BRICS Bank can accelerate post-Covid recovery

SOUTH Africa is caught between a rock and a hard place. The looting and violence, together with the chaotic Covid-19 roll-out programme and recovery over the past 18 months, can be described as sub-optimal, peppered with multiple cases of mismanagement in procurement and a general lack of an effective integrated government. The result is deep socio-political malaise and economic fissures.

The latest International Monetary Fund (IMF) growth forecast is especially sobering. The IMF forecasts that South Africa’s real GDP will grow by 4% in 2021 and 2.2% in 2022 – well below global benchmarks.

South Africa’s GDP shrank by 7% in 2020 due to the impact of the pandemic and the restrictions. The 4% growth expected for this year comes off a very low base.

Of the major markets assessed, South Africa has the second-weakest anticipated growth rate for 2022, above only Brazil (+1.9%), pointing to an exceptionally slow recovery. It also warned that a slower-thananticipated vaccine roll-out would allow the virus to mutate further. Ironically South Africa was an early beneficiary of a mega IMF Covid bailout package in June last year, and despite being invited to the G7 summit in London, there is little to show in terms of substantive developmental infrastructure and programmess.

As a member of forums such as the G20, BRICS and the AU, South Africa can do better at being a role model for a successful and inclusive development and recovery programme. Even though BRICS nations have had varied successes in Covid-19 response and recovery, those nations that have taken on neo-liberal programmes such as India, Brazil and South Africa have experienced very high levels of economic disruption, over-dependence on multinational corporations’ vaccine value chains, and slow and chaotic vaccine roll-out programmes.

Hard lockdowns have meant that economic recovery is likely to be anaemic for the year head. At least South Africa is a member of BRICS, and the New Development Bank (NDB) is set to contribute to the reconstruction of the South African economy, as the process will hinge upon the success of the infrastructure investment drive.

An ambitious plan announced by Ramaphosa to attract R1.2 trillion in foreign capital can be aided by the financial institute of the BRICS grouping. For instance, the NDB’s loan book rose to $24.4 billion (about R356bn) last year. In response to the coronavirus pandemic the bank disbursed loans to its members to support national health-care systems. Last year South Africa secured a $1bn emergency loan to support its economic recovery from the pandemic in April, and another one of the same amount in June. The money was channelled to provide a social safety net to alleviate the economic impact of the disease containment measures on vulnerable individuals. That money has run out.

At a BRICS foreign ministers’ meeting in June, foreign ministers noted with appreciation the role of the NDB in infrastructure and sustainable development financing to combat the pandemic. Special attention was given to social infrastructure, especially at a time when the pandemic has had a direct impact on people’s lives, notably on health care and education systems.

The bank has AA+ long-term issuer credit ratings from S&P and Fitch and an AAA foreign currency long-term issuer rating from the Japan Credit Rating Agency. This has enabled it to access funds at rates way cheaper than what is possible by individual BRICS member states.

For instance, this year the NDB approved the restructuring of the Fundo Clima $500m loan in Brazil. The project’s goals are to contribute to climate change mitigation and adaptation investments in various sectors, such as urban mobility, waste treatment and renewable energy. Another loan of $40m went to the Brazilian municipality of Sorocaba. The objective is to improve road infrastructure, promote alternate means of transportation, improve the environment and quality of lives of its residents.

The same scheme should be widely used for eradicating the pressing infrastructure financing gap in South Africa. The Presidential economic advisory team and the National Planning Commission should actively foster engagement with the NDB’s regional office in Johannesburg to keep the new projects coming to ensure sustained post-Covid economic recovery of South Africa’s economy.

The bank has the capacity to expand membership as well as lend to other non-member countries in the southern African region, providing an alternative source of financing to the traditional West-dominated Bretton Woods institutions – the World Bank and the IMF. With the new opportunities being opened up by the African continental free trade agreement and the BRICS summit planned for later in the year, South Africa’s economy must be streamlined to take the full benefit of the future continental common market, rooted in our developing world status and need for inclusive industrialisation.