News / Africa

    BRICS Bank to Challenge Western Influence

    A Mar. 29, 2012 photo shows (L-R) Brazil's President Dilma Rousseff, Russian Pres. Dmitry Medvedev, Indian PM Manmohan Singh, former Chinese Pres. Hu Jintao and South African Pres. Jacob Zuma at the BRICS Summit in New Delhi, India.
    A Mar. 29, 2012 photo shows (L-R) Brazil's President Dilma Rousseff, Russian Pres. Dmitry Medvedev, Indian PM Manmohan Singh, former Chinese Pres. Hu Jintao and South African Pres. Jacob Zuma at the BRICS Summit in New Delhi, India.
    Anita Powell
    Brazil, Russia, India, China and South Africa formed their economic partnership as part of a drive to counter traditional western economic and political supremacy. The group, known as BRICS, plans to form its own development bank at this year’s summit in South Africa. But can they afford to turn their backs on the West’s most powerful ambassador - the dollar? Experts don’t think so.

    The U.S. dollar drives development around the world, as the currency of choice of major lending institutions like the World Bank and the International Monetary Fund.
     
    BRICS says it wants its development bank to fill the gaps left by those major banks and reach out to the developing world. BRICS representatives have said their funds will be loaned out for infrastructure projects in developing nations. Preliminary reports suggest each of the five nations will put $10 billion into the bank.
     
    But what currency will this new bank use? That, experts say, is the $50 billion  question.
     
    Anil Sooklal, South Africa’s ambassador to BRICS, said details are still being finalized. But he noted that the bloc had previously agreed to trade, when possible, in local currencies - the real, the ruble, the rupee, the renminbi and the rand.
     
    “Well, as you know, last year at the summit in [New] Delhi, we signed an agreement, an interbank agreement, on trading in local currencies among BRICS countries," he said. "So you already have an agreement on trading in local currencies. But in terms of the currency to be used by the BRICS bank, that is also an issue that will be put to the finance ministers to take a decision on.”
     
    But none of those currencies has the chops to hold up a bank, as none are considered international reserve currencies. Those include the U.S. dollar, the British pound and the euro - which are often held in reserve by governments and major financial institutions.
     
    Nigeria, the continent’s second-largest economy after South Africa, gave China’s currency a vote of confidence last year, by becoming the first African nation to invest significantly in the renminbi, by adding $500 million worth - or more than 3.1 billion renminbi - to its reserves.
     
    Standard Bank analyst Simon Freemantle said he thinks China will try to use the BRICS bank to push the status of its currency.  “I think very core to the bank from China, at least, has been the desire to use it as a means to continue the internationalization of the renminbi," he said.
     
    "The idea would not be not to host it in a single currency. … But there will also be benefits in removing the dollar from bilateral trade between, say, South Africa and Brazil, South Africa and India, if that can happen. But I think principally, it’ll be a push for RMB internationalization," Freemantle added.
     
    But he said it is unlikely that this move will unseat the major reserve currencies. He also said trade within the BRICS group makes up a small portion of international trade - which is mainly in dollars.
     
    “I think it’ll be a very long time before the dollar’s status at the global reserve currency is offset, or diminished," he said. "This would really just be an ambition to lower the costs of trading and investing between BRICS members and between China and Africa … So, it’ll be some time, and I expect that the effect on the dollar will be very minimal, at least for the foreseeable future.”
     
    But the future trends are undeniable. Chinese investment in Africa reached nearly $20 billion last year.
     
    And the renminbi is playing an increasingly larger role here. Freemantle estimates that as much as 40 percent of China-Africa trade could be conducted in renminbi in the next two years, up from about 10 percent now.

    You May Like

    Former US Envoys Urge Obama to Delay Troop Cuts in Afghanistan

    Keeping troop levels up during conflict with both Taliban and Islamic State is necessary to support Kabul government, they say

    First Lady to Visit Africa to Promote Girls' Education

    Michele Obama will be joined by daughters and actresses Meryl Streep and Freida Pinto

    Video NYSE Analyst: Brexit Will Continue to Place Pressure on Markets

    Despite orderly pricing and execution strategy at the New York Stock Exchange, analyst explains added pressure on world financial markets is likely

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Brexit Vote Plunges Global Markets Into Unchartered Territoryi
    X
    June 24, 2016 9:38 PM
    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Brexit Vote Plunges Global Markets Into Unchartered Territory

    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Experts: Very Few Killed in US Gun Violence Are Victims of Mass Shootings

    The deadly shooting at a Florida nightclub has reignited the debate in the U.S. over gun control. Although Congress doesn't provide government health agencies funds to study gun violence, public health experts say private research has helped them learn some things about the issue. VOA's Carol Pearson reports.
    Video

    Video Trump Unleashes Broadside Against Clinton to Try to Ease GOP Doubts

    Recent public opinion polls show Republican Donald Trump slipping behind Democrat Hillary Clinton in the presidential election matchup for November. Trump trails her both in fundraising and campaign organization, but he's intensifying his attacks on the former secretary of state. VOA National Correspondent Jim Malone reports.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapide’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.
    Video

    Video Florida Gets $1 Million in Emergency Government Funding for Orlando

    The U.S. government has granted $1 million in emergency funding to the state of Florida to cover the costs linked to the June 12 massacre in Orlando. U.S. Attorney General Loretta Lynch announced the grant Tuesday in Orlando, where she met with survivors of the shooting attack that killed 49 people. Zlatica Hoke reports.
    Video

    Video How to Print Impossible Shapes with Metal

    3-D printing with metals is rapidly becoming more advanced. As printers become more affordable, the industry is partnering with universities to refine processes for manufacturing previously impossible things. A new 3-D printing lab aims to bring the new technology closer to everyday use. VOA's George Putic reports.
    Video

    Video Big Somali Community in Minnesota Observes Muslim Religious Feast

    Ramadan is widely observed in the north central US state of Minnesota, which a large Muslim community calls home. VOA Somali service reporter Mohmud Masadde files this report from Minneapolis, the state's biggest city.

    Special Report

    Adrift The Invisible African Diaspora