About two-thirds of its balance sheet is in dollars, with the renminbi accounting for 17% (it has issued several yuan-denominated instruments, as well as in several developed market currencies). While there are no directly comparable instruments, the yield NDB was able to issue at was probably lower than the SA government could have issued at. That suggests a sustainable economic value of NDB to SA: a source of cheaper funding than direct issuance.
It will be interesting to see how the NDB builds its portfolio of SA loans. It might concentrate its exposure to the SA government, funding projects by state-owned enterprises and the central government balance sheet, though its mandate includes lending to private sector projects. The bank’s portfolio is dominated by transport infrastructure (33%) and clean energy (11%) projects. The NDB is keen to project itself as complementary to the existing international financial architecture rather than competing with the likes of the World Bank.
Apart from the NDB, Brics has not yet created much institutional structure. There is the Brics Contingent Reserve Arrangement, in which SA is a much smaller contributor, which is intended to support members’ currencies in the event of crises, competing with the IMF. Besides that, Brics is driven more by vision than reality. There has been talk of everything from a joint undersea cable that will be free of US spying to a common payments system, but none of these have yet got off the ground. There are also no trade agreements, despite regular talk of creating a free-trade bloc. In the one real outcome so far, SA has managed to gain significant participation and benefit, disproportional to its economic clout.
The expansion of Brics that was announced at the summit two weeks ago does not necessarily mean the expansion of the bank’s members or capital base, though it probably implies it. The bank risks becoming a tool to offer new Brics members a tangible return for their involvement in the bloc, something SA will need to defend against, both to manage the risk to its capital invested and its access to lending. Given the clout it now has in the bank, it could succeed.