From left, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma pose for a group photo during the 6th Brics summit in Fortaleza, Brazil, on July 15, 2014. Picture: Nacho Doce

President Jacob Zuma returned from the sixth Brics summit in Brazil yesterday and hailed the establishment of the bloc’s new development bank as “an everlasting legacy that will change the face of global economics and the face of all the developing world for the better”.

He was referring to the decision by Brazil, Russia, India, China and South Africa to launch the R535 billion development bank along the lines of the International Monetary Fund and the World Bank.

Each member country got something out of the deal. The bank would be headquartered in Shanghai, the commercial capital of China.

The first chairman of the board of governors would be from Russia, with the first chairman of the board of directors from Brazil.

South Africa would establish an African regional centre.

Zuma said: “Although we wanted to have the headquarters in our country, I think South Africa, on behalf of the continent of Africa, got a good deal out of the decision about the bank.”

He added that the decision was reached through consensus, looking at all the advantages and resource positions of all the member states.

Zuma said the Brics countries had added a refreshing and enlightening dimension to the management and direction of the affairs of the world for the benefit of developing countries.

The New Development Bank will mobilise resources for infrastructure and sustainable development projects in Brics nations and other emerging and developing economies that continue to face significant financing constraints to address infrastructure gaps and sustainable development needs.

The Ministry of Finance said in a statement that South Africa hosting the first regional centre of the bank was a significant development not just for our country, but for the continent as a whole.

It said: “Sub-Saharan Africa is among the fastest-growing regions in the world. However, it has tremendous infrastructure and developmental challenges that are constraining faster economic growth. 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.”

Cas Coovadia, the managing director of the Banking Association of SA, said the bank would take a while to get off the ground and whether it succeeded would depend on its mandate, structure and scope.

“It is not going to be successful if its opposing the Brentwood institutions. It needs to ask why the African Development Bank and the Development Bank of Southern Africa have not invested in infrastructural projects. It must understand why things have not happened before,” he said.

Coovadia said that the development bank should crowd in the private sector to be sustainable. - Business Report