DeWet Frans Petrus Louw
Bachelor of Commerce in Economics and International Trade
Bachelor of Commerce in Entrepreneurship and Business Management 22326103
Mini-dissertation submitted for the partial fulfilment of the requirements for the degree Bachelor of Science (Honours) in International Trade at the Potchefstroom Campus of the North-West University
Supervisor: Ms Carli Jacobs
2.1 Background and Motivation:
International trade is regarded one of the greatest generators of income in terms of GDP. It is also one of the main factors contributing to economic growth. International trade is an important factor to ensure a countries economic development and growth. The fact is that no country in the world is self sufficient (ITRISA, 2012: 5). Jim O’Neill, Chief Economist of Goldman Sachs initially thought of an idea to combine the largest developing and newly industrialised economies in the world, and so the idea of the BRIC nations was born. The acronym of BRIC was coined together by Jim O’Neill himself. The foreign ministers of the initial four BRIC states (Brazil, Russia, India, and China) met in New York City in September 2006, beginning a series of high-level meetings. A full-scale diplomatic meeting was held in Yekaterinburg, Russia, on May 16, 2008 and marked the birth of the BRIC nations. It was not until 2010 with the inclusion of South Africa as a BRIC nation to form the BRICS nations. These nations are regarded as the major developing and newly industrialised economies, but they are distinguished by their large, fast growing economies. “The BRICS are defenders and promoters of developing countries and a force for world peace” (Jintao, 2012). As of this year, the 5 BRICS nations represents over 40% of the global population, close to 3 Billion, with a combined nominal GDP of US$14.9 trillion, and an estimated US$4 trillion in combined foreign reserves. At first, South Africa seemed like a strange addition to the group. South Africa is not ranked among the top 10 economies in the world neither is it at the top of population figures in Africa or the world, such as the other BRICS nations. The land mass of South Africa is the smallest of all BRICS nations as well as its GDP representing only a quarter of that of Russia’s GDP at US$1.45 Trillion. Most economists and world leaders do not even expect South Africa to have a large economy by 2050. So the question is why did the BRIC nations invite South Africa to be part of this global initiative? The answer to this is the fact that Africa is considered a rapidly growing continent and since Brazil, Russia, India and China all have economic ties with Africa which they want to embrace, the addition of South Africa seemed like a beneficial move to all of the other BRICS nations, and to the entire world in fact. South Africa is the most developed African country with greater political stability and is seen as less corrupt (Transparency International, 2013). Considering the fact that trade between the BRICS nations alone grow at a rate of 30% per year, it makes perfect sense that South Africa should be motivated to engage in trade with its fellow BRICS nations (Lira, 2012a). As mentioned earlier, South Africa strives for economic development, and participation within this international trading block will enable this for the South African economy. The BRICS economies are gaining in power and growing into a more tangible factor in international affairs, contrary to sceptics’ expectations (Toloraya, 2013a). The fifth BRICS summit will be held this year and one of the main topics of this summit will be promoting trade between BRICS and Africa. The focus will be on the facilitation of Africa’s infrastructure development, establishment of the BRICS Development...