‘Brics Bank’ spreads its wings

The New Development Bank (NDB), or ‘Brics Bank’, and the South African Government hosted the ninth annual meeting of the NDB Board of Governors in Cape Town last week. Legalbrief reports that there was keen interest in the expanding institution which continues to muscle its way onto the global stage, particularly with its member states – Brazil, Russia, India, China and SA – pledging not to use the US dollar any longer when conducting trade and business among themselves. This isolation of the US dollar by trading giants is expected to impact the US economy. This year marks a significant milestone in the history of the NDB. It is the 10th anniversary of the signing of the agreement on the NDB. Over the past decade, the NDB has achieved important strategic objectives. For instance, it has opened four regional offices and centres in all founding member countries of the strategic bloc. The Sunday Tribune reports that the bank has since expanded its membership – with the addition of Bangladesh, Egypt and the UAE. It has approved over $30bn in project financing in its member countries. Reflecting on what has already been accomplished and, more importantly, on what can still be achieved, the theme for the ninth annual meeting was ‘Investing in a Sustainable Future’.

In addition to the opening ceremony, where the Finance Ministers of the NDB member countries thrashed out the notion of a shared future, it was impossible to miss the wind of change blowing from Cape Town. The NDB Flagship Governors Seminar and other seminars and workshops were held behind closed doors to ensure they could ‘enable a productive exchange of knowledge, lessons and ideas on several inter-related aspects of the broad theme of Investing in a Sustainable Future’. The Sunday Tribune reports that the meeting brought together Ministers from NDB member countries, as well as other national and local government representatives, leaders of multilateral and national development institutions, distinguished scholars, prominent commercial bankers, business leaders and representatives of civil society organisations. Resolutions adopted at the Cape Town meeting will be shared during the Brics Summit in October, which is scheduled to take place in Russia.

Algeria has been approved for membership in the NDB. The decision was taken on Saturday and announced by NDB chief Dilma Roussef at the meeting. By joining ‘this important development institution, the financial arm of the Brics group, Algeria is taking a major step in its process of integration into the global financial system,’ the Algerian Finance Ministry said in a statement. Voice of America reports that Algeria's membership was secured thanks to ‘the strength of the country's macroeconomic indicators’ which have recorded ‘remarkable performances in recent years’ and allowed the North African country to be classified as an ‘upper-tier emerging economy,’ it said. Membership in the institution will offer Algeria – Africa's leading exporter of natural gas – ‘new prospects to support and strengthen its economic growth in the medium and long term,’ it added.

And the NDB approved a $1bn loan to SA for the development of water and sanitation infrastructure. News24 reports that the NDB's board of directors approved the loan, ahead of the meeting. The NDB said the loan would finance water and sanitation infrastructure development under SA's Municipal Infrastructure Grant (MIG). The MIG is a conditional grant allocated to municipalities by Treasury, aimed at reducing infrastructure backlogs and ensuring the provision of basic services to poor households. ‘By focusing on providing access to water and sanitation services, the Municipal Water Supply and Sanitation Programme aligns with the National Water and Sanitation Master Plan 2030 of South Africa,’ the statement read. 

The question that many people ask is whether the NDB can seriously rival the well-established International Monetary Fund, IMF, and/or the World Bank. In an IoL analysis, Bonke Dumisa says the quick answer to this question is an unambiguous ‘no’ becaue the financial base of the NDB is just too small to seriously rival the IMF or the World Bank. ‘In fact, we can safely assume that the major reason why Argentina quickly decided not to join Brics is because it is currently the largest debtor to the IMF, and its joining of the Brics may have complicated its precarious position as the debtor of the IMF, which they are struggling to pay. Egypt is also one of the biggest debtors of the IMF, hence their ambivalence on actively pursuing Brics membership. We must be objective enough though to accept that while the NDB may play a very positive role in financing infrastructural development in many Brics countries, and in financing other sustainable development projects within the Brics countries, the relatively very small NDB financial base poses absolutely no serious threat to the dominance of the IMF and the World Bank on global finance.’