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New Development Bank and its implications for South Africa

The New Development Bank (NDB) the key financial institution for the BRICS countries in funding infrastructure and business projects with 23 projects approved for all BRICS countries, the NDB is also deepening its impact with regards to South Africa.

South Africa one of the beneficiary of the bank, according to the asaurenergy.com NDB recently cleared $300 million for the financing of South Africa’s green energy sector. The NDB in July activated a dormant loan to Eskom of $180 million and earlier this month extended a line of credit to the Development Bank of Southern Africa (DBSA) worth $300 million.

In May of this year the NDB loaned $200 million to a state-owned ports and freight operator, Transnet for the rehabilitation of its container terminals in Durban. New South African finances minister Tito Mboweni, in his 2018 medium-term budget speech highlighted the New Development bank, as one of the key banking institutions with regards to promoting agriculture and infrastructure develpoment.

The New Development Bank is also planning to increase lending for private sector to as much as 30% of its portfolio which sits at $5.1 billion at the moment, as reported by africanbusinessmagazine.com. South Africa is definitely well positioned to gain even further in the future especially with the economic constraints its facing at the moment.

By Mokgethi Mtezuka

 

India supports BRICS Bank’s Membership expansion

Final G-20 Finance Ministers and Central Bank Governors Meeting under the 2018 Argentine Presidency and the final BRICS Deputies Meeting under the 2018 South African Chairmanship were held on 11th -12th October 2018 in Bali, Indonesia on the sidelines of the IMF/Fund Bank Annual Meetings.

The BRICS Deputies Meeting focused on reviewing the progress achieved by the BRICS Forum in 2018 as well as deliberating on the way forward under the upcoming 2019 BRICS Chairmanship of Brazil.

On the Finance Ministry track, the main issues that came-up for discussion were the membership expansion of New Development Bank (NDB), the staggering of schedule of payment of paid-in capital of NDB, the work of BRICS PPP Task Force and examining the possibility of developing a consensus on BRICS Rating Agency.

On the Central Bank track, the discussions centred on the test run of the BRICS Contingent Reserve Arrangement undertaken by the Central Banks in 2018, the Fintech stocktaking exercise and the progress of work happening in the BRICS Bond Fund Working Group.

 Department of Economic Affairs Secretary (EA), Shri Subhash Chandra Garg, in his interventions indicated India’s unequivocal support for NDB’s membership expansion. Further, he called upon the BRICS Deputies to endorse the membership expansion plan of NDB following which the NDB Board along with the Management can continue with their work on finalizing the processes for membership expansion. Secretary (EA) also emphasized that the role of BRICS is to provide broad guidance to NDB and the decisions on managing the micro details should be left to NDB Board of Directors and Board of Governors.

On the BRICS Rating Agency, Secretary (EA) indicated that the Report of the Expert Group set-up to study the feasibility of BRICS Rating Agency has envisaged the setting-up of a BRICS Rating Agency which is completely independent and private sector led.

Secretary (EA) emphasized on the need felt by the emerging markets and developing economies for a rating methodology that takes into account the country circumstances of these economies. In this context, there was a need for BRICS to take lead and work together on the setting-up of a BRICS Rating Agency.

Source: Clipper 28 (Press release)

 

BRICS Institutions

The New Development Bank (NDB), based in Shanghai, China has been one of BRICS’ key achievements. The bank was launched in 2014 with the aim of financing infrastructure projects for member states.

BRICS members have articulated that this institution does not seek to compete with traditional international finance institutions, but rather, to complement them.

The bank utilises the model of multilateral development banks. What this means for Africa is that there will be a variety of funding avenues on offer if funding is opened up for non-member countries or if the BRICS Plus outreach is formalised.

Representatives of the African diplomatic community are positive about the bank, saying Africa stands to benefit from a new finance institution as it adds a competitive advantage.

banks and, along with the African Regional Centre, stands to gain and learn from the AfDB. Research undertaken by the South African Institute of International Affairs (SAIIA) shows a large amount of interest in the NDB – and, by extension, its regional office – on the part of African leaders.

