BRICS: Destination Africa - The New Development Bank - a promise of new funding?
On Wednesday, May 27, 2015, Day 3 of the African Development Bank’s 50th Annual Meetings, a panel session was dedicated to a discussion on the BRICS (Brazil, Russia, India, China and South Africa) countries. Among other issues addressed by participants, was the New Development Bank (NDB), the African Regional Centre (ARC) and the Contingent Reserve Arrangement.
Contributions were made to this roundtable by South African Finance Minister Nhlanhla Nene; Deputy Governor of the Central Bank of Uganda, Louis Kasekende; Chair of the Board of the Tanzania Investment Bank (TIB), William Lyakurwa; and the Chief Executive Officer (CEO) and founder of fund management company Advanced Finance & Investment Group (AFIG), Papa Madiaw Ndiaye, from Senegal. The panel was completed by renowned banker Mizinga Melu, currently CEO of Africa Regional Management at Barclays.
South African Finance Minister Nhlanhla Nene was the first to speak, emphasizing the plural dimension embodied by the economic group of the BRICS states, composed of Brazil, Russia, India, China and South Africa. Nhlanhla Nene recalled that when South Africa hosted the BRICS Conference in 2013, the South Africa Head of State had invited his counterparts from the continent to the event.
"Our participation in the BRICS enabled us to make significant progress, including the creation of the NDB," said Nhlanhla Nene. He went on to add that this panel was the place to share what had been done so far, to take inspiration from it to the benefit of the African continent. South Africa, the Minister revealed, will be the location of the headquarters of the ARC. As for the New Development Bank, identification of its future location is in progress. Priority will be given to such projects as road infrastructure, because Africa has a real need for this. This new bank, according to Nhlanhla Nene, will have a capital of US $100 billion, including $41 billion provided by China and $5 billion from South Africa. Other African countries are invited to invest in it.
Louis Kasekende, Deputy Governor of the Central Bank of Uganda, expressed his wholehearted agreement, deploring the large infrastructure gap on the continent. Kasekende added that the BRICS bank will play a complementary role to that of other development partners. "We want to have access to credit as quickly as possible and at the lowest rates," he said. Louis Kasekende expressed the opinion that there was a need to go much further than trade with China in consumer goods, targeting other areas such as construction and public works, major projects, etc. He added that from the perspective of the BRICS, it was necessary to further expand trade.
Papa Madiaw Ndiaye, representing the Senegalese private sector, said that Africa needed concrete trade initiatives, before going on to ask South Africa to facilitate the participation of African banks in this new bank, a "breakthrough bank", according to Papa Madiaw Ndiaye. He then went on to call on the private sector, the engine of growth, to feel more affected.
William Lyakurwa, Chair of the Board of Directors of the Tanzania Investment Bank, said that the BRICS states were not satisfied with existing international financial institutions. Just as Asia had created its own bank, the creation of the NDB marked a positive step. William Lyakurwa concluded on the need, in his view, for Africa to present bankable projects to develop its infrastructure, to promote the better circulation of people and goods, etc.
Returning to the subject of the BRICS states' New Development Bank, Mizinga Melu made the point that it would bring together partners from Brazil, a country renowned for mining, from Russia, which has good experience in oil, and from China, a specialist in construction and public works. With 62 per cent of its population being young people, Africa needs the support of the NDB, concluded the CEO of Barclays' Africa Regional Management.
What will the future bank's priorities be? How can the maintenance of infrastructure be ensured when some of it is proving to have a short lifespan while loans are repayable over 50 years? What support needs to be offered to local authorities in the context of a decentralization policy? There were many questions raised during the panel session. The South African Finance Minister pleaded for an alternative bank to support already existing financial institutions.