DEVELOPMENT banks, as opposed to commercial banks, were needed to grow emerging markets, which were focused too heavily on profit-making, Nobel laureate and former World Bank chief economist Joseph Stiglitz said in Pretoria yesterday.
His comments came amid discussions among the emerging market bloc Brics economies (Brazil, Russia, India, China and SA) to create a joint development bank.
Brics leaders in April agreed that the bank would fund infrastructure and act as an alternate lender to the World Bank and other conventional finance bodies.
"Too many African countries let go of them (development banks) too quickly. I think they should have kept them like some Asian countries did. The likes of Korea industrialised quickly by using development bank assistance," said Mr Stiglitz during a discussion on industrial policy.
SA already has a development bank but business want to see a bigger role for such institutions.
Nomaxabiso Majokweni, CEO of Business Unity SA, recently told an African National Congress business forum that a Brics bank would serve much of the world.
"The Brics bank will promote growth and investment in its member states and other emerging markets, and will be a strong voice in the lobbying for the reform of international financial institutions," she said. However, some analysts have said the Brics members would need to trade more with one another before creating a bank.
Mr Stiglitz said the Brics members' trade would grow naturally as they developed.
"We need to lay the foundations of the bank first," he said.
But Sanlam group economist Jac Laubscher said trade levels and a financial institution that bound Brics members were separate issues.
"I don't see how they are related. A development bank would help SA with external capital essentially. This would not interfere with our trade," he said.
Also speaking at the roundtable, Economic Development Minister Ebrahim Patel said industrial policy and a development bank would be the key drivers in the future growth of African economies.
Africa's relationship with other economies needed to change for the continent to play a greater role in productivity, he said.
"Africa has to negotiate new relationships with both the emerging and traditional markets, so that we don't reproduce the status as the supplier of raw material," he said.
With Khulekani Magubane