The recently launched BRICS development bank otherwise known as the New Development Bank (NDB), is opening its doors to members outside of the grouping.
BRICS is an acronym for an association of five major emerging markets: Brazil, Russia, India, China and South Africa.
Tito Mboweni, non-executive director of the NDB, told CNBC Africa that this bank will over time invite other members to join in or accept applications from other countries.
“This is why we legally moved away from calling it the BRICS bank, because it’s going to be a game changer,” Mboweni substantiated.
Currently the capital base of the NDB sits at 100 billion dollars. Mboweni admitted, “There were divisions among the members about how much each country would contribute with China, obviously, contributing the largest base.”
Following speculation that South Africa is punching above its weight where financing of the NDB is concerned, Mboweni clarified that the government has already funded its contribution to the capital base. The contingency reserve management aspect is funded by the central bank.
Mboweni pre-emptively cautioned that South Africans are “narrowly focused at home”.
He said with regards to anticipated questions like, “Why should we take five billion dollars and put it in this development bank when we should be building houses?”- South Africans need to broaden their outlook.
Mboweni motivated that starting this bank was mandated by the modus operandi that other development banks were found to be “weak”.
“They didn’t seem to respond adequately to the needs of developing countries, more often than not, they were stringent conditions that when applied in total resulted in stagnation and no growth,” he explained.
The NDB will aim to be different by introducing new forms of doing things. Mboweni coined a phrase that instead of “best practice” they are talking of “the next practice”. “It’s a far more responsive approach to development financing, much more risk-taking,” he asserted.
On the unfolding economic dilemma of Greece, Mboweni advised, “The Europeans must be very careful, not to be seen to humiliate the Greeks.” The Greeks are not the first country in the world to fail to pay their debts, he advised.
Germany has also defaulted before. In fact, historically speaking when the Bank for International Settlement (BIS) was formed it was meant to service the debt of Germany.”
He further added that it would be in the best interest for both countries to find a mutually beneficial position for bond markets and currency markets.