End of the Bric road

End of the Bric road


The rand bounced the most in two years and the Johannesburg stock market was up more than 1,000 points on the day. Investors like the look of Cyril Ramaphosa, who now looks certain to take over from Jacob Zuma as the leader of South Africa.


The trouble is, Ramaphosa will not be able to salvage the “Brics”. The biggest investment concept of the last decade now looks to have been a failure. First coined by the Goldman Sachs economist Jim O’Neill way back in 2001, the Brics – collectively Brazil, Russia, India and China with South Africa added later – were meant to be the emerging giants reshaping the global economy. Dozens of Brics funds were launched, as investors jumped on the bandwagon, and every global company had a strategy for capturing some of that turbo-charged growth.


And yet the results have been very disappointing. Sure, China has powered forward, and may well become the largest economy in the world. But India has grown only fitfully. Russia has been hit by a currency crisis and sanctions. Brazil has been chaotic and South Africa has gone backwards. Investors have done poorly. Measured over five or 10 years, Brics indices have struggled to outperform global markets.


In fact, the Brics thesis now looks to have been flawed from the start. China has industrialised in the same way much of the rest of Asia did before it. But other emerging markets have found it hard to emulate that model of rapid expansion. Indeed, the most striking aspect of the last decade is that the really impressive growth has come from technology companies based in the developed countries, not from newly industrialising economies. The “Fangs” – Facebook, Amazon, Netflix and Google – have done far better than the Brics.


Ramaphosa may improve the beleaguered South African economy a little. He could hardly be worse than Zuma and he has some good ideas on freeing up business, and reducing corruption (along with some bad ones about increasing state control). But he isn’t going to be able to salvage the Brics. That concept can now be declared officially dead.

Happy investing