 million tonnes of South African coal in February, making it the largest purchaser of coal from the country
  13. 13. Gateway to other African nations which will lead to integration of African nations to the world BRICS nation are targeting the markets which were earlier ignored due to low purchasing power Leveraging both IBSA and BRICS, South Africa will promote African agenda and will create new trade opportunities for exports and investments The original BRIC nation account for more than 50% of overall emerging market IT spending Global Effects : South Africa joining BRIC Absence of formal structure and administrative bodies governing BRICS hampers the robustness of the structure. It is not as strong as it can be BRIC Members are capital rich and possess a lot of mettle. It can result into exploitation of South African and African market Power that South Africa receives by joining BRIC can result into Neo Colonisation of other Sub Saharan Countries. South Africa by becoming economic and political link between rest of Africa and BRIC, is exposed to the threat of losing out of trade from other large global powers due to rivalry South Africa which enjoys tremendous clout in African continent can damage its position by exposing other markets to BRICS member nations Apprehensions : South Africa joining BRICs
  14. 14. South Africa’s relatively sophisticated financial services industry and its long history of trade relations with other members in the group is one of the most important reason for its inclusion. BRICS currently constitute 43% of world population and is growing at a pace which is much faster than western countries, hence the demand coming from BRICS will be phenomenal. This demand will lead to consumption and this consumption will lead to development and prosperity Inclusion of South Africa will provide a stability to other BRICS nation and will help in avoiding supply constraints which countries like India and Brazil constantly face. This is because they have abundant resources. BRICS as a Brand has lot of scope and other major emerging economies like Turkey and Mexico have shown interest in joining it. BRICS might lack that proper structure and agenda but it definitely has that awe factor which can trouble the developed economies With more maturity coming in the organization the inclusion of South Africa will prove to be a masterstroke as Africa is on the verge of revolution and the . This increase in trade and support on other soft issues will lead to coordination at international forums like WTO and IMF. This will lead to formation of a strong lobby at international level which can safeguard the interest of developing economies Key Takeaways
  15. 15. • • • • • • africas-inclusion-and-chinas-response&catid=58:asia-dimension-discussion-papers&Itemid=264 • Bibliography