File Image: President Jacob Zuma presides over the official launch of the African Regional Centre of the BRICS New Development Bank (NDB) in Sandton, Johannesburg.
CAPE TOWN - The launch of the New Development Bank (NDB) signaled a new era of Development Finance.

Last week President Jacob Zuma and the president of the NDB, K V Kamath, launched an African regional centre of the bank, otherwise known as the Brics Bank.

This not only heralds a new era for infrastructure funding in South Africa, but for the region and the continent as a whole.

While other international financial institutions like the World Bank and European investment bank have their offices located here, the entry of NDB not only breaks this near hegemonic status, but redefines the balance of forces both in terms of resources and development thought leadership.

The NDB founding members are Brazil, Russia, India, China and South Africa.

All these countries are Group of 20 member countries, a very influential body in global development matters.

There is no doubt that China is without doubt a presumptive leader of the group. The fact that the headquarters of NDB are in Shanghai only serves to reinforce the view.

China has also been instrumental in the establishment of yet another development Finance Institution, namely the Asian Infrastructure Investment Bank.

If anyone had any doubt about the centre of gravity in terms of global development, these institution give a clear indication that Asia will be that centre.

“Development banking will never be the same again” asserted Zuma.

The statement by the president could not have been more apt. “NDB can and will be the game changer”.

Unlike its Bretton Woods predecessors and regional peers, NDB has decided to keep its board part-time as opposed to resident board of directors, which is an organisational feature of most international financial institution.

This makes NDB much more nimble and agile in approving projects.

They have also shown innovative approaches in raising funds from capital markets by pioneering a green renminbi bond in China.

K V Kamath has indicated that NDB intends to fund in local currencies, something that will strike a chord with South Africa and indeed other countries in Africa.

Perhaps a distinguishing feature of NDB is its mainstreaming and embracing of sustainability principles and projects.

NDB has undertaken to scale up renewable and green projects from its inception.

This progressiveness in its strategy has allowed it to leapfrog its Washington-based counterparts, whose funding and mainstreaming to renewable and sustainable energy solutions has not gone beyond statements of intent and some “demonstration” projects

The NDB will need to learn from huge lessons if it is to become effective and sustain its competitive advantage.

The first lessons is that it has to stick to its mandate as the development bank. Often, there is the temptation within the development finance institutions to veer towards the “banking” function at the expense of the "development” mandate.

This tendency is often reinforced by perverse incentives that place emphasis volumes of operations as opposed to quality and that exalt output over outcomes and impact.

NDB must also eschew the personality cult and regional dominance in its staff. The fact that in the Asian Development Bank a Japanese will always be a president, and in the World Bank an American, is a practice that should be actively avoided.

NDB should respect local knowledge and talent. Mutual beneficial partnership and additionality must constitute the modus operandi.

Perhaps one area that the NDB has to carefully consider is extending its membership base beyond the founder states.

While this may be necessary for purposes of broadening the balance sheet and obtaining international credit ratings, it is important that this step be carefully debated within Brics countries.

Landiwe J Mahlangu is Nafcoc’s chief economic adviser.