Regular readers of these country risk advisory briefings will appreciate that there is substantial comparative value in many of the threats and challenges that investors should be aware of with respect to KCS’ multiple country coverage. Investor risks associated with security and governance challenges, both soft and hard in nature, are pervasive across many emerging market economies. Such markets are often rich in natural resources and have thriving albeit underdeveloped consumer sectors, which can make them exciting business opportunities for flows of international investments. Yet the risks associated with investment in such markets should not be underestimated. In particular, the BRIC country group, traditionally comprised of Brazil, Russia, India and China, and near BRIC countries, such as Indonesia, are prone to both risks and rewards from an international business perspective. KCS has given particular attention to these countries in recent writings.
In December 2010, the Republic of South Africa was officially admitted to the BRIC club of states and the Republic’s president, Jacob Zuma, attended the April 2011 BRICS Summit in Sanya, Hainan province, China, as a full member of the now five nation club. This is not, in essence, a surprising development. As many Africa watchers will appreciate, South Africa is arguably the African continent’s most sophisticated country and its largest economy. It is Africa’s largest producer and consumer of energy, with a renowned minerals sector boasting a history of investments from the world’s largest mining companies. Recent surveys indicate that in 2011 South Africa (together with Kenya and Nigeria) is rated as one of the top three countries in Africa for investment, with the country’s Trade and Industry Minister, Rob Davies, recently stating that South Africa had already confirmed new investments in excess of US$17 billion during the next 3 years.
Investments of some US$4.3 billion were recently announced in the country’s automotive sector, creating 13,000 jobs, according to the Trade and Industry Ministry. This bodes well for a country traditionally reliant on the minerals sector (the combined market capitalisation of mining companies listed on the Johannesburg Stock Market is US$270 billion), given its need for diversification of the economy and investments into many other sectors. Last year’s Football World Cup, which was hosted by South Africa, spurred new investments into the country’s construction and infrastructure sectors. South Africa’s increasing presence on the foreign direct investment (FDI) map within the BRICS context bears some resemblance to Indonesia, on which KCS recently reported as ‘almost the BRIC nation’, with high exposure to global FDI flows.
KCS Group Staff
