Brics bank will fill a gap but it is the mortar that matters
BRICS countries launch their long-awaited development bank this week, but there is still plenty of uncertainty about how it will work. Members of this group of emerging nations — Brazil, Russia, India, China and South Africa — still need to decide where the bank will be based and how the voting rights will be weighted. Voting power may determine which country runs the institution.
The Brics leaders will meet in the Brazilian coastal city of Fortaleza on Tuesday and Wednesday.
It has still to be decided which countries will be the first to get investment, which may cause headaches because all five are at different stages of development.
Donna Oosthuyse, chief country officer of Citi bank in South Africa, said she did not see the Brics bank as reinventing the wheel, given the existence of similar development institutions, such as the World Bank and African Development Bank.
Oosthuyse, who will join the JSE next month, said the establishment of the bank was a good idea, provided its mandate and strategies were clear.
Although Gazprombank deputy chairman Oleg Vaksman largely agreed with Oosthuyse, he was anxious about the finer details of how the Brics bank would be run.
“How and where are the finances going to go? Who will have the voting power when the finances are allocated?” Vaksman was also concerned about the Brics bank being yet another Chinese-controlled development bank. There are also fears that countries unable to contribute as much as others— such as South Africa — may have less of a voice.
This country will contribute only $5-billion (about R53-billion) to the establishment of the $100-billion bank. China, holder of the world’s largest foreign-exchange reserves, will contribute the bulk, $41-billion. Brazil, India and Russia will chip in $18-billion each.
Russia’s finance minister, Anton Siluanov, said the summit would decide whether the bank would be based in Shanghai or New Delhi.
However, Trade and Industry Minister Rob Davies told a media briefing on Friday that no decision had been made and Johannesburg was still in the running to be its headquarters, AFP reported.
Siluanov said the chairmanship of the bank would rotate among member countries every five years.
Wei Xin, spokeswoman for the Chinese embassy in this country, said the new bank would enhance the risk resistance of Brics countries and therefore give them solid support for their development. It would also enable them to establish their own networks for finance security.