New Brics Bank ‘To Boost South Africa’

BRICS leaders
Leaders of the BRICS group of emerging economies

The development bank planned by members of the BRICS group of influential emerging economies could help South Africa finance its state-led infrastructure drive, says Business Unity SA CEO Nomaxabiso Majokweni.

According to I-Net Bridge, Majokweni told an African National Congress (ANC) business forum in Johannesburg on Monday that an immediate benefit of a BRICS bank would be “a massive injection in our infrastructure development plan, which could help the government meet some of its very ambitious growth targets”.

At the BRICS summit in New Delhi, India in March, the leaders of the five countries considered a proposal to set up a BRICS-led South-South Development Bank, funded and managed by the BRICS and other developing countries.

Such a bank could help its member countries pool resources for infrastructure development and lend among themselves during difficult global times.

Majokweni said on Monday that a BRICS bank would “promote growth and investment in its member states and other emerging markets, and will be a strong voice in the lobbying for the reform of international financial institutions”.

The bank could be launched as early as 2013, when South Africa hosts the next BRICS leaders summit.

BRICS financial safety net discussed

Last week, South African President Jacob Zuma, Chinese President Hu Jintao, Brazilian President Dilma Rousseff, Russian President Vladimir Putin and Indian Prime Minister Manmohan Singh met on the sidelines of the G20 summit in Mexico.

During their meeting last Monday, the five leaders discussed the possibility of setting up a currency swap arrangement and a foreign exchange reserve pool within the five-member framework.

The foreign exchange reserve pool would act as a financial safety net, creating a joint pool of reserves to be used in case any member country was faced with sudden capital flight.

BRICS agree to help recapitalise IMF

The Brics leaders also agreed that they would contribute to a recapitalisation of the International Monetary Fund (IMF).

On the Tuesday following the meeting, South Africa announced that it was commiting US$2-billion of its foreign reserves to the IMF’s firewall fund to help prevent future financial crises.

International Relations Minister Maite Nkoane-Mashabane, also addressing the ANC’s business forum on Monday, said the IMF loan would help South Africa gain influence internationally.

“This pledge by BRICS countries is in line with the provision to transform institutions of global governance,” Nkoane-Mashabane said.

“It has been a tradition … that decisions in international financial institutions are made and influenced by countries with strong financial muscles. The more we contribute … the better the prospects for us as a country to influence decisions.”

Mexican President Felipe Calderón, in comments on the weekend, noted that this was the first time that the IMF was being recapitalised without the participation of the US, “which reflects the importance of emerging markets”.