Note from Stephen Cook: There’s always an ‘up’ side to every ‘down’ side. This shows how the 2008 GFC led (positively) to the BRICS alliance teaming even more closely to ensure they protect themselves from global market manipulations and turmoil. One major benefit is the establishment of its own Development Bank to counteract the IMF and other current global financial institutions.By Helmo Preuss for The BRICS Post in Johannesburg – April 9, 2014 | Thanks to Golden Age of Gaia.
South African Deputy Finance Minister Nhlanhla Nene on Wednesday said the 2008 global financial crisis helped BRICS co-operation as the five countries worked together to reduce their vulnerability to external financing.
Addressing the theme of development finance in the BRICS economies at the Wits Business School at the University of Witwatersrand, Nene said the proposed BRICS development bank would help with addressing the infrastructure backlog.
“There was a silver lining to the global financial crisis as it boosted South-South co-operation. The modalities of how the development bank will operate and where its headquarters will be located are subjects that are being discussed right now and will be tabled on the sidelines of the World Bank / International Monetary Fund meetings later this week,” he said.
In response to a question from The BRICS Post on the proposed $50 billion capital base, which African Development Bank (AfDB) President Donald Kaberuka said “lacked ambition”, Nene responded that the capital base would grow over time.
The formations of the ambitious BRICS Development Bank was announced at the 2013 BRICS Summit in Durban. The next BRICS summit is to be held in Brazil in July 2014, but a firm date has not yet been finalised.
Africa’s infrastructure backlog has been estimated at requiring an annual $100 billion in funding.
Hannah Edinger from Frontier Advisory noted that the BRICS share of world trade had grown from 4% in 1990 to about 17% with South Africa and Brazil trading the most with other BRICS members.
Trade data released by the South African Revenue Service showed that although South Africa’s imports from Russia jumped by 120% in 2013 to R3.7 billion from only R1.7 billion in 2012.
South Africa’s trade with its BRIC (Brazil, Russia, India & China) partners jumped to R381 billion in 2013 from R297 billion in 2012, accounting for a fifth of total foreign trade in 2013.
South Africa, however, had an overall deficit of R69.9 billion with the bloc in 2013 compared with a deficit of R49.2 billion in 2012.
In response to a question from The BRICS Post on whether funds from the BRICS development bank could be used to finance inter-regional projects such as Phase Two of the Lesotho Highlands Water Project, which supplies water to South Africa, Nene said that as it would benefit two nations, there was a strong possibility of obtaining finance for the project.
President Jacob Zuma officially launched Phase Two in a visit to Lesotho in March 2014. The project is expected to cost more than $1 billion and will boost Lesotho’s water supply to South Africa by 50% by the time the project is completed in 2020.
Asked on what the recent elevation of Nigeria to Sub-Saharan Africa’s largest economy meant for South Africa’s position as “gateway to Africa”, Nene responded that it was of benefit to South Africa as it could no longer be complacent.
“We do not however encourage growth so that we compete with some other nation in a league table. We promote growth so that we can address the development issues of poverty, inequality and unemployment in South Africa,” Nene argued.