Pretoria - South Africa has hailed the establishment of the BRICS New Development Bank (NDB) and Contingent Reserve Arrangement (CRA), adding that all resolutions and declarations taken at the summit were done on an equal basis.
The five members of the group - Brazil, Russia, India, China and South Africa (BRICS) - laid out the designs of the NDB and the CRA in a declaration released, following their sixth summit in the Brazilian city, on Tuesday.
The new bank will be based in Shanghai, China, while an African regional centre of the bank, to be located in South Africa. The regional centre will be opened concurrently with the headquarters before the first loan in 2016.
The bank will have starting authorized capital of $100 billion, of which $ 50 billion will be subscribed.
The five countries decided that the first chair of the Board of Governors shall be from Russia, the first chair of the Board of Directors from Brazil, and the first President of the bank from India.
The bank, according to the Fortaleza Declaration, is aimed at "mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies".
Economic potential of the bank
Speaking to the media fresh from the summit on Thursday, Finance Minister Nhlanhla Nene said government is excited about the economic potential that the bank will bring to the continent.
Minister Nene said the bank will help mobilise resources for infrastructure investment and address development challenges.
These he said include transformational infrastructure development projects that allow the region to take forward its regional integration agenda.
“What is unique about this bank is that it is established by developing countries who understand development challenges and have demonstrated their ability to tackle such challenges. So we are excited about this development and more so what it means for South Africa and the continent as a whole,” Minister Nene said.
Based on sound banking principles, Minister Nene said the NDB will strengthen cooperation among countries and will supplement the efforts of multilateral and regional financial institutions for global development.
This, he added, will contribute to the developing countries’ collective commitments for achieving the goal of strong, sustainable and balanced growth.
BRICS countries will enjoy equitable shareholding of the bank.
Minister Nene said the bank will cooperate fully with the development partners and the international financial institutions.
“We will complement the efforts of existing institutions and alternate source of financing for global development.”
Regional offices of the bank
The minister said they are not disappointed that South Africa is not hosting the bank. In the past SA offered to host the bank.
“We are not disappointed; remember the decision was taken by the summit and the leaders collectively. We are also happy with the regional offices in Africa as a country fighting for African integration.”
The regional office, he added, is going to do a number of things including the project development facility, and lead in the implementation of the infrastructure projects in the region.
Looking ahead, Minister Nene said the regional office of the bank might spread to other parts of the world and looking at other shareholders - from other developing countries, although the BRICS countries would have the majority 55% shareholding.
Developing countries have long complained that loans from organisations like the World Bank have always come with strings attached and thus advocated reforms at these institutions.
The BRICS nations constitute one fifth of the world's economic output and account for half of global economic growth - however their representation at the International Monetary Fund (IMF) does not match their growing economic might.
Contingent Reserve Arrangement
During the summit, the leaders had also agreed on plans for a CRA.
At its core, the CRA is a pledge to help one another in times of financial crisis.
Each country will achieve this by together pledging a total of US$100 billion to a common pool - with China contributing the most (US$41 billion), Brazil, Russia and India contributing $18 billion each, and South Africa the least (US$5 billion).
These pledges will not be physically put aside, but will be made available in times of crisis.
The minister dismissed fears of dominance from the stronger economies like China, saying all member countries are committed to playing equal and striking the balance.
“The shareholding will be equal. We do not for see any dominance.” - SAnews.gov.za
