Speech by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane, on the occasion of a Public Lecture on: ”South Africa’s Chairpersonship of BRICS – from Durban to Fortaleza”, Institute for Global Dialogue (IGD), Friday, 01 August 2014.
Dr Siphamandla Zondi, Director IGD;
Your Excellencies, High Commissioners and Ambassadors with us;
Senior Managers from DIRCO with us here today;
Members of the academic community, and Think-Tanks with us;
Our hosts, and members of staff of IGD;
Members of civil society with us this morning;
Men and women of media; and
Ladies and Gentlemen;
It is a great honour and privilege for me to deliver this address today, in partnership with the Institute for Global Dialogue.
I must accordingly express my sincere gratitude to the IDG, in particular, Dr Siphamandla Zondi, for inviting us to give our perspective on South Africa’s chairpersonship of BRICS.
We at DIRCO have taken note of the work you do at IGD, and appreciate the volume of resources and sheer labour that goes into all your research and the many articles and books you produce. We thank you for sharing these resources with us – they will go a long way in helping us do our work smarter.
With such strong support from our alliance, we are hoping that this session will place us in a pole position to provide a much stronger, richer and vibrant account of the voyage we have covered with our BRICS partners from Durban to Fortaleza.
Our journey from Durban to Fortaleza has not been an easy one, but it is from this journey that we have a good story to tell.
Amongst others, a good story worth telling is that we are proud members of an emerging group that represents 42,6% of the world’s population, 18% of global trade, attracts 53% of foreign capital, accounts for 20% of global GDP and generated 61% of economic growth in the world economy and has an estimated USD 4tr foreign reserves base.
Our own trade with BRICS countries increased from R297 billion (2012) to R381 billion (2013) – 20% of total South African trade. The BRICS Exchange Alliance is based on cross listing of shares from over 7000 BRICS companies with a total capitalisation of about $8 trillion.
When President Jacob Zuma addressed a session of business leaders from Brazil, Russia, India, China, South Africa (BRICS) member states on the side-lines of the BRICS Summit in New Delhi, India, he point out that our participation in this grouping of the world’s leading emerging economies is;
“designed to help us achieve inclusive growth, sustainable development and a prosperous South Africa”.
Since New Delhi, we never looked back. To this day, we continue to strengthen the responsibility we have bestowed on ourselves to achieve inclusive growth, sustainable development and a prosperous South Africa, with Africa as our priority. We look at BRICS as a vehicle through which we could achieve some of our developmental goals.
Ladies and Gentlemen;
As you know, President Jacob Zuma has just returned from Brazil where he participated at the 6th BRICS Summit in Fortaleza.
At Fortaleza, South Africa ripped the benefits of its earlier engagements in Durban, where we successfully hosted the 5th BRICS Summit in March 2013.
In Durban, we had an opportunity to stimulate dialogue, and launch negotiations for the establishment of, namely;
- the New Development Bank (NDB), and
- the Contingent Reserve Agreement(CRA).
In Fortaleza, leaders agreed to move swiftly in order to process the Agreement on the New Development Bank (NDB); and the Treaty for the Establishment of a BRICS Contingent Reserve Agreement (CRA).
These are some, amongst the many, tangible outcomes of our BRICS chairpersonship – a legacy whose humble beginnings can be traced from Durban.
We are inspired by these outcomes. We have an urge to work twice as hard, and smarter. This is perhaps the reason why we want to continue our forward march, redouble our efforts to bring about more tangible and vibrant proposals, particularly on issues of common interest and mutual benefits within the field of development within emerging economies and like-minded states.
The New Development Bank is by far the most powerful, single institution conceived by emerging economies for the sole benefit of their own development and prosperity. It has a solid vision inspired by ideals founded upon South-South Cooperation.
South Africa remains committed to these ideals that seek to position developing nations, and emerging economies, on a global map as key contributors to the global GDP, and overall growth and development.
Programme Director, having said that, please allow me to share with you and our esteemed guests some practical information on the proposed modalities and future operations of the New Development Bank. These are as follows:
- The headquarters of the Bank will be located in Shanghai, China;
- The establishment of the NDB’s first regional office will be in Johannesburg (the Africa Regional Centre) to be launched concurrently with the bank in Shanghai;
- The order of rotation of Presidents of the Bank who will serve for a five year term, non-renewable, will be India first to be followed by Brazil, Russia, South Africa and China;
- A Special Fund will be created within the Bank, with the participation of all founding members, for the purpose of helping project preparation and implementation;
- The first chair of the Board of Governors shall be from Russia; and
- The first chair of the Board of Directors shall be from Brazil.
