The African Regional Centre was expected to be the face of the two-year old bank on the continent and it was identifying infrastructure projects for the country.
Speaking on the sidelines of the launch, Malusi Gigaba said the promised $1.5bn would go a long way towards assisting the government to reinforce and strengthen the balance sheets of state-owned enterprises.
“We will be able to implement critical infrastructure projects in the areas that we will agree on,” Gigaba said, adding that the Treasury was working to draw up a project pipeline.
“We are working with the bank to ensure these are critical projects in terms of our priorities, we will also assist the economy. In an environment of slow growth, and high unemployment we need infrastructure investment to reignite growth in the economy to get young people employed,” added Gigaba.
The launch of the office comes after President Jacob Zuma signed into law the New Development Bank Special Appropriation Bill, which allowed South Africa to contribute R2bn from the Treasury for the country’s first investment in the bank.
The NDB’s president, KV Kamath, said the bank, which was in the process of obtaining an international rating, was exploring the possibility of raising local currency funding.
Kamath also said the NDB was the youngest development financing institution established in the 21st century, giving it an advantage to learn from past experiences.
“Having been a banker all my life, I am a firm believer that reducing exchange rate risk in any financing currency will enable infrastructure project to be financed more sustainably,” he said.
NDB vice-president Leslie Maasdorp said the bank planned to raise funding in the bond market, lend that funding and charge interest.
“Most of the loans in the past of all these investment banks were made in US dollars. It is often a challenge that many borrowers face, because if their currency depreciates, the loan becomes more expensive,” Maasdorp said.
In 2017 the bank was expecting to approve 10 projects worth between $2.5bn to $3bn for its Brics member countries: Brazil, Russia, China, South Africa and India.
In 2018 it expected to present 20 projects to its board, worth $4bn.
By the end of 2018, the bank would target a total loan book that would be at $8bn for 35 projects.
Kamath said: “We expect the office to play a major role in project identification and preparation. The last two days my message to the team in South Africa and Shanghai is that we have an appetite to do $1.5bn of lending to South Africa for next 18 months, the task is to make sure this pipeline becomes a reality,” he said.
According to its website, the NDB was established with an initial authorised capital of $100bn and an initial subscribed capital of $50bn.
The subscribed capital stock was divided into paid-in capital, with an aggregate value of $10bn and callable capital with an aggregate value of $40bn.
David Maynier, the DA Shadow Minister of Finance, said: “Let’s be honest, the New Development Bank is a see-no-evil alternative to the World Bank, which will have gobbled up R10.3bn in capital instalment payments by the end of this financial year, and which has already run into trouble with a R2.4bn loan to zombie state-owned enterprise Eskom.”