The establishment of the New Development Bank, which will be headquartered in Shanghai in China, and the Contingent Reserve Arrangement (CRA) was announced this week at the sixth BRICS Summit in Brazil.
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The bank is expected to have authorised capital of up to 100 billion US dollars and subscribed capital of 50 billion US dollars. All five BRICS member countries – Brazil, Russia, India, China and South Africa – will have equal shareholding of 10 billion US dollars.
“South Africa welcomes the establishment of the bank and is excited about the economic potential that this institution will bring to the continent. The bank will mobilise resources for infrastructure investment and sustainable development projects.
“These include, amongst others, transformational infrastructure projects that allow the region to take forward its regional integration agenda. That South Africa will host the first regional centre of the bank is a significant development, not just for our country but for the continent as a whole.”
The ministry also stated that the regional centre would open concurrently with the headquarters and that the events of the past week have perhaps been some of the most exciting in global development finance in recent times.
“Sub-Saharan Africa is among the fastest growing regions in the world. However, it has tremendous infrastructure and development challenges that are constraining faster economic growth,” it said.
“What is unique about this bank is that it is established by developing countries, who understand development challenges, and have demonstrated their ability to tackle such challenges.”
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BRICS nations are expected to have majority shareholding in the bank, with 55 per cent. However, shareholding should soon be open to other emerging markets, developing countries and advanced economies.
“The bank will cooperate closely with other development partners and international financial institutions. It will complement the efforts of existing international financial institutions and also be an alternative source of financing for the global development challenges of our age,” said the ministry.
“BRICS also signed a treaty establishing a CRA, which is a framework for a plurilateral financial safety net. The aim of the CRA is to complement the existing system of financial safeguards, for example, to address short term balance of payments challenges that member countries may face.”
The ministry added that it is excited about the economic potential that the institution would bring to the continent.