Identifying and preparing proposals for projects in Africa has met with major bottlenecks. Hence, say SAIIA researchers, “early engagements between Africa and the NDB should include agreements that project preparation goes beyond bankability to the point of integrating those factors that indicate how NDB-funded projects will address and measure poverty alleviation and the empowerment of women”.

find full article in BRICS Journal Print Issue 6

BRICS New Development Bank uses its secure rating to launch rand bonds

The BRICS New Development Bank (NDB) will be using its strong credit rating to launch a rand bond programme which will enable it to provide funding South Africa’s public entities. NDB Africa head, Monale Ratsoma said on an interview last week, that this could be on-lent at a competitive rate.

The BRICS Bank has prolonged a $300 line of credit to the Development Bank of Southern Africa (DBSA), this will be the third loan with a SA public entity.

The DBSA loan according to Spokesperson, Sebolelo Matsotso the loan will be drawn when mandatory.  According to Matsotso, the loan will be used for renewable energy projects and other projects that will aid in reducing the greenhouse gases being released in SA.

Like the BRICS Bank, the DBSA is an infrastructure bank and has lent money to the country’s state-owned entities such as Eskom.

Matsotso’s intention according to Business day was to use the NDB’s strong credit rating at a lower cost than what can be done by South African public entities. Most SA public entities hold the same or lower rating that South African sovereign. Only Moody’s still rates South Africa’s sovereign debt as investment grade at Baa3 while Fitch and S&P have it in noninvestment territory, reports Business day.

“We hope to utilise the rating strength of the NDB to raise money in a more cost-effective way. The DBSA should then be able to competitively on-lend to its clients. We also want to use the rating strength to issue a rand bond. Regulatory processes with the JSE and SA Reserve Bank towards that fairly advanced,” says the spokesperson.

The size of the bond programme is to depend on the need for it in the market, which is still researched.

 

Source: Business Day

Emerging market crisis – the BRICS Bank makes headway

 

Formerly referred to as the BRICS Bank, the New Development Bank (NDB) was founded just over three years ago. The BRICS has been a receiving a lot of criticism over the years – it was dismissed a label as a marketing acronym.

With the current cloud hanging over emerging markets the bank is surprisingly making headway. South Africa slipped into an unexpected recession earlier in the month, Brazil and Russia’s economies are still recovering. “A sharp fall in the rupee reflects jitters about India” – the Economist. China is currently in a trade war with the US.

The bank aimed at reshaping world development finance, has been constantly compared to the Asian Infrastructure Investment Bank (AIIB) which was launched after the NDB. The BRICS Bank was viewed to be of lesser influence and effectiveness.

The Economist. Com at a closer look inspect both financers and noticed the following; both banks are busy as each other. The New Development Bank has approved $5.7bn in loans and the AIIB has approved $5.3bn. Both the NDB and the AIIB are adding to their ranks daily. Both have international credit rating, three rating agencies rated AIIB triple -A scores last year. The NDB was rated S&P and Fitch AA+ in August.

The BRICS bank is gaining traction and has been admired by economists. “Why do we need another World Bank? The AIIB looks a lot like what’s out there. The NDB is looking more innovative” says Gregory Chin, economic diplomacy specialist at the University of Canada.  Chin added by saying that the BRICS walls are shaky, but the banks looks more solid.

 

Source: The Economist

BRICS bank board of directors approve three projects worth $825 million in Russia and India

New Development Bank (NDB) board of directors approved three projects worth $825 million in Russia and India. The NDB, formerly referred to as the BRICS bank is been run by BRICS member countries, Brazil, Russia, India, China and South Africa. The projects were approved at the NDB’s 16th meeting in Shanghai.

“The board approved a non-sovereign loan of $300 million to Sibur Holdings for environmentally sustainable infrastructure development related to ZapSibNefteKhim project” said the board of directors in a statement.

According to the statement the BRICS bank will provide financing “including reimbursement of expenses for construction of utilities including water treatment facilities, transport and logistics infrastructure”.

The BRICS bank is also going to provide two loans of $350 million and $175 million to India for fixing major district roads with total length of approximately 2,000 KM. The roads according to Tass the project is meant to create connectivity between rural interior, national and state highways.

 

Source: TASS

The New Development Bank (NDB) executes projects successfully

The New Development Bank (NDB), run by a group of emerging economies , BRICS (Brazil, Russia, India, China and South Africa) has been successfully implementing projects says the bank’s senior manager.

