（ Reprint by China-Africa Project 8 June 2015）
SHEN Chen, Visiting Scholar of Centre for Chinese Studies, Stellenbosch University
In July 2014, the leaders of the multi-lateral grouping BRICS (Brazil, Russia, India, China and South Africa) signed a contract to create the US$ 100 billion BRICS Bank in Fortaleza, Brazil. However, after nearly one year of preparation, the BRICS bank has made little progress. Only recently was India announced as the first president of the bank. Additionally, the Chinese government has proposed several other similar institutions, for example the Asian Infrastructure Investment Bank (AIIB), which South Africa has also joined. These issues raise questions as to the continued commitment toward the BRICS bank. Does it mean that emerging countries have shifted their focus from the BRICS bank to the AIIB? And how should South Africa strategically position itself in light of these new developments?
The BRICS bank and its alternatives
On 11 May 2015, ahead of the 7th BRICS Summit in Russia, India named Kundapur Vaman Kamath as the first head of the BRICS development Bank (officially called the new development bank). Soon after, the Chinese government also nominated Zhu Xian, who once served at the World Bank and the Asian Development Bank, as one of the vice presidents. It had been announced that the BRICS Bank would be put into operation no later than early 2016.
Over the past few years, many observers have considered the development of a BRICS Bank as a symbol of emerging countries, not least of all China, which is perceived to be challenging western dominance of global financial governance. However, the BRICS Bank has not been China’s only global financial initiative. From October 2014 to April 2015, over a period of six months, China established the working group of the Belt and Road Initiative (“One belt one road” in Chinese), the Silk Road Fund and the Asian AIIB.
Despite being proposed later than the BRICS Bank, all of China’s new initiatives have received backing within pre-existing institutional architecture. For example, 57 states have announced their participation in the AIIB, including the five BRICS members and American allies such as Britain, Germany and Korea and so on. Because the AIIB already contains all the BRICS countries, some critics have suggested that the BRICS Bank is no longer necessary. Nevertheless, with the recent nomination of presidents, some of the confidence in the BRICS Bank project has been restored.
The BRICS Bank differs significantly from the AIIB. To change the global order dominated by the United States of America (US) and Europe, the BRICS bank has been established in the spirit of democracy and equality: the first head comes from India; the inaugural chairman of the Board of Directors will come from Brazil; the inaugural chairman of the Board of Governors comes from Russia; the headquarters are located in Shanghai; and the African regional centre will be set up in Johannesburg. Furthermore, the stake of the BRICS Bank is equally shared by five members, while in the AIIB, China will hold around 40 per cent. In light of the complex compromise between the five countries, it is not surprising that the BRICS Bank has been much slower in developing than other similar institutions.
The AIIB has a geographical scope – its infrastructural construction is in Asia, especially Southeast Asia, Central Asia and China’s other neighbours (an initiative viewed by the US as a way for China to expand influence across Asia). Additionally, their functions differ somewhat. While infrastructure is a dominant business of the BRICS Bank, it will also offer types of aid to developing countries.
Implications for South Africa
South Africa has shown great interest in the BRICS Bank. At the University of Cape Town, at least three special seminars on this topic have been held since August last year. Though more South African scholars consider the establishment of the BRICS Bank as a chance to enhance African development, some of them are worried about China’s dominance in this process. It is true that Chinese development financial institutions, whether it be China EXIM Bank or China-Africa Development Fund (CADFund), have traditionally only supported Chinese companies in Africa. However, as a joint attempt, the BRICS Bank will have to consider every member’s benefit. To pursue its own and African development, South Africa should take account of the steps laid out below.
Firstly, there is a need to regulate the relationship between the Development Bank of Southern Africa (DBSA) and the African regional centre of the BRICS Bank. Last year, the DBSA expanded its mandate from the Southern African Development Community (SADC) to the African continent, which is viewed as a step closer to the BRICS Bank. As Chris Wood has noted, because of the reliability of Chinese banks, the BRICS Bank will help the DBSA get better ratings and lower cost loans.
Secondly, South Africa’s foreign policy places the African interest at the same level as national interest. There’s a US$ 96 billion infrastructure construction gap in sub-Saharan Africa every year, according to the World Bank. Obviously neither the African Development Bank nor the World Bank could fill that gap. To avoid duplicate constructions and to share risks, the African regional centre has great potential to co-operate with other regional institutions.
Last but not least, South Africa is always believed to punch above its weight among other big BRICS members. So it is necessary to bring more African countries in as partners. The BRICS Bank Chapter asserts that membership is open to the United Nations, and Greece has been invited to join in by Russia. To show the leading role in Africa, South Africa should establish linkages with other African countries on behalf of BRICS. Despite most African countries being unable to provide meaningful funds, the BRICS Bank or the African regional centre should offer observer statuses for these less developed countries.
The BRICS Bank is still the most suitable opportunity for South Africa and the whole African continent. In the upcoming BRICS Summit in Russia, none of the five countries would like to further postpone the establishment of the bank. In this case, it is best for South Africa to design and build an African regional centre as early as possible.