President Jacob Zuma, far right, engages with the leaders of fellow Brics nations at the Brics Summit last month.  Picture: GCIS

Photograph by: President Jacob Zuma, far right, engages with the leaders of fellow Brics nations at the Brics Summit last month. Picture: GCIS 

ON JULY 21 the New Development Bank was formally launched in Shanghai, China. It was a memorable occasion, marked by a palpable promise of a new beginning.

Although not its official designation, the bank is more popularly known as the Brics Bank. There was an initial inclination to refer to it as that, but because the intention of the founders is to operate within and beyond the Brics countries (Brazil, Russia, India, China and SA), a more inclusive name was agreed upon — the New Development Bank (NDB.)

In July last year Brics countries signed an agreement to establish this bank. A definitive part of the agreement states that the purpose of the NDB is to "mobilise resources for infrastructure and sustainable development projects in Brics and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development".

The NDB, which is headquartered in Shanghai, China, will have an Africa regional office in Sandton, Johannesburg and over time will establish additional regional offices in other member countries.

The founding members have committed to an initial $100bn capital base for the bank, with China being the single largest contributor. The bank will raise additional capital as and when it is required and bonds will be issued in the local currencies of the founding members. The bank will in due course seek a rating from local rating agencies. That concludes the logistics.

The NDB is a political initiative and the founding members have structural political oversight of the institution. By this we mean that it is driven by a set of shared values and an outlook on development that seeks to counter the current dominant actors.

The board of governors comprises the ministers of finance from the Brics countries and the board of directors and executive directors, referred to as vice-presidents, are all appointees of their respective countries.

A president from one of the member countries heads the executive. Therefore, the political oversight role is the responsibility of the ministers, governance and management lies with the board of directors and the overall direction of the bank is guided by decisions by the heads of state and governments of the founding countries.

As stated in the bank’s purpose, the NDB is not a substitute for the World Bank, African Development Bank, Asian Development Bank or the Development Bank of Latin America. Rather, the NDB will complement and in many cases work with the existing, established institutions.

So why a new bank, you may ask? This is a fair question and must be answered.

Firstly, the Group of Seven countries (G-7) have bullied the emerging market countries into all forms of conditionalities and policy dictatorship. The G-7 countries have made it clear that the head of the International Monetary Fund has to be from Europe and the head of the World Bank, from the US. They have not budged on this despite logical arguments to the contrary.

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THEY openly hold regular caucuses on how to maintain control over these institutions, without any shame whatsoever. And why should they? They are the major shareholders, after all. That an alternative should emerge is a natural outcome of a dispensation that has not been inclusive.

Secondly, the experiences of many emerging market countries point to the need for a new approach to development financing, one that works with emerging market countries without being overly imposing. An alternative that "shows some respect" one might say. The NDB seeks to develop the "next practice" because the "good practice" of old has not been sufficient.

Thirdly, we need a "game changer" in development financing. The NDB proposes to be this, particularly through its crosscontinental alliance of so-called "developing countries".

We recognise that the developing world is increasingly able to leverage its own resources for the purpose of socioeconomic progress and therefore want to act upon this so that we can rebalance the global order with respect to development finance.

As part of this, the NDB will also seek to leverage private sector resources into infrastructure development. I know for certain that the private sector will be a keen partner on this journey.

Fourthly, we desperately need new thinking on development and the NDB should find a way of supporting and partnering with academic and research institutions to promote this. The Shanghai Institute for International Studies has already embarked on this process.

In its view, which I subscribe to, "the NDB should also think beyond providing long-term financing for infrastructure and also seek to become a real ‘new knowledge bank’". In other words, rather than run the risk of capture by existing institutions, the NDB will seek to influence the thinking of our existing partners. This is what the bank perceives as an outcome of being a positive force in global institutions.

Closer to home, the Development Bank of Southern Africa, the African Development Bank and the Africa Finance Corporation are the logical partners for the NDB. We may not always agree on the approaches to use, but we will negotiate our way to a productive working relationship because together, we can raise our financing capacity.

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THE key to our success is to "move with speed" and not be bogged down in bureaucratic squabbling. The NDB is already under a significant amount of pressure to show a pipeline of projects by the end of April next year, making for a clear incentive for collaboration.

While the responsibility to bring these projects lies with the founding members, I doubt that any African country with a sound proposal will be turned down.

In conclusion, I go back to the very beginning. The origins of this "Brics thing" lay in a genuine irritation with the behaviour of the G-7 countries. As a result, the ministers of finance and governors of the central banks of Brazil, Russia, India, China and SA decided to create their own caucus.

The countries met at the spring and annual meetings of the Bretton Woods institutions to plot our own common position and we have now become a voice that cannot be ignored anymore.

We naturally briefed our political principals about this and they too liked the idea and wanted to meet regularly.

Parallel to this, one of the best brains at Goldman Sachs, Jim O’Neill, had been writing and talking about the growing international economic role of what he called the Brics countries. In all intellectual honesty, the acronym originates with him and his team.

Today, the club has a bank because we understood that no dreams for infrastructure development could be achieved without one.

Now we have one bank of our own and can look forward to a new chapter in global development.

Mboweni is a nonexecutive director of the New Development Bank and a former governor of the South African Reserve Bank