beyondbrics

The godfather has spoken – the godfather of the Bric group. Jim O’Neill of Goldman Sachs had planned to stay quiet over the holidays, but he couldn’t resist reacting to a gutsy move by China on Christmas Eve to insert South Africa into the acronym he coined.

According to reports in Chinese state media, China invited South Africa to join the four-letter club of fast-growing emerging markets – or at least to join a summit of theirs in China next year. In a note to clients on Wednesday, O’Neill wrote: “While this is clearly good news for South Africa, it is not entirely obvious to me as to why the Bric countries should have agreed.”

As chairman of Goldman Sachs Asset Management today, he clearly doesn’t want to offend anyone. But the implicit message of his note is that the Bric concept has become political and has been unmoored from the economic logic that underpinned his creation of it in 2001 when he was Goldman’s top economist.

He wrote:

When I created the acronym, I had not expected that a political club of the leaders of the BRIC countries would be formed as a result. In that regard, the purposes of the two might be regarded differently and more so after this news.

He says “South Africa rightly sees itself as a leading emerging nation”. But this is just to soften the blow of his main point, which is that in economic terms South Africa is very far from being a Bric contender.

The size of its economy is $350bn. And as O’Neill notes:

… this is quite small by not only BRIC standards, but compared to some others. For example, Russia is around $1,600 billion, nearly 5 times larger than South Africa. And, India is currently similar in size to Russia. Brazil is currently closer to $2,000 billion in size, while China is considerably larger at around $5,500 billion.

Importantly, he adds, there are also a number of other economies from the so-called emerging world that are bigger than South Africa.

This would include Indonesia (approximately $700 bn), Mexico ($1,050 bn), Turkey ($725 bn) and South Korea ($1,000 bn). These four nations, along with each of the BRIC economies, are all 1 pct or more of global GDP, and what we would increasingly think of as “Growth Economies.” … It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries.

Ouch.

Tuning his political antennae, O’Neill notes that a South African role “might be justified as Africa’s representation alongside the BRICs, as the continent as a whole is about as large as India or Russia”.

But Nigeria is hardly going to accept that. And what O’Neill, the godfather, will have to accept, it seems, is that he is losing control of the concept he created.

Related reading:
Why Africa won’t be the next Bric, beyondbrics (Aug 27)