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SA puts on brave face after BRICS loss

The BRICS Development Bank will be based in Shanghai and not Johannesburg.

Russian President Vladimir Putin, India's PM Narendra Modi, Brazilian President Dilma Rousseff, China's President Xi Jinping and South Africa's Jacob Zuma gesture during the 6th BRICS Summit in Fortaleza, Brazil, on 15 July 2014. Picture: AFP.

JOHANNESBURG - South Africa is putting on a brave face after losing the contest to host the new BRICS development bank to China.