Creating infrastructure for the New Development Bank is a milestone for Brics, writes Sanusha Naidu.
Pretoria - The seaside resort of Fortaleza in the northern part of Brazil was the destination for the sixth summit for the Brazil, Russia, India, China and South Africa (Brics) group of nations. Flying into the city, one would not be immediately aware it was playing host to this increasingly significant geo-strategic platform of the Global South. Daily life moved along routinely.
The only other activity of note, parallel to the official summitry discussions and signing of agreements, was the flurry of engagements being attended by international and domestic civil society organisations.
These actors were involved in a slate of planned actions that sought to harness an alternative dialogue of platforms on a variety of issues.
They included identifying entry points to monitor and evaluate how Brics can achieve global sustainable development initiatives; defining advocacy interventions around the proposed model of development finance policy; and raising public awareness of what the Brics nations are doing and how that affects the lives of ordinary citizens and communities.
As these deliberations took place, the five heads of state of the Brics nations took the next steps towards crystallising their platform into a formidable structure in the geo-political and economic architecture.
The hype surrounding the sixth Brics summit was palpable.
Giving way to the Fifa World Cup in the run-up to the summit held on July 15 and 16, expectations were widespread in respect of the possibilities revolving several areas of interest. First was the prospect around the governance, location and operational structure of the proposed Brics Development Bank.
Second was the anticipation of the kind of road map that Brics would institutionally design for itself in the future.
Third was the need to gauge at what level Brics will intensify its engagements and sustainability.
And, finally, was the all-important question of whether Brics will remain and retain its identity as it is, or open its membership doors to others.
So, how has the sixth Brics summit responded to these expectations? How should its success be measured?
But perhaps more importantly, what do the outcomes from the sixth summit mean for South Africa’s continued membership of the grouping?
Without a doubt, Brics has cast its net as a global player with the announcement of the Brics bank, now officially being called the New Development Bank.
A precedent has been set from which Brics cannot afford to retract.
The agreement formally launching the institution is clear that it is not a policy bank, but rather a lending entity, which will marshal resources for infrastructure and sustainable development projects.
The significant characteristic of this bank, as outlined in the agreement document, is that it will do so by supporting “public or private projects through loans, guarantees, equity participation and other financial instruments”, which will be market-driven.
A second key feature of the bank is that it is not immune to expanding its membership to borrowing and non-borrowing countries that are part of the UN system.
In this regard, the bank is not exclusive, although the Brics member states will still enjoy the majority share of capital stock holdings of not less than 55 percent at all times.
In this way, their autonomy and voting power within the governance structure of the bank is maintained.
Of course, in all of this, South Africa has been tasked with establishing the first regional office of the bank, called the New Development Bank Regional Centre, together with the Shanghai headquarters.
This is a noteworthy opening for South Africa to build on its Africa Outreach Partnership on the Brics that President Jacob Zuma initiated, as well as ensure the continual focus on Africa’s developmental infrastructure needs.
Yet, like all things that are new, there are grey areas that still remain uncertain and will have to be clarified during this second phase of summits and properly understood in terms of their impact in achieving sustainable development.
The first issue relates to safeguards associated with financing projects. The agreement is unclear about what constitutes acceptably defined safeguards or how they will be enforced.
This especially relates to the downstream effects and governance norms of infrastructure projects, particularly in the energy sector, around environmental protection, and notwithstanding the rights of communities.
A second issue that needs to be spelt out is that of seeking finance from the global market.
While the bank will source some of its equity through the international financial market, the question that needs to be asked is whether it can remain impervious to imposing conditionalities to the loans that it provides that it may need to undertake because of the nature of how financial markets operate.
Third is the more pertinent issue of the volatility of financial markets and the use of the US dollar as the unit currency. How will the bank insulate itself against such effects?
Despite these and other more pertinent issues, the reality is that speculation around the launch of the bank has been put to rest.
It is being set in motion, with its first set of funding projects coming on stream in 2016. And so the Brics nations have created their first institutionalised structure.
While the New Development Bank dominated headlines, the Fortaleza Declaration also signified a voice of authority in what can be described, in this author’s opinion, as a very substantive text.
As much as critics may say that in part the declaration still retained overtures of broad rhetorical language linked to global governance reforms, one cannot detract from what can be interpreted as a more strengthened view of confidence.
Perhaps formalising the bank provided the impetus. Although, the silence on the situation in the Ukraine was deafening.
A third feature flowing from the summit was the individual speeches made by the five heads of state. In particular, Russian President Vladimir Putin’s address could already be seen as setting the scene for when Moscow assumes the chair this time next year.
The proposal of setting up the Brics energy association, under which the Fuel Reserve Fund and the Energy Policy Institute were identified as structures, demonstrates another possible resolve to try to gradually disengage from the Organisation of Petroleum Exporting Countries (Opec) and begin initiating an alternate structure.
The proposal aligns closely to Putin’s call for an anti-dollar alliance. At the same time, Indian Prime Minister Narend Modi called for the establishment of a Brics university, illustrating the need for the Brics to develop their own knowledge production and empirical studies that will inform their analysis and interventions.
In addition, Zuma’s proposed Brics Africa Council would further augment trade and investment opportunities between African countries and Brics.
No doubt this would serve to promote Pretoria’s strategic African agenda in Brics.
These remarks signal a broad road map for the bloc in its second phase.
It provides insights into the possible agenda of what can be anticipated as subsequent summits are held and especially with the heads of state requesting that Brics’ long- vision document be finalised.
The Fortaleza summit has definitely fortified the institutional architecture of Brics as a global platform. With that said, the Brics nations cannot afford to become reticent about their future or tepid in their actions.
The world is watching and, in particular, the Global North.
Undoubtedly, the New Development Bank opens up the possibilities of co-operation with non-Brics countries with the inclusion of borrowing and non-borrowing countries in its ranks.
But this is not to suggest that the Brics countries do not have teething problems that still need to be addressed. For South Africa, the gains obtained in respect of its Brics Africa focus and hoping to align more closely to its macroeconomic needs under the National Development Plan will remain a focal point of its continued membership in the bloc.
The Brics group now needs to bring about a better-informed public diplomacy strategy that will domesticate a national Brics identity within each of the member countries.
* Sanusha Naidu is a research associate of the department of political science at the University of Pretoria.
** The views expressed here are not necessarily those of Independent Newspapers.