SA drags its heels on joining Asian bank
SA faces a $1m payment deadline by the end of December to officially join the Asian Infrastructure Investment Bank or risk being excluded from the multilateral development lender that it agreed in principle in 2015 to join. Though a founding member, SA has been a reluctant participant in the bank.
SA faces a $1m payment deadline by the end of December to officially join the Asian Infrastructure Investment Bank (AIIB) or risk being excluded from the multilateral development lender that it agreed in principle in 2015 to join.
Though a founding member, SA has been a reluctant participant in the bank, and for several years it failed to ratify its articles of agreement. It has also whittled down its initial proposed shareholding by more than half since 2015.
SA has missed four ratification deadlines from 2016 to 2019 to become a member, which would grant it access to finance for sustainable development projects, for example. As much as 50% of the AIIB’s portfolio is for funding green projects in member countries.
The cabinet approved the terms in September that would give SA a minimum shareholding of 50 shares, or a 0.19% stake, in the AIIB with a nominal value of $5m.
An amount of $1m (about R17m) would be payable within 30 days after ratification by parliament, with the outstanding $4m being callable.
As a nonregional founding member, SA would also receive an additional 600 shares after ratification, but to retain this status it will have to pay the full $1m by end-December.
Treasury chief director Mfundo Hlatshwayo told MPs that SA participation in the AIIB was intended to be a symbolic gesture, geared towards strengthening burgeoning business relationships in Asia and towards demonstrating solidarity with the region’s development aspirations under what is called South-South co-operation.
“SA may benefit through technical assistance and financing of its clean energy transition programme,” Hlatshwayo said. The Treasury is asking parliament to approve the ratification, but the DA, FF+ and IFP reserved their positions on the finance committee’s decision on Tuesday to recommend to the National Assembly to approve the ratification.
“The National Treasury and the ministry of finance were not able to finalise this matter given the challenge of the changing economic environment and reconsiderations on the shareholding that SA to take up at the AIIB. Cabinet endorsement was necessary in respect of the proposed revised shareholding,” Hlatshwayo said.
SA is already a member of the New Development Bank (NDB) established by the Brics countries (Brazil, Russia, India, China and SA). It owns 19.42% of the subscribed capital of the bank, which came into force in 2015, and has received $5.4bn in financial support to date.
Each member country has had to pay $2bn over seven years as their contribution to the bank’s capital.
The AIIB was formed by 21 Asian countries, led by China, and it now has 93 members — 47 in Asia and 46 outside the region. Other African member countries include Algeria, Benin, Ivory Coast, Egypt, Ethiopia, Ghana, Guinea, Liberia, Morocco, Rwanda, Sudan and Tunisia. The bank has an authorised capital of $100bn and a subscribed capital of $50bn.
The 2015 cabinet recommendation was for SA to subscribe for up to 590 shares plus its 600 founding member shares, which would have required a $60m contribution, but Hlatshwayo said that this option was “no longer affordable to SA due to prevailing economic and fiscal challenges.”
Only SA and Kuwait have not yet ratified the articles of agreement.
SA MAY BENEFIT THROUGH TECHNICAL ASSISTANCE AND FINANCING OF ITS CLEAN ENERGY TRANSITION PROGRAMME