Wesley Seale. Picture: Supplied
By Wesley Seale
President Jacob Zuma tells of how he remonstrated with Russian president, Vladimir Putin, on where the headquarters of the New Development Bank (NDB), or formerly known as the BRICS bank, should be.
According to the former president, Russia and China would simply be perpetuating imperialism if the bank had its headquarters anywhere else but on the African continent and he shared this much with President Putin and China’s president, Xi Jinping, at the time.
Putin had apparently suggested that the bank’s headquarters be in Shanghai.
In the end, a compromised was reached. The headquarters would be in Shanghai with a regional office in Johannesburg; offices in São Paulo, GIFT City in India and Moscow would follow.
According to Danny Bradlow and his colleague, Magalie Masamba, at the University of Pretoria, “by locating its first regional office in Africa, the NDB was seeking to emphasise Africa’s status as an important international stakeholder. It also sent a positive signal regarding Africa’s potential role in the NDB.”
Established a decade ago, the NDB will host its ninth annual meeting in Cape Town this week.
Meeting under the theme: ‘Investing in a Sustainable Future’, the annual meeting, which comprises several events, will seek to ensure that it is continuing its founding mandate.
This mandate includes amongst others financing infrastructure projects, supporting sustainable efforts in emerging markets and facilitating cutting-edge financial systems for promoting a sustainable future.
The events will include the 44 th meeting of the board of directors, a workshop for the bank’s board of governors on local currency financing platforms, a business session, a flagship governors’ seminar on unlocking financing for sustainable development in emerging markets and developing countries as well as a high-level seminar on energy.
The engagement with civil society organisations will be followed by a seminar on development finance institutions at the forefront of infrastructure investment.
Yet despite its rather young age, the bank has been able to achieve much in the last decade.
Bradlow and Masamba state that in respect of its first objective, which is to finance infrastructure and sustainable projects, the NDB is currently financing at least 13 sovereign and sub-sovereign projects on the African continent alone.
Eleven of these projects are concentrated in strategic sectors such as transport and clean energy.
During the Covid pandemic, US$2 billion (about R35 billion) was made available through the bank’s Covid-19 Emergency Program Loan.
However, it is useful to name some of the projects that the bank has granted loans for because often Africans and people in the developing world in general are not quite sure how their lives are affected by the work done by global institutions such as the NDB.
South Africans would be pleased to know that up to a billion US dollars was made available for the South Africa Municipal Water Supply and Sanitation Program which should be implemented for the next two years.
For our rail logistics improvement program, R17.5 billion was granted while US$180 million was also made available for a project finance facility for Eskom. These are just three examples of the 14 projects, listed by Bradlow and Masamba, which are financed by the NDB.
But the bank has also played a significant role in introducing innovative instruments in the international economy. For example, in the same year the bank was established, BRICS countries also introduced the Contingent Reserve Arrangement which was to provide protection against global liquidity pressures.
In other words, members’ national currencies could be assisted when negatively affected by global financial pressures.
The introduction of the CRA has led to discussions on dedollarisation whereby countries reduce their dependence on the US dollar as a reserve currency, medium of exchange and/or as a unit of account.
In the wake of sanctions against Russia, the desire for dedollarisation seems to have intensified and already China has used its yuan for its energy imports from Russia.
Indian refiners have also paid for Russian oil imports with yuan, the Chinese currency.
Nonetheless, dedollarisation as well as the establishment of the NDB is not to be understood as competitors to the existing western institutions but rather in addition to these.
The majority of BRICS+ countries continue to engage and sit on the World Bank and the International Monetary Fund (IMF) but their wish is to create multipolar institutions rather than just having these Bretton Woods Institutions rule the roost. The same applies to the dollar.
Despite the examples listed above of both India and China using the yuan to trade with Russia and this practice probably expanding to other BRICS+ and developing countries, the dollar will remain firmly in place and even be used by other BRICS+ countries.
Only last week, India’s oil and gas minister, Hardeep Singh, was quoted as saying: “I would like to be able to transact everything in rupees [the Indian currency]…I don’t know what kind of change [the dollar needs to] be affected but I don’t see it…it’s not so easy.”
In other words, for this Indian minister, the dedollarisation process was still a far way off.
The same thinking applies to the NBD vis-à-vis the World Bank and the IMF.
In early June and speaking at a meeting with the Russian president, Vladimir Putin, the current head of the NBD and former Brazilian president, Dilma Rousseff, emphasised the need to develop a multipolar global economy.
“We are a different bank, created by the countries of the global south for the countries of the global south,” Rousseff was quoted as saying, “we cannot dictate conditions for our members.”
In January this year, Chinese vice-premier, Ding Xuexiang, praised the long-term, broad and fruitful relationship between China and the World Bank.
Welcoming a delegation of executive directors from the World Bank to Beijing, Ding committed China to working with the World Bank “to jointly promote global poverty reduction and sustainable development, and strengthen cooperation in areas including climate change response and diversity.”
When the IMF predicted earlier in the year that the Russian economy will grow faster than all advanced economies, the institution received heavy backlash from western governments for ‘doing Moscow’s bidding.’
“Why is the IMF Pushing Putin’s Economic Propaganda?” shouted ‘Time’ magazine.
While the participants of the ninth annual meeting of the NDB have their agenda items and will be discussing innovative ways of financing infrastructure and sustainability, they will be meeting in the aftermath of global financial market volatility.
Whereas German investment in China increases, the worsening of sentiments in German business continues as well as the occurrences regarding the yen all contribute to a global economy that remains tense.
The prices of energy and food continue to rise globally thereby continuing to exacerbate the high cost of living.
In the face of these crises, the need for a multipolar world and multipolar global economy becomes even more imperative.
In this way, institutions such as the NDB will not necessarily compete with the World Bank and IMF but rather stand in addition that countries more options in mitigating the hard hits on national economies.
For to insist on a global economy, as we have seen in the last eight decades, that just has the options of the Bretton Woods institutions will certainly be to continue imperialism.
* Seale wrote his PhD on BRICS.
** The views expressed here are not necessarily those of Independent Media or IOL.
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