New Development Bank Special Appropriations Bill - [B32-2015]
Honourable Speaker/ Deputy Speaker!
Honourable President/ Deputy President!
At the fifth BRICS Summit in 2013 - a decision to establish the BRICS bank was announced. This moment meant the beginning of a new era for the much needed infrastructure and project financing. If indeed we are concerned about the economic emancipation in our lifetime and addressing the infrastructure backlog which was created by the Colonialism of a "Special Type", we ought to support such initiatives.
Honourable Members! We have a moral and revolutionary duty imposed upon those of us who are privilege to serve during this historic moment where we are charged with a mammoth task to dismantle the legacy of apartheid. The Colonial Rule was characterised by land disposition, as well as the total exclusion of the black majority from all forms of economic freedom and participation.
It is against this backdrop Honourable Speaker that I would like to to table a report of the Standing Committee on Appropriations on a New Development Bank Special Appropriations Bill [B32- 2015] (NDB). We believe this Bill will contribute strongly towards the liberation and the creation of non- racial, non-sexist and prosperous South Africa as envisaged by the founding leaders of our glorious movement fifty sixth years ago (56) in the Freedom Charter, in Kliptown.
The Bill was tabled by the Minister of Finance in October 2015. It aims to provide for an additional amount of money to be paid for the first paid - in capital instalment towards the capitalization of the BRICS Development Bank for the 2015/16. The NDB has its headquarters in Shanghai and a regional office in Johannesburg, no loan has been disbursed yet.
After the Bill was tabled before Parliament, the Bill was referred to the Standing Committee on Appropriations (SCoA) to consider and report to National Assembly. The Bill appropriates a total amount of R2.09 billion from the National Revenue Fund (NRF) in 2015/16.
Obviously, this is informed by the agreement between Brazil, Russia, India, China and South Africa (BRICS) to establish a New Development Bank (NDB). As part of the BRICS countries South Africa signed the agreement during the 6th BRICS Summit held in Fortaleza.
Honourable Speaker! I know that some opportunistic parties are determined to oppose every progressive step the African National Congress (ANC) is making, but we must remember Hon. Members that it was this very same House which ratified the Agreement on the 3rd of July 2015 as required by Section 231 (2) of the Constitution, and there was never any opposing views to the agreement.
Furthermore, the Agreement stated that the Bank shall have an initial authorized capital of US$100 billion and subscribed capital of US$50 billion. Therefore, we cannot sign an agreement and not honour its imperatives as that would be tantamount to sabotaging our own effort and the Constitution itself.
Most importantly, Hon. Speaker is that Section 1 (3) of the Bill gives powers to the Minister of Finance to impose conditions on the appropriation to promote and enforce transparency and effective management of these funds, and the Minister can stop the use of the appropriation, if the imposed conditions are not met.
However, Section 1 (4) of the Bill provides that the stoppage of an appropriation must be disclosed in the National Treasury's next quarterly report to the relevant Parliamentary Committees.
Of note, is that the Committee received a briefing from Financial and Fiscal Commission (FFC) on the New Development Bank focusing in the following areas:
- Funding and Budget Process of the New Development Bank,
- Cost Benefit Analysis,
- Intergovernmental Fiscal Relations, and
- Other Dimensions - including South African Reserve Bank
Honourable Speaker! The FFC submission really assisted the Committee to better engage, understand and interrogate the Bill and the Committee took this submission very serious.
The Committee also noted that institutions such as University of Western Cape (UWC), Financial and Fiscal Commission (FFC) and Human Science Research Council (HSRC) held an international BRICS conference in October 2015 which also shared some light on the pros and cons of the initiatives and this was part of deepening our democracy.
The initial authorized capital of the New Development Bank is US$100 billion and subscribed capital is US$50 billion to be equally distributed amongst founding members as per the agreement.
Article 7, paragraph c of the agreement suggests that this should be divided into paid-in shares (US$10 billion) and callable shares.
Honourable Speaker! As a BRICS partner, South Africa is liable for US$2 billion in respect of paid-in shares. This amount is a direct charge against the National Revenue Fund (NRF) and forms part of a national budget vote of the National Treasury and therefore, South Africa is liable for US$8 billion in callable shares.
So - the voting powers of each member country is equal to the subscribed shares of capital stock of the Bank. South Africa therefore has the same voting power to other member countries.
Honourable Speaker! Through your indulgence, I just want to point out few but most important gains this initiative is going to bring to our economy.
- The New Development Bank Articles of Agreement allows for the option of financing certain projects in local currencies.
- It will reduce systemic risks associated with foreign exchange lending to unhedged borrowers.
- To this end, debt issuance in local capital markets can help avoid currency mismatch arising out of such project funding, and help to develop nascent capital markets of municipal debt.
- It could increase financial stability: Large, internationally diversified bank safer, it has a lower probability of failure, at the same time leading towards less fighting depositors.
However, Honourable Speaker! The Committee notes the selling of non-strategic assets to obtain appropriate amount to finance this initiative. As much as the Committee supports this but we would like to encourage our Government to make sure that measures are put in place to ensure that the country's ability to secure funding is enhanced and even more robust.
Most importantly, Honourable Speaker! while the New Development Bank is likely to have benefits beyond existing opportunities, we believe that for these benefits to materialise will require an active Parliament to play a very strong oversight and scrutiny to ensure ongoing relevance, project readiness, constitutional values are upheld and fiscal risks are minimised in this regard.
Honourable Speaker, the seeds planted by the famous piece called Long Walk to Freedom can only sprout within an environment that is truly conducive to that of a united, non - racial, non-sexist, democratic and prosperous society. The 1994 democratic breakthrough provided the African National Congress (ANC) as a liberation movement with the opportunity to pursue economic policies, which holds inclusive growth, development and wealth distribution at its core to bridge the inexorable gap between the rich and the poor within our country. It is therefore critically important for the Committee to recommend that the House adopts the Bill without any amendment, and the ANC supports the Bill.
I thank you!!!