South Africa is just five weeks away from hosting the BRICS Summit in Johannesburg with the leaders of the most important emerging economies. If the BRICS foreign ministers’ meeting held in Pretoria is anything to go by, there will be a lot more to discuss than mere trade, investment and development financing.
It seems the ministers may actually want to align their foreign policies on certain issues of international concern, which will serve as a counterbalance to the unilateralism of the US administration.
The very fact that the BRICS envoys (deputy ministers) on the Middle East and North Africa will be meeting in Durban this week in order to grapple with burgeoning international crises in this complex region is indicative of attempts to develop a common political approach to crises.
The days of sidelining the emerging economies in global politics is surely over. Together Brazil, Russia, India, China and South Africa are finding their collective political power, and are even expanding the grouping to the “BRICS Plus” in order to broaden the power base BRICS yields.
BRICS could potentially expand its formal membership in the foreseeable future, bringing in African and other powerhouses. This means that we need to capitalise on our position as the only current African partner in BRICS to drive a progressive agenda in keeping with the AU’s priorities.
BRICS has a great deal to show for its decade of partnership and perhaps one of the most important accomplishments of BRICS to date has been the creation of the New Development Bank (NDB) in Shanghai in 2015. The NDB epitomises the desire of major developing countries to play a bigger role in global governance. It is well known that developing countries and emerging markets grew impatient with the slow pace of reform at international financial institutions to obtain a bigger voice.
The core purpose of the NDB is to mobilise resources for infrastructure and sustainable development in the BRICS countries. The NDB’s vice-president is a South African, Leslie Maasdorp, who has proved to be a visionary driver of the process to mobilise development financing. It is a huge accomplishment that the NDB, which is three years old, has approved loans to date of $5.1billion (R68.7bn).
The NDB is prepared to reach $15bn worth of loans by 2021.
According to Maasdorp, the NDB has completed its first loans to entities in keeping with its policy that 30% of its loans should go to non-sovereign operations or the private sector, while 70% of the loans should have a sovereign guarantee. Usually loans are made to state-owned enterprises or a government where the government underwrites the loan. Many multilateral banks are now giving loans to the private sector for infrastructure financing.
The recent meeting of the board of directors and governors of the NDB has reached an important milestone, having approved a budget for six new projects. One loan is of particular importance to South Africa, as the bank has approved a loan of $200million to Transnet in order to enhance the capacity of its port in Durban.
The project will see the rehabilitating of the port’s container terminal berths that are currently operating beyond their original design, and the upgrading of port infrastructure to provide additional slots for larger vessels.
Sixty-five percent of South Africa’s through-put goes through the Durban port, but its lack of capacity is a key inhibitor of GDP growth.
While Transnet is 100% owned by the South African government, the government is not underwriting the loan as it is being made directly to Transnet in an effort to reduce the number of sovereign guarantees. Similar loans are being approved for other BRICS countries, such as a $200m loan to the state oil company in Brazil, Petrobras, to improve its environmental footprint.
The loan is not being underwritten by the Brazilian government. The loan is to assist Petrobras in complying with new environmental regulatory requirements, through the upgrading of the infrastructure of two existing refineries with the objectives of reducing harmful emissions and preventing water and soil contamination.
The NDB has proved it is helping to fill an important gap in the global development finance architecture, as financing for infrastructure development is limited, despite growing demand. Infrastructure is Africa’s priority, and the infrastructure build across the continent will help to reverse the low levels of intra-regional economic exchange, thereby increasing Africa’s share of global trade.
Such developments are indicative of the real relevance of BRICS for emerging economies today.
At the end of the day, BRICS has become the main engine driving world economic growth. Together BRICS countries contribute to 50% of world economic growth, which exceeds the contribution of all developed countries combined.
* Shannon Ebrahim is Group Foreign Editor
This article first appeared on IOL