At this stage, the only outstanding matter is for member states to ratify agreements for the New Development Bank and Contingency Reserve Agreement – we have made a commitment to give priority to this undertaking.
The Bank shall have an initial authorized capital of USD 100 billion and the initial subscribed capital shall be of USD 50 billion, equally shared among founding members.
South Africa will contribute USD 2 billion within a 7 year period, which is broken down as 7 instalments of USD 150 Million for the first 6 months, USD 250 Million for the 18 month period, followed by USD 300 Million for years 3, 4 and 5 and then USD 350 for years 6 and 7.
Ladies and Gentlemen;
It will now be the responsibility of the BRICS Central Banks to work with speed to conclude an Inter-Central Bank Agreement (ICBA) which will operationalise the Contingency Reserve Agreement (CRA).
What is this Contingency Reserve Agreement (CRA)?
The CRA is a virtual foreign exchange reserves pool modelled along the lines of the Chiang Mai Initiative Multilateralisation Agreement with a USD 100 billion reserve.
In order to ensure that the CRA is activated, members are expected to advance financial contributions, with China contributing the most part at USD 51 billion, Brazil, Russia and India USD 18billion and South Africa USD 5 billion. These contributions are aimed at forestalling short-term balance of payments pressures, provide mutual support and also provide additional and supplementary support and insurance for global financial stability.
The Parties shall be able to access resources subject to maximum access limits equal to a multiple of each Party’s individual commitment - for China 0,5% and for Brazil, Russia and India 1%while South Africa benefits with 2%. This means, therefore, that South Africa will be able to call on USD 10 billion. These transactions bear no immediate or direct financial implication. They will only be activated once a member makes a call for capital and according to the agreed share. Under this arrangement, transactions come with strict conditions of repayment.
Ladies and gentlemen;
In Fortaleza, President Dilma Rousseff of Brazil also extended an invitation to the leaders from eleven South American countries i.e. Argentina, Bolivia, Chile, Columbia, Equator, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela to meet with the BRICS Leaders on 16 July 2014. On 27 March 2013 when we hosted the 5th BRICS Summit, President Jacob Zuma also extended the same gesture to African leaders.
Leaders from South America warmly endorsed and welcomed the Bank initiative. They indicated that they had project proposals ready. They also added that there have been many attempts since the Second World War to launch such and initiative and that the Bank is a first tangible outcome in this regard.
Other agreements concluded include a Memorandum of Understanding on Cooperation among BRICS Export Credit Insurance Agencies, and the Cooperation Agreement on Innovation under auspices of the BRICS Inter-bank Cooperation Mechanism under auspices of the BRICS Inter-Bank Cooperation Mechanism to which the Development Bank of Southern Africa is the South African party.
The Summit outcome documents, the Fortaleza Declaration and the Fortaleza Action Plan strengthens the BRICS willingness to shape the global discourse through leveraging its amplified voice on issues pertaining to Growth and Development, Global Governance and Peace and Security.
We reflected pertinently that international governance structures designed with a different power configuration show increasingly evident signs of losing legitimacy and effectiveness as transitional and ad hoc arrangements become increasingly prevalent, often at the expense of multilateralism. We reiterated that BRICS is intended as an important force for incremental change and reform of current institutions towards more representative and equitable governance, capable of generating more inclusive global growth and fostering a stable, peaceful and prosperous world.
Ladies and Gentlemen;
As the only African country with membership of BRICS, our role is very key and strategic. Our geo-strategic importance and influence is of critical importance to other member state of BRICS.
The rationale for the establishment of BRICS was anchored upon a shared vision to pursue the restructuring of the global political, economic and financial architecture into one that is more equitable, balanced and rests on the important pillar of multilateralism.
As a result, we proposed to our BRICS partners that it was imperative that likeminded countries, more than ever before, pursue the ideal of a new world order whose multilateral structures would be more representative and legitimate. We are humbled that since inception, BRICS has focused on the reform of the global financial and economic architecture.
It will be recalled that BRICS leaders have always articulated that they “are committed to advance the reform of international financial institutions, so as to reflect changes in the global economy”. We will continue to support and leverage the amplified BRICS voice to ensure economic gains and developmental space for emerging as well as poorest and most vulnerable countries.
