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Posted at 9:14 AM ET, 01/29/2011

The New Reality and its meaning for Africa

By Dr. Martyn Davies

This year’s World Economic Forum annual meeting in Davos was framed by the theme “Shared Norms for the New Reality” – seeking to comprehend the emerging and increasingly complex new models that are shaping the global political economy.

In the same way that the world experienced a dramatic political and economic reorientation after the tumultuous collapse of the Eastern Bloc and Soviet Union that took place from the late 1980s, the world is now struggling to come to terms with the fallout of the financial crisis and the subsequent fragile economic state in Western economies. Two decades ago communism was discredited. George H.W. Bush called it the New World Order. Unbridled capitalism is currently being questioned. Now it’s the New World Order 2.0.

Twenty years ago as a grad student studying Law and International Relations I remember debating in class the reasons behind the collapse of communism – the “End of History” as Francis Fukuyama called it – and more importantly where we were headed, not just as a community of countries but in particular South Africa. Global events then shaped our own (negotiated) political revolution and future. What has been called the “golden age of political liberalism” swept the world, affecting all but the most politically resistant states, many of which still (unfortunately) reside in Africa.

The financial crisis that compounded after the collapse of Lehman Brothers in September 2008 is also a tipping point that is not so much questioning political models as it is economic and developmental models. And this is what is so relevant for Africa and other aspiring developing states. The rollback of market fundamentalism – or the Washington Consensus as it is often referred to – is being questioned. Emerging African states seek new approaches to development. Considering the dramatic rise and economic success of China, the so-called “China model” is trying to be interpreted so that it can be transplanted. The future of development economics lies in China.

BRIC+S

Before Christmas, Beijing invited South Africa to be a member of the BRIC grouping of states – the first-tier emerging market economies of Brazil, Russia, India and China. Goldman Sachs’ BRIC report has become the global ranking standard for emerging markets. The BRIC economies are the first tier, based on the premise that “big is beautiful”. Size is the defining factor rather than the immediate economic fundamentals of the country.

The challenge for South Africa is to expand its market through extending its policy influence beyond its borders to its neighboring economies. If it can successfully expand its market size through deepening regional integration and encouraging regional growth, the “S” in BRICS will begin to refer to SADC – a market of over a ¼ billion people. However, the global competition for capital is coming from our emerging marker peers. Davos hosted the heads of state of Mexico, Ethiopia, Indonesia and Poland – all leading emerging markets in their own right.

In his opening address at Davos, Russian president Dmitry Medvedev welcomed South Africa as a member; India, too, has formally welcomed South Africa into the club – both echoing China’s original invitation.

BRICS now represents the new reality – the economic balance of power has shifted from the old world to the new. South Africa must now figure out how to leverage its relations with its BRIC compatriots in order to position SA Inc. to align to its respective commercial interests in Africa. This will begin with China. We are now setting out the terms of engagement with China – “C” is the biggest letter in BRIC.

Approaches to political management, national development strategies and corporate business models will have to change to meet the complex challenges that are arising. The global center of economic gravity has clearly shifted toward emerging-market economies. How Africa carves for itself a competitive position in the NWO 2.0 will determine the continent’s economic fate.

Dr. Martyn Davies is chief executive of Frontier Advisory and was in Davos as a Young Global Leader of the World Economic Forum.

By Dr. Martyn Davies  | January 29, 2011; 9:14 AM ET
Categories:  Dr. Martyn Davies  
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Next: Reflections from Davos: Rebuilding Trust

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