The G20 summit at the weekend brought together leaders of the 20 major economies, but for the Brics countries the gathering took on greater significance.
The summit allowed Brazil, Russia, India, China and South Africa to place new momentum behind their commitment to the New Development Bank (NDB) initiative and determination to fast-track its formation.
Briefing the media from the treasury in Pretoria on Tuesday, Finance Minister Nhlanhla Nene said leaders expressed their joint ambition for the swift ratification of the NDB and contingent reserve arrangement.
“Furthermore, they announced the formation of an interim board of directors that will lead the next phase establishing the NDB and tasked ministers of finance to designate president and vice-presidents of the NDB well before the next Brics summit,” he said.
The Brics countries – the world’s largest emerging economies – signed an accord to push ahead with a $50-billion development bank, as announced following the sixth Brics Summit, which took place in Brazil in July.
A treaty for the establishment of the contingent reserve (an emergency fund of sorts), with an initial size of $100-billion, was also signed. The bank will have its headquarters in Shanghai, and there will be an African regional centre in Johannesburg.
Nene said South Africa’s work on the bank and contingent reserve fell under the purview of the inter-ministerial committee on Brics, and a technical local steering committee chaired by treasury director general Lungisa Fuzile.
Since July both committees have been working on Brics initiatives including: the ratification of the agreements establishing the bank and the contingent reserve, participating in working groups and making preparations for the African regional centre.
In establishing the bank, “each country still has to complete an internal process – each will have to satisfy its own country rules and regulations and processes”, Nene said.
A significant number of NDB clients were expected to come from sub-Saharan Africa.
“There are a number of projects in Africa, including transformational infrastructure projects, which face the challenges associated with conversation into the bankable stage. This results in the pace of Africa’s development agenda being constrained,” said Nene.
The project preparation facility embedded in the business of the bank would help to bridge the gap in addressing this challenge, he said.
“In this way the New Development Bank is consistent with our other efforts in the financing and mobilisation of resources from infrastructure,” he said.
New G20 hub
The G20 announced the establishment of a global infrastructure hub that complements ongoing efforts in most G20 nations to reduce barriers to infrastructure development.
The hub, intended to be operational in early 2015, will be open to nonmember countries and is intended to attract private sector financing to complement public sector efforts.
Leaders at the summit agreed that, “while there might be scope in some countries to still use macroeconomic policies to stimulate and support the economy, a bigger boost to growth will have to come from country specific structural reforms”, Nene said.
In South Africa this centres on the National Development Plan. A peer review mechanism facilitated by the International Monetary Fund, World Bank, the International Labour Organisation and the Organisation for Economic Co-operation and Development found it to be well aligned with the strategies agreed to by G20 members.
Nene said the peer review found nothing wanting, except the need for implementation.