The formation of a BRICS New Development Bank was announced at the 6th BRICS Summit*, and is aimed at mobilising resources for infrastructure and sustainable development projects in developing nations. While the head office will be based in Shanghai, the BRICS New Development Bank will have its African regional branch located in Johannesburg, South Africa.
Charles Brewer, Managing Director of DHL Express Sub Saharan Africa, says that the announcement of the formation of the BRICS New Development Bank and South African-based regional branch is a significant milestone in fostering trade between South Africa and other BRIC (Brazil, Russia, India and China) economies.
He says that the establishment of the New Development Bank will assist in removing key economic stumbling blocks for South Africa’s economic growth and further position the country as a gateway into Africa. “It has been reported that the bank is scheduled to begin lending in 2016 and that they will be open to membership by other countries. This could bode very well for other African countries and the development of infrastructure within these regions where there is a huge need for this investment.
“Within the business of logistics, we often witness how the quality of infrastructure in a country can positively or negatively impact economic performance. For instance, in many African countries, infrastructure is a major constraint on doing business. With underdeveloped road and rail networks, and some cities only being serviced by one flight per week, infrastructure and connectivity are among the most pressing problems limiting growth,” says Brewer.
He says as a comparison, according to 2013 data by the World Bank pertaining to air transport, South Africa reported 185 963 registered carrier departures worldwide, while other BRICS nations, Brazil and India reported 958 782 and 681 063 respectively.
Brewer says that infrastructure development is key to South Africa’s economic growth as it assists in connecting regions, and will subsequently increase the economic activity within the country.
“While local initiatives have been established to drive infrastructure development in South Africa, such as the Government’s plan to allocate over R920 billion to public-sector spending on infrastructure over the period of 2013/14 to 2015/16 in line with the National Development Plan, much more is needed to fully develop the country’s infrastructure system for optimal growth,” says Brewer.
Brewer says that forming a dedicated body, which will have a key focus and interest on specific regions, will further aid infrastructure development in South Africa. “The fact that leaders of the BRICS countries have recognised these issues and are driving the decision, can only bode well for future business development and success in these nations.
“The $50-billion initial capital that has reportedly been assigned for loans highlights the potential this will offer to discover new sources of economic growth for the various nations.
“According to the African Development Bank, in 2013, South Africa reported a growth rate of 1.9%, while the global economy experienced approximately 3%. DHL has over the years invested in numerous infrastructure projects in Africa, and as a result, witnessed first-hand how improved infrastructure can boost a business’ productivity and subsequently a country’s GDP. With the proposed increased infrastructure development and support in the form of the BRICS New Development Bank, economic output could increase even further, and contribute to the continent’s growth rate to rival that of the global economy,” concludes Brewer.