Summit ends on positive note

Summit ends on positive note

At the end of the two-day Brics summit, there was agreement on a number of issues – setting up a development bank chief among them. A business forum and think tank council were also launched.

Brics ends

At the close of their fifth summit, Brics leaders have stressed the importance of working together to find solutions to the economic and social problems afflicting their countries and have agreed to set up a development bank to mobilise resources for infrastructure and sustainable development.

The Industrial Development Corporation also used its presence at the summit to build and strengthen partnerships with its counterparts in other Brics members. It signed two memoranda of understanding on the first day of the summit.

One, with the Russian Bank for Development and Foreign Economic Affairs (Vnesheconombank), is expected to help South African small and medium enterprises develop their businesses. The agreement paves the way for the OJSC Russian Bank for Small and Medium Enterprises Support (SME Bank), a subsidiary of Vnesheconombank; and South Africa’s Small Enterprise Finance Agency Limited (Sefa), a subsidiary of the IDC, to co-operate on SME development.

Its other agreement was signed with the Brazilian Development Bank, the Banco Nacional de Desenvolvimento Economico e Social-BNDES (BNDES), on the exchange of technical information about their products and financial policies.

Development bank

In addition, in a business session on the first day moderated by the IDC’s chief executive, Geoffrey Qhena, entitled “Finance for economic development”, economists from the five countries gave their support to the Brics development bank. The following day, on Wednesday, 27 March – the final day of the summit – the heads of state of Brazil, Russia, India, China and South Africa agreed to set up the bank, which many see as an answer to their nations’ disillusionment with the World Bank and the International Monetary Fund.

First proposed at the fourth Brics summit in New Delhi, India in 2012, the bank will cater to the infrastructure challenges of developing countries that are the result of insufficient long-term financing and foreign direct investment, especially investment in capital stock.

In a joint statement, the leaders said they were “satisfied” that the establishment of a Brics development bank was “feasible and viable”. “We have agreed to establish the new development bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”

The five nations are proposing initial seed capital of US$50-billion (about R463-billion) to start the bank, with each nation contributing a fifth of that sum. However, it is yet to be decided where and when the bank will established.

In addition, they also mooted a contingent reserve arrangement to act as a financial safety net. It would have “a positive precautionary effect, help Brics countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability”.

The reserve would also contribute to strengthening the global financial safety net and complement existing international arrangements as an additional line of defence. “We are of the view that the establishment of the CRA with an initial size of US$100-billion is feasible and desirable, subject to internal legal frameworks and appropriate safeguards. We direct our finance ministers and central bank governors to continue working towards its establishment,” the leaders said in their joint statement.

Business council

In addition, a Brics Business Council was set up to further strengthen intra-Brics co-operation, while the Brics Think Tanks Council, also launched at the summit, would help to grow innovation in the bloc.

At a plenary session on the final day of the summit, President Jacob Zuma set out key areas in which South Africa would like to co-operate with fellow Brics members. He said South Africa needed “to upgrade the skills of at least 3.2 million youths who are neither in employment, education nor training, so as to ensure that they are employable and can be absorbed into productive labour market economy”.

“We are working on overhauling our post-school education and training system, as well as the skills development environment in order to address this challenge.” He also said there was need for the countries to co-operate in the field of media and information technology.

Later in the day, Brics leaders met African leaders at the Fairmont Zimbali Lodge to discuss relationships between Brics and Africa. Zuma said sub-Saharan Africa achieved strong growth of over 5 percent in 2012 which would continue in 2013, notwithstanding the fairly weak, but improving growth prospects in the rest of the world.

“African countries are fully committed to maintaining the momentum on reforms, to induce higher growth supportive of poverty reduction … Brics countries have provided new options for African development and have added to giving Africa a new world prominence,” he said.

Chinese President President Xi Jinpin said the dialogue between leaders of Brics and African countries reflected the political will of both sides to realise equality and inclusiveness and to seek common development. Africa’s economic growth brought a wealth of opportunities to Brics countries, he added.