Status of the New Development Bank which was launched according to an agreement in Fortaleza, Brazil on 15 July 2014 by the member states of BRICS
FOR WRITTEN REPLY
QUESTION NO: 319 (NO2651E)
PUBLISHED IN INTERNAL QUESTION PAPER NO: 7-2014 OF 5 NOVEMBER 2014
Mr B A Radebe (ANC) to ask the Minister of International Relations and Cooperation:
In view of the agreement on 15 July 2014 at Fortaleza in Brazil by the member states of BRICS to launch a New Development Bank,
(a) When will this bank become operational?
(b) how will (i) South Africa, (ii) the Southern African Development Community and (iii) the rest of the continent benefit from this bank and
(c) will this bank impose the same conditions as the International Monetary Fund and the World Bank? NO2651E
a. Steady progress is being made in both the domestic as well as the BRICS context, in respect of the operationalization of the New Development Bank and its Africa Regional Centre (ARC). We also have to facilitate the ratification of these agreements before the National Assembly as well as the National Council of Provinces (NCOP) as early as possible.
The Bank will technically become operational once ratification processes have been completed. This Agreement shall enter into force when instruments of acceptance, ratification or approval have been deposited, in accordance with Article 48 of the Agreement by all BRICS countries.
There is a strong political commitment by all BRICS members to prioritize such processes, but the required policies and administrative procedures will be prepared in the meantime for consideration by the Board of Governors, once operational. The BRICS Finance Ministers will submit a first report back to the BRICS Leaders at the G20 Summit on 15 November 2014 in Brisbane in this regard.
b. The New Development Bank’s Articles of Association state that, “The Bank shall mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.”
I would also like to emphasize that this new institution presents us with an ideal opportunity to create new and innovative approaches to ensure that the Bank’s Headquarters and African Regional Office work closely together and ensure better communication with its clients, which will logically come from the region, as well as to respond better to the region’s needs and developmental agenda and aspirations. It can be recalled that President Zuma was designated as the nodal point between the BRICS and African Union leadership at the Fifth BRICS Summit Retreat that was hosted in 2013 and which pertinently focused on cooperation on mobilizing resources for infrastructure, which together with sustainable development, constitute the core purpose of the Bank.
As you are aware, Africa faces many challenges of infrastructure development due to insufficient long term financing. The World Bank estimates that Africa will require approximately two trillion US dollars, in order to reach a level sufficient to fast-track industrialization and regional integration within the continent.
The establishment of the New Development Bank and its African Regional Centre should also play a significant role in availing the required resources to overcome this deficit. Our focus will be to align the implementation of the AU’s projects, including those of its Regional Economic Communities, such as SADC, and programmes within the ambit of the Bank’s operations.
c. The New Development Bank’s interim Board of Directors will now focus on developing the required policies, terms of reference and other required measures to operationalize the provisions contained in the agreement on the New Development Bank, including the relevant policies prescripts according to which financing of projects will be granted.
We are cognizant of the infrastructure gaps that exist in the continent, which bar us as Africans, from trading with each other in an efficient manner as well as integrating and developing at a faster pace. Only through solid infrastructure programmes that make it cost-effective to manufacture and trade with each other, can we truly develop as a continent. The New Development Bank and its African Regional Centre can be one of the important actors that can play a role in ensuring that we have the important infrastructure fundamentals needed to grow and develop. South Africa will obviously align our input to these policies and processes with sound financial practices and risk mitigation policies while also cognizant of our Continent’s developmental imperatives and the African Union’s relevant positions and practices.