BRICS bank vice president, Vladimir Kazbevov told Russia’s state news agency, TASS that the bank has approved 23 projects for all BRICS countries.  “Their total cost is 5.7 billion. By the end of the year, I think another 1.5 billion dollars will be added. Next year, we plan to expand projects to somewhere around 7.5 billion dollars” says the New Development Bank President.

The NDB has received AA+ rating from Standards & Poor’s and Fitch agencies. According to Kazbevov the rating is enough confidence for the NDB to enter the international financial market.

The bank’s capital is being boosted every year. “Next year, the plan is 7,5 billion dollars. And according the strategy, in my opinion, by 2022 we should have about 44.5 billion dollars in capital. Our capital is being formed quite on schedule, Russia and China are contributing ahead of time” he added.

The banks capital is approximately 100 billion dollars and it says all members of the United Nations can join it, but BRICS nations can never have less than 55 percent of the voting power.

 

Source: Reuters

BRICS Business Forum seeks to boost trade among five members

South Africa, host of the 10th BRICS Summit, held a business forum in opening of the event, yesterday. The event aimed at enhancing trade between members of the BRICS bloc was attended by business and government leaders from member countries (Brazil, Russia, India and China).

Chinese President Xi Xinping used the forum as a platform to speak against unilateralism and protectionism – Xiping said this in the wake of the US imposing tariffs on billions of dollars worth of Chinese goods. 

Xinping said; “a trade war should be rejected because there will be no winner.” He added that those who are “pursuing this course would only end up hurting themselves.”

Every year, leaders from the five countries meet to deliberate and make recommendations to governments about ways to harness business opportunities, as well as address trade imbalances.

South Africa has maintained a trade deficit with Brazil and China, with China being the country’s largest trading partner among the BRICS countries, accounting for between 40-75% of annual exports and up to 75% of annual imports.

The New Development Bank has given out loans to the value of $1.7bn this year alone.

The Chairperson of the BRICS Business Council, Iqbal Surve, said initiatives such as the New Development Bank should be used as vehicles to enhance trade between BRICS countries, especially in the face of protectionist policies. 

 

Source:Fin24

 

China rallies BRICS support as US steps out trade-war

China has rallied the backing of BRICS in fighting protectionism as US President Donald Trump has threatened tariff impositions on virtually all Chinese imports.

China, Brazil, Russia, India and South Africa have agreed to “fight against trade protectionism together”, after the G20 Summit of finance ministers and central bankers in Buenos Aires, the Chinese Finance Ministry confirmed in a statement.

Finance Minister Liu Kun told the meeting that BRICS should: ”firmly support economic globalisation and multilateralism and unequivocally oppose unilateralism and protectionism in any form,’’ as the global economy faces increasing uncertainties and instability.

Liu also urged his counterparts to push for advanced nations to adopt “responsible” economic policies, and closely monitor the pressure on capital flows in emerging markets brought forward by policy changes in developed nations.

The statements were released subsequent to Donald Trump saying is he is prepared to impose $500bn in tariffs on imports from China. Trump alleged that the China and European Union are weakening their currencies to obtain trade benefits.

Source: Fin24

BRICS Africa Infrastructure Programme launches

The BRICS establishment continues to break new grounds ahead of the upcoming 10th BRICS Summit.

Wednesday 10 July marked the official launch of the BRICS Africa Infrastructure programme, initiated by the BRICS Business Council Infrastructure Working Group. This is a brand new project portal  that will create and encourage connectivity amongst BRICS member states.

The Infrastructure Working Group in partnership with with Transnet are tasked with the mission of promoting manufacturing, job creation and facilitate interaction among businesses.

Said Transnet Freight Rail Chief Executive, Mr. Ravi Nair: “The Working Group is creating the connectivity of BRICS  projects as a vehicle for project owners to meet with potential funders/sponsors. It will also be available to the global community that is interesting in understanding the status of infrastructure projects and their funding. The projects’ visibility will assist in unlocking more opportunities, funding and to initiate practical cooperation projects in the infrastructure space. The portal will also allow African investors interested in opportunities in other BRICS Member states to have access to project information.”

The portal will be hosted on South Africa’s BRICS business Council website. The BRICS Business Council was established in 2013 with the aim of promoting business engagement between the BRICS countries.

Additional reporting: SABC News