‘New’ development bank

18th March 2016 By: Terence Creamer - Creamer Media Editor

‘New’ development bank

The New Development Bank (NDB), which is in the process of being established by the Brics bloc of Brazil, Russia, India, China and South Africa, is aspiring to begin approving its first batch of loans from next month.

South Africa’s Finance Minister, Pravin Gordhan, announced during his Budget speech in February that the NDB’s Africa regional centre would be set up in Johannesburg during March. He also confirmed that the country had made its first R2-billion NDB subscription in December and that provision had been made for further commitments totalling R11.8-billion over the coming three years.

Launched in 2015 to promote greater financial and development cooperation among developing nations, each of the five founding members of the NDB committed to making initial subscriptions of $2-billion. Despite South Africa’s weakened fiscal position, the country has indicated it will find a way to meet its capital obligations, with the December instalment funded through resources raised from the sale of government’s stake in Vodacom.

Funds for the next instalments will probably have to be secured as part of a R31.8-billion “reprioritisation” exercise undertaken since the October 2015 Medium-Term Budget Policy Statement to accommodate “new spending requirements”, such as those arising as a result of the successful #feesmustfall protests.

It is understood that all five countries have submitted their priority projects for consideration, with bank president KV Kamath revealing to Reuters recently that the first loans were likely to be directed towards “green projects”. Kamath also indicated that, while the bank had no minimum project size, “anything less than $100-million doesn’t make sense”.

It is understood that the four initial projects proposed by South Africa included finance for transmission lines to connect future solar and wind farms to the national grid; a water transfer pipeline; support for the next phase of the Lesotho Highlands Water Project; and the Grand Inga hydropower development, which is proposed for development in the Democratic Republic of Congo, but will supply electricity to several Southern African countries.

Economic Development Minister Ebrahim Patel indicated in February that government was making progress on its first $250-million application to strengthen grid infrastructure and facilitate the connection of additional renewable-energy projects.

In other words, the initial NDB focus in this region is likely to be on large-scale economic infrastructure, which is logical in light of the serious backlogs in power, transport, water and communications networks.

However, researchers from Oxfam and the South African Institute of International Affairs point out that the bank’s vision is to support not only infrastructure projects, but also sustainable development initiatives. They argue that not enough is known about how the NDB defines sustainable development and the role civil society can play in shaping the bank’s agenda.

The researchers argue that, for the NDB to be a truly “new” force in development finance, it should not only clarify its approach to sustainable development, but also create a mechanism through which civil society can influence the bank’s philosophy and programmes.