Peace and security remains a sore point in our developmental aspirations as a country, and indeed for the region. Working together with the UN, and our BRICS partners, we can silence the barrels of guns in the continent.
President Zuma again briefed and engaged our BRICS partners on collaboration with the AU Peace and Security architecture at the Fortaleza Summit. This move sought to garner support for the vision of the AU leadership and its ongoing commitment for a conflict-free continent by 2020.
We believe that in achieving lasting peace, conditions must be created that to support development and share prosperity with those who less privileged. Our BRICS partners’ support was obtained. What remains is for our leadership to engage further, and mobilise resources and operationalisation of the African Capacity for Immediate Response to Crises (ACIRC). It is envisaged that the ACIRC will be launched in October 2014, and will serve as an interim mechanism until the African Standby Force is launched
Ladies and gentlemen;
In the regional context, President Zuma once again utilised this occasion to engage the BRICS Leaders on the importance and significance of the New Development Bank for the aspirations of the African continent as the African leadership.
It could be recalled that the African Union Chairperson, the New Partnership for Africa’s Development (NEPAD) Chairperson as well as the AU Commission Chairperson had approached President Zuma in March 2012 to engage the BRICS Leaders on this initiative.
We are pleased to report that President Zuma has indeed successfully represented the mandate received from the African leadership in respect of the importance of the Bank for the continent’s own developmental aspirations.
When we consider that the aggregate price tag of the PIDA projects is estimated at USD 360-billion over the next 30 years, with at least USD 68-billion required by 2020 for 51 regional projects and programmes – and over 400 subprojects, the Bank is a timely response to these needs. Infrastructure and sustainable development projects will be the core focus of funding for the Bank.
The significant additional gain is that the regional office, which will be established in South Africa concurrently with the Headquarters in Shanghai, will pay particular attention to project preparation and implementation.
Our country also has its own Infrastructure Plan. This plan requires funding beyond the means of our fiscus. This Bank will certainly bring complementary funding to facilitate the implementation of such projects, in line with our National Development Plan.
The Bank’s leverage to achieve impact will be multiplied by the multiplicity of currencies ranging from the Rand, Real, Rouble, Rupee and Renminbi investments made by the members.
Our contributions to the bank are in fact investments and not mere expenditure. It is expected that the Bank will function according to sound commercial terms with a view to obtain desired credit ratings. We have no doubt that its assets will grow and multiply over time as is the case with other similar Multilateral Development Banks..
The BRICS Trade Ministers also met prior to the Summit, and welcomed the presentation of Joint Trade Study which was prepared during South Africa’s tenure. The latter made important recommendations for promoting value-added exports among our countries. Furthermore, it ensures that intra-BRICS trade is more sustainable and aims to foster economic cooperation and to promote trade and investment between the BRICS countries. The Ministers further highlighted the potential for forging closer links between the Micro, Small and Medium Enterprises (MSME) of the BRICS.
The meeting of the BRICS Business Council and Business Forum took place from 14-15 July 2014 and attracted 700 business-persons. We were particularly pleased that the Council also focuses on promoting and increasing value-added trade and manufacturing amongst the BRICS countries and between the BRICS countries and Africa.
The proposed BRICS-Africa Council could add an additional dimension to augment trade and investment between BRICS and Africa, now the fastest growing region in the world. The UNCTAD’s World Investment Report of 2013 describes BRICS as significant investors in Africa. In 2010, the share of BRICS in FDI inward stock in Africa reached 14 per cent and their share in inflows reached 25 per cent. Most BRICS FDI projects in Africa are in manufacturing and services. South Africawas the fifth largest holder of FDI stock in Africa in 2011, with USD 18 billion.
Russia as the next Chair also highlighted priority focus areas for its tenure as from 2015, notably, BRICS Economic Cooperation proposal. The BRICS Sherpas will submit such a proposal by the next Summit.
On our part, we will continue to prioritise our domestic priorities, with a continuous review of our BRICS Strategy accordingly. We will continue to play a catalyst role to advance the required reforms of the global political and economic architecture. This commitment will ensure prosperity for all according to a new “win-win” global template, breaking with the previous zero-sum template.
The BRICS Leaders’ vision continues to resonate with the core foreign policy vision of South Africa.
Enquiries: Mr Clayson Monyela, Spokesperson for DIRCO, 082 884 5974.
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