Brazil, Russia, India, China and South Africa (Brics) – also known as the Brics group of emerging economies have together launched the New Development Bank (NDB) in Shanghai.
This is on the back of the 7th Brics Summit held in Ufa, Russia in July.
The NDB, which is situated in Shanghai, China, will lend money to developing countries to help finance infrastructure projects.
The first loan is expected to be made early next year by the bank, which will have $50 billion in starting capital and focus mainly on infrastructure projects.
The Brics Business Council will work closely with Brics governments to recommend specific lines for financing private projects on sustainable development, infrastructure, skills development and renewable energy.
Among its other recommendations, the council said the bank should finance early stage feasibility and engineering studies for the development of infrastructure projects that foster regional development. It has suggested that the bank focus on existing regional physical integration projects such as the Programme for Infrastructure Development in Africa (Pida).
To advance co-operative learning and help the bank to build investment processes, the council also wants the bank to carry out pilot projects in key pre-identified sectors such as energy and higher education.
It also recommended that the bank carry out a benchmarking exercise of national development banks in order to tailor proposal of fees, rates and terms of loans.
Russian President Putin told the summit that Russia would by the end of the year put together a blueprint mapping out investment co-operation between the Brics nations, adding that the government had already placed about 50 projects and business initiatives onto the roadmap
Among the proposals is one to establish an energy association and an energy research centre.
South Africa’s vice-president at the bank, Leslie Maasdorp, said in Shanghai during the bank’s launch that a lot of people were already pressing him for details of the bank’s first loans, but that the bank only expects to release these in the first quarter of next year.
Meanwhile, the bank’s next centre will be a regional one, to be launched in South Africa.
The Minister of International Relations Maite Nkoana-Mashabane said in July, that a temporary location for the regional office has been identified in Johannesburg.
She said as one of the main challenges to infrastructure development is the absence of bankable projects, project preparation will be the main focus of the centre.
The bank will have a president (India’s Kundapur Vaman Kamath) and four vice-presidents each chosen from one of the Brics countries. They will be based in Shanghai.
Maasdorp, the former vice-chairman of Barclays Capital and Absa Capital will represent South Africa as vice-president, while former Reserve Bank governor Tito was among the non-executive directors appointed.
Did you know?
- Together, Brics countries account for 43 per cent of the world’s population, almost 30 per cent of the world’s economy and produce a third of the world’s industrial products and half of all agricultural goods.
- Trade between member countries had increased from $168 billion (R2.1 trillion) in 2008 to $291 billion (R3.6 trillion) in 2014.
- South Africa’s trade with Brics has grown 43 per cent between 2011, when it was R268 billion and last year, when it hit R382 billion, said President Jacob Zuma during the summit.
- South Africa’s exports to Brics countries in 2013 accounted for 17 per cent of the country’s total exports, up from 13 per cent of all exports in 2010.