SA drags its heels on joining Asian development bank
SA has missed four deadlines to ratify an agreement and risks exclusion from the Asian Infrastructure Investment Bank unless it pays a minimum $1m by the end of December
22 November 2022 - 17:36
by Linda Ensor
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SA faces a $1m payment deadline by the end of December to officially join the Asian Infrastructure Investment Bank (AIIB) or risk being excluded from the multilateral development lender that it agreed in principle to join in 2015.
Despite being a founding member, SA has been a reluctant participant in the bank, having failed for to ratify its articles of agreement for several years. It has also whittled down its initial proposed shareholding by more than half since 2015.
SA has missed four ratification deadlines between 2016 and 2019 to become a member, which would grant it access to finance for sustainable development projects, for example. As much as 50% of the AIIB’s portfolio is for funding green projects in member countries.
The cabinet approved the terms in September that would give SA a minimum shareholding of 50 shares, or a 0.19% stake, in the AIIB with a nominal value of $5m.
An amount of $1m (about R17m) would be payable within 30 days after ratification by parliament, with the outstanding $4m being callable. As a non-regional founding member SA would also receive an additional 600 shares after ratification, but to retain this status it will have to pay the full $1m by end-December.
Treasury chief director Mfundo Hlatshwayo told MPs SA’s participation in the AIIB was intended to be a symbolic gesture, geared towards strengthening burgeoning business relationships in Asia and towards demonstrating solidarity with the region’s development aspirations under the so-called South-South co-operation.
“SA may benefit through technical assistance and financing of its clean energy transition programme,” Hlatshwayo said.
The Treasury is asking parliament to approve the ratification, but the DA, FF+ and IFP reserved their positions on the finance committee’s decision on Tuesday to recommend to the National Assembly to approve the ratification.
“The National Treasury and the ministry of finance were not able to finalise this matter given the challenge of the changing economic environment and reconsiderations on the shareholding that SA to take up at the AIIB. Cabinet endorsement was necessary in respect of the proposed revised shareholding,” Hlatshwayo said.
SA is already a member of the New Development Bank (NDB) established by the Brics countries (Brazil, Russia, India, China and SA). It owns 19.42% of the subscribed capital of the bank, which came into force in 2015, and has received $5.4bn in financial support to date. Each member nation has had to pay $2bn over seven years as their contribution to the bank’s capital.
The AIIB was originally formed by 21 Asian countries, led by China, and it now has 93 members — 47 in Asia and 46 outside the region. Other African member countries include Algeria, Benin, Ivory Coast, Egypt, Ethiopia, Ghana, Guinea, Liberia, Morocco, Rwanda, Sudan and Tunisia. The bank has an authorised capital of US$100bn and a subscribed capital of $50bn.
The 2015 cabinet recommendation was for SA to subscribe for up 590 shares plus its 600 founding member shares, which would have required a $60m contribution, but Hlatshwayo said this option was “no longer affordable to SA due to prevailing economic and fiscal challenges.”
Only SA and Kuwait have yet to ratify the articles of agreement.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
SA drags its heels on joining Asian development bank
SA has missed four deadlines to ratify an agreement and risks exclusion from the Asian Infrastructure Investment Bank unless it pays a minimum $1m by the end of December
SA faces a $1m payment deadline by the end of December to officially join the Asian Infrastructure Investment Bank (AIIB) or risk being excluded from the multilateral development lender that it agreed in principle to join in 2015.
Despite being a founding member, SA has been a reluctant participant in the bank, having failed for to ratify its articles of agreement for several years. It has also whittled down its initial proposed shareholding by more than half since 2015.
SA has missed four ratification deadlines between 2016 and 2019 to become a member, which would grant it access to finance for sustainable development projects, for example. As much as 50% of the AIIB’s portfolio is for funding green projects in member countries.
The cabinet approved the terms in September that would give SA a minimum shareholding of 50 shares, or a 0.19% stake, in the AIIB with a nominal value of $5m.
An amount of $1m (about R17m) would be payable within 30 days after ratification by parliament, with the outstanding $4m being callable. As a non-regional founding member SA would also receive an additional 600 shares after ratification, but to retain this status it will have to pay the full $1m by end-December.
Treasury chief director Mfundo Hlatshwayo told MPs SA’s participation in the AIIB was intended to be a symbolic gesture, geared towards strengthening burgeoning business relationships in Asia and towards demonstrating solidarity with the region’s development aspirations under the so-called South-South co-operation.
“SA may benefit through technical assistance and financing of its clean energy transition programme,” Hlatshwayo said.
The Treasury is asking parliament to approve the ratification, but the DA, FF+ and IFP reserved their positions on the finance committee’s decision on Tuesday to recommend to the National Assembly to approve the ratification.
“The National Treasury and the ministry of finance were not able to finalise this matter given the challenge of the changing economic environment and reconsiderations on the shareholding that SA to take up at the AIIB. Cabinet endorsement was necessary in respect of the proposed revised shareholding,” Hlatshwayo said.
SA is already a member of the New Development Bank (NDB) established by the Brics countries (Brazil, Russia, India, China and SA). It owns 19.42% of the subscribed capital of the bank, which came into force in 2015, and has received $5.4bn in financial support to date. Each member nation has had to pay $2bn over seven years as their contribution to the bank’s capital.
The AIIB was originally formed by 21 Asian countries, led by China, and it now has 93 members — 47 in Asia and 46 outside the region. Other African member countries include Algeria, Benin, Ivory Coast, Egypt, Ethiopia, Ghana, Guinea, Liberia, Morocco, Rwanda, Sudan and Tunisia. The bank has an authorised capital of US$100bn and a subscribed capital of $50bn.
The 2015 cabinet recommendation was for SA to subscribe for up 590 shares plus its 600 founding member shares, which would have required a $60m contribution, but Hlatshwayo said this option was “no longer affordable to SA due to prevailing economic and fiscal challenges.”
Only SA and Kuwait have yet to ratify the articles of agreement.
ensorl@businesslive.co.za
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