South Africa to contribute $5bn towards Brics contingent reserve arrangement

5 September 2013

South Africa has committed $5bn (R51bn) to a $100bn Brics contingent reserve arrangement (CRA) that will among others help member countries fund current account deficits.

Most analysts are confident South Africa can afford it, with gold and foreign exchange reserves amounting to $47bn in July.

Leaders from Brazil, Russia, India, China and South Africa (Brics) held a meeting on Thursday on the sidelines of the Group of 20 (G-20) summit in St Petersburg, Russia.

The establishment of a development bank and the CRA were first mooted at a Brics summit in Durban earlier this year.

Being the smallest of the five countries, South Africa — which is likely to be the main beneficiary — will contribute the least to both the CRA and the development bank.

China has committed $41bn to the $100bn arrangement, while Brazil, India, and Russia will contribute $18bn each to the CRA.

"South Africa has committed to it so we have to afford it," said CEO at research firm Frontier Advisory, Martyn Davies.

A statement from the Presidency reported that Brics leaders had achieved consensus on "many key aspects and operational details" regarding the establishment of the CRA.

On the new development bank, the leaders agreed to an initial subscribed capital of $50bn, although no agreement had been reached yet about how much each country would contribute.

Progress was made in negotiating the bank’s capital structure, membership, shareholding and governance at the meeting.

The leaders want speedy progress on both the bank and the CRA.

"In light of the progress achieved both in the negotiations of the NDB (new development bank) and CRA, the Brics leaders expect tangible results by the time of the next summit," they said in a statement.