AFRICAN FOCUS: South African President Jacob Zuma (center) addresses the Fifth BRICS Summit in Durban on March 27 (CHANG LIN)
In Africa they say it is a positive sign if it rains at the start of an important event. That certainly seemed to hold true in South Africa's premier eastern port city, where the Fifth BRICS Summit began with thunderous skies and unrelenting showers. As the flags of the five member countries—Brazil, Russia, India, China and host South Africa hung limply in the humid coastal air, beachfront street vendors, industrious taxi operators and local retailers spruced up to welcome the influx of 5,500 delegates and media professionals to Durban.
This year's theme, BRICS and Africa: Partnership for Development, Integration and Industrialization, was highlighted by South Africa taking over the group chair for the next year and using the opportunity to link Africa much closer to the potential of the BRICS collective and cement its place as the gateway to the continent.
BRICS potential is vast, not only in Africa, but across all member states where the five muscular emerging nations now fuel a combined engine propelling 50 percent of the world's economic growth. The BRICS 2013 annual report seen at the summit shows that BRICS makes up 17 percent of world trade—and predictably trade between China and other members topped $300 billion last year.
This figure will eclipse $500 billion by 2015, of which about 60 percent will consist of China-Africa trade, said Simon Freemantle and Jeremy Stevens, analysts with the South Africa-based Standard Bank. Clearly, from where Africa is sitting, China is the BRICS powerhouse, and subsequently comes in for much criticism from the traditional world order dominance of Europe and the United States.
Don't break the bank
Much of this criticism has been leveled at the proposed BRICS Development Bank, which was undoubtedly the star item on the summit's agenda. Speaking at the BRICS Business Forum, Business Unity South Africa President Jabu Mabuza said the major hurdle to development was access to funding, a theme echoed throughout the two-day event. Adding to the pressing need for a group bank is the ongoing concern with the pedestrian pace of reform at the International Monetary Fund (IMF).
It was therefore welcome news that a formal agreement had been reached on establishing a BRICS Development Bank.
Brazil's President Dilma Rousseff said BRICS success has confounded its critics, who now recognize its contribution to the global economy, and emphasized the need for an alternative to the World Bank and the IMF.
The BRICS bank has been under discussion for over a year, with much speculation as to its specifics and implementation. However, the bank's doors won't be opening anytime soon, despite the ideological urging of politicians and business leaders.
South African President Jacob Zuma told the media that the bank, the first formal institution in the informal BRICS group, would make the group more autonomous and less reliant on traditional lenders.
"In terms of our earlier deliberations, we have decided to enter formal negotiations to establish a BRICS-led new development bank based on our own considerable infrastructure needs, which amounts to around $4.5 trillion over the next five years, but also to cooperate with other emerging markets and developing countries in the future," said Zuma, adding that in addition a BRICS Contingent Reserve Arrangement (CRA) "safety net" would be set up to provide emergency financial crisis funding for member states.
However, specific contributions and the bank's location remain points of contention. A figure of $10 billion each had been mooted, but South African Finance Minister Pravin Gordhan said although a global amount of $100 billion had been agreed for the CRA, details for bank seeding "still had to be worked out." Analysts say resolving these details could take years, especially if contributions are based on a country's wealth and China is seen to dominate the bank.
Chinese Finance Minister Lou Jiwei told Xinhua News Agency the great demand for funds to expand infrastructure development had made the establishment of the bank "necessary." Lou said the finance ministers had not discussed initial investment in Durban.
Russian President Vladimir Putin said his country supported the creation of the bank, but it must work on market principles only and support the businesses of "all our countries."
A review of the progress made with both the bank and the CRA would be made by BRICS members on the sidelines of the Group of 20 Summit in September.