The ninth annual meeting of the BRICS New Development Bank takes place in Cape Town from August 29 to 31, 2024.
By Professor Bonke Dumisa
Next week, from Thursday, August 29, to Saturday, August 31, 2024, the BRICS’ New Development Bank, NDB, will host its Ninth Annual Meeting, in South Africa at the Cape Town International Convention Centre, CTICC, under the theme “Investing in a Sustainable Future”.
Just to refresh your minds, BRICS is a multinational organisation that was created by geographically diverse countries, with very little ideological commonalities. These five original countries of BRICS are Brazil, Russia, India, China and South Africa.
At the last BRICS’ Heads of State Meeting, held in Sandton, South Africa on August 20-23, 2023, the BRICS secretariat mentioned that there were many other countries who were interested in joining BRICS. The countries they mentioned included, but were not necessarily confined to Egypt, Ethiopia, Argentina, Saudi Arabia, and the United Arab Emirates. It is important to mention that even though Argentina was initially interested in joining BRICS; it later changed its mind and did not join BRICS. I will explain later what I think may be the real reasons why Argentina decided against joining BRICS.
The agreement for establishment of the NDB was signed during the sixth BRICS Summit in Fortaleza, Brazil, on July 7, 2015. The NDB Board of Governors comprises the Finance Ministers and/or alternatively the Deputy Finance Ministers, or delegated country officials, from all the five founding members. Each of the member countries also sends some of its top officials with a good background in finance to serve on the to executive levels of the NDB at its Shanghai Headquarters in China. Its current president is Marcos Prado Troyto from Brazil. South Africa is currently represented on the NDB Executive by Dr Duncan Pieterse, previously at the National Treasury.
The NDB has an authorised capital of US$100 billion, of which US$50 billion has been subscribed equally by the five founding members. The Bank’s initial subscribed capital comprised of paid-in capital of US$10 billion and callable capital of US$40 billion.
The question that many people ask is whether the NDB can seriously rival the well-established International Monetary Fund, IMF, and/or the World Bank? A quick answer to this question is an unambiguous “no”; the financial base of the NDB is just too small to seriously rival the IMF or the World Bank. In fact, we can safely assume that the major reason why Argentina quickly decided not to join BRICS is because it is currently the largest debtor to the IMF, and its joining of the BRICS may have complicated its precarious position as the debtor of the IMF, which they are struggling to pay. Egypt is also one of the biggest debtors of the IMF, hence their ambivalence on the actively pursuing BRICS membership.
The Russian invasion of Ukraine on February 22, 2022 also complicated the effectiveness of BRICS, because it became an unnecessary distraction to BRICS. When President Vladimir Putin ordered the Russian army to invade Ukraine, the “Western Countries” quickly set in motion for his international warrant of arrest, purportedly on grounds that he had also ordered for the separation of Ukrainian children from their families.
This also resulted in the most stringent economic sanctions against Russia; this compromised the normal trade within the BRICS members, and those BRICS countries who chose not to toe the line set by the United States and the European Union members were targeted for vindictive actions. It was under these circumstances that the US even accused South Africa of selling arms/weapons to Russia. The whole vindictiveness of the US and its allies even resulted in a situation where President Putin was effectively forced to abandon physical attendance of the BRICS Heads of State gathering in South Africa in August 2023.
It was a very embarrassing time for BRICS in 2022 when South Africa and other African countries Heads of State were in Ukraine and Russia trying to broker some peace between these two countries; whilst at the same time the Indian Prime Minister Narendra Modi was being paraded by the US being shown getting all the pampering at the White House. This was yet another indication that no matter how noble the BRICS’ NDB ideals may be, the NDB can never be consciously developed to rival the IMF and/or the World Bank, when the Russian invasion of Ukraine forces the leaders of BRICS countries are forced to publicly demonstrate their allegiance to “the West” whilst at the same time having behind-the-scenes trade relations with Russia.
One conspicuous positive outcome of these tensions caused by the Russian invasion of Ukraine was the popularisation of the de-Dollarisation concept, where many countries are now publicly speaking out against the weaponsation of the US dollar against countries who dare challenge the US’s stance on anything. Many of the BRICS countries are now doing some, though not all, of their trade using their own currencies instead of doing it via the US dollar. This has somehow helped in taming the strengthening of the US dollar at the expense of the global trade relations.
We must be objective enough though to accept that whilst the NDB may play a very positive role in financing infrastructural development in many BRICS countries, and in financing other sustainable development projects within the BRICS countries; the relatively very small NDB financial base poses absolutely no serious threat to the dominance of the IMF and the World Bank on global finance.
* Professor Bonke Dumisa is an independent economic analyst.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.