Brics builds business

2013-03-31 10:00

Although the summit in Durban wasn’t the stellar conference many had hoped for, key progress was made in terms of a development bank and a business council.

The fifth annual Brics Summit may not have delivered a detailed deal on a development bank, but it has made serious progress towards the creation of an alternative to World Bank and International Monetary Fund (IMF) funding for developmental projects.

In essence, the five-member states – Brazil, Russia, India, China and South Africa – formally signed off on creating the bank, the idea of which was mooted a year ago.

They failed to agree on capitalisation, voting powers and base, but mandated their finance ministers to deliver on the detail by September.

The bank will still take several years before it goes operational, up to a full decade, according to Finance Minister Pravin Gordhan.

Gordhan and others argue that it is urgently needed to provide alternative sources of funding that do not carry the political restrictions and conditions attached to IMF and World Bank funding.

They also agreed on a $100?billion (R925?billion) contingency fund as a safety net to help member states avoid short-term liquidity pressures.

Brics also delivered infrastructure agreements that will be crucial to investment in infrastructure development on the African continent.

These, along with investment discussed at a post-summit retreat convened by President Jacob Zuma, will cement South Africa’s role as a de facto continental representative on Brics.

The summit also saw the launch of a Brics business council.

Business leaders from the five nations were already striking deals on the sidelines of the summit, among them a $300?million joint hotel venture in Durban involving China’s Shanghai Pengxin Group and South Africa’s BEK Holdings.

South Africa’s parastatals walked away smiling, with Transnet securing $5 billion from the China Development Bank.

Sandile Zungu, one of the South African representatives on the council, said its creation was “very significant”.

“Multilateral forums are often criticised for being talk shops because they lack means for implementation of great ideas. By setting up a business council, Brics has created a delivery mechanism to ensure that bold decisions are implemented. Business is by its very nature accustomed to action and getting things done. Brics is setting itself apart from many other forums by doing this.”

Politically, the summit backed reform of multilateral institutions like the World Bank, IMF and United Nations Security Council, with Russian President Vladimir Putin committing to taking the “eThekwini Declaration” to the G20 Summit in St Petersburg in September.

Abdullah Verachia, director for Frontier Advisory and director for India Africa at the Gordon Institute of Business Science, believes the bank concept now has the “political capital’’ to make it happen.

“A development bank of this size, magnitude and focus will take at least two years to set up. What is important is that it now has political capital at a head-of-state level, which is vital for success,” he said.

“The Brics economies are now part of the expanded G13 and the G20, so individually and collectively the Brics members represent a new bloc of economic and political clout.”

Durban also delivered on creating an institutional memory and institutional structures around Brics, Verachia said.

Fifth Brics Summit outcomes

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