NDB's President Dilma Rousseff with Dr Rania A. Al-Mashat, Minister of International Cooperation and Egypt's Alternate Governor. The bank’s president, Dilma Rousseff, said on Saturday that the bank had nonetheless remained in a good financial position, and its liquidity, reserves and loan capabilities were robust. Picture: Supplied
The New Development Bank (NDB) successfully wrapped up its annual meeting in Cape Town on Saturday in a good position to continue with its mandate of funding South-South economic development and infrastructure projects, and after having made a substantial contribution to the development of South Africa.
The meeting was held against a backdrop of increasing geopolitical tensions, weak global growth, high interest rates and countries that are once again struggling with high sovereign debt, exchange rate devaluation and softening growth.
Developed country multilateral financial institutions, traditionally the major funders of infrastructure and big economic development projects in emerging markets, have consequently tightened their foreign development and investment funding.
The bank’s president, Dilma Rousseff, said on Saturday that the bank had nonetheless remained in a good financial position, and its liquidity, reserves and loan capabilities were robust.
She said the NDB also remained steadfast in its mandate to provide funding for infrastructure and major economic development development projects, as well as to continue to admit more members from southern hemisphere countries. During the meeting, Algeria was admitted as a member of the bank.
She said emerging markets were struggling with the mismatch between debt in strong currencies, while the income to fund the debt comes from projects in local currencies. This match was a big barrier to sovereign and non-sovereign investment in developing countries.
During the meeting, the NBD signed a R5 billion loan agreement with Transnet to develop its rail infrastructure. It also approved a R17.8bn loan to the government to finance water and sanitation infrastructure projects. The water loan will fall under South Africa’s water infrastructure grant which is managed by the municipalities.
The bank is also investigating loans to assist in the much-needed expansion of Eskom’s electricity transmission grid, which is estimated will cost more than R200bn by 2030.
Rousseff said they had received and assessed many applications to join the NDB. As a measure to deal with the mismatch between developed and developing country currencies, the bank had devised a strategy to make up to 30% of its loans in local currencies, which would make NDB financing very competitive for private-sector borrowers. In addition, the diversification of currency baskets also improves economic resilience against shocks associated with monetary policy decisions.
Over the past decade, the NDB has opened four regional offices and centres in its founding members countries and has expanded its membership to include Bangladesh, Egypt and the United Arab Emirates. Its founding members are the BRICS countries – Brazil, Russia, India, China and South Africa.
It has approved more than $30bn in financing for its member countries, and part of its strategy is to direct 40% of total financing contributions to climate change mitigation and adaptation, and the energy transition.
The bank also said over the weekend that it had drawn up a sustainable finance policy framework to manage green, social and sustainability bonds, as well as other debt instruments in international and domestic capital markets.
“The framework has obtained a second party opinion … which confirms the framework is credible, impactful and aligns with core components of global principles, including the Green Bond Principles and Social Bond Principles developed by the International Capital Market Association,” the NDB said.
Finance Minister Enoch Godongwana said that the bank was an important partner for emerging markets when it came to addressing development and infrastructure finance for projects.
Godongwana said the meeting will send a strong message to world nations that the NDB was committed to addressing the Sustainable Development Goals (SDG), set out by the UN. He said also that the NDB needed to drive more private investment by global multinational corporations into BRICS nations into sectors such as green energy, digital transformation and infrastructure development.
Resolutions adopted during the Cape Town meeting will be shared during the BRICS Summit in October, which is scheduled to take place in Russia.
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