south Africa vacation spotsSouth Africa is officially the newest member of the BRICs now (BRICSs). South Africa has an economy of $286 billion and a consumer base of 49 million. South Africa, compared to other BRIC nations; Brazil, Russia, India and China, has the smallest population and economy. Comparatively, South Africa’s economy is quarter of that of Russia, which is considered to have the smallest economy among BRIC nations. Jim O’Neil, an economist at Golden Sachs, who coined the famous phrase “BRICs” in 2001, stated it makes little sense for South Africa to be grouped with BRIC but as a representative of Africa, a country which has a consumer base of over 1 billion, it seem to be a sensible decision.

BRIC nations collectively represent 40% of the total population of the world. BRIC is recognized as a powerful bloc of nations with emerging markets which would make up for approximately 61% of global growth by 2013 according to International Monetary Fund (IMF) and is predicted to collectively equal U.S.A’s economy by 2020. For South Africa to be a part of such a strong team of nations opens up new doors of opportunities and developments for the nation.

Some are not very acceptable of the idea of South Africa joining the BRICSs, including Jim O’Neil who states being a member of a political club does not necessarily mean people will start viewing South Africa’s economy as being equal to that of the other BRIC nations. Therefore, South Africa has to work on existing major economic issues like unemployment (currently at 25%) to flourish as a part of the BRICSs member.  South Africa unquestionably has some issues when it comes to its economy, but it is also true that it is the biggest economy on the continent of Africa with a properly regulated banking system, highly developed financial market and a fully established democratic government. South Africa has come a long way from the apartheid state that existed only two decades ago. South Africa is also the biggest investor of Africa and makes up for around 1/3rd of sub-Saharan Africa GDP.

In 2010, United Nations in the conference on Trade and Development recognized South Africa as one of the top 20 priority economies for foreign direct investment (FDI) in the world. South Africa now being a part of BRICS attracts numerous opportunities for trade and investment within BRICS nations and for Africa in general. Having South Africa as a part of the BRIC bloc, the member nations gain open access to the 1 billion consumer base of Africa and more importantly the mineral resources of Africa, which includes oil and platinum. The recent global average growth in trade and investment within the BRICS nations should prove promising for the economic future for all the BRICS members.

The monopolistic existence of major developing companies within Africa and the comparatively less stringent antitrust laws, makes South Africa an attractive investment option for investors (even though it might not be in the best interest for consumers). In a conversation I had with a value hedge fund manager in South Africa, he stated that he likes investing in South Africa because it is easier to find monopolistic companies.

Additionally, Africa accounts for 60% of world’s uncultivated agricultural land and there is presence of unexploited mineral wealth. Gold Fields Limited, a South African based gold mining giant, states that there is high growth potential for South African mining industry, which is the “linchpin of country’s economy”. As the other members of BRICS have high need for raw materials, which South Africa can offer, there is high potential for mergers and acquisitions and South Africa can serve as a major source of investment.

The membership of South Africa in BRICS makes room for extensive trade and investment opportunities and cooperation among BRICS nations. Despite this making certain companies less attractive to investors, it could lead to breaking up monopolies and providing more investment opportunities. This could lead to high development of South African economy through the creation of competitive environment within the country. Finally, the increase in FDI and general competition among firms could help curb the problem of unemployment as increased trade and investment leads to industrialization and consequentially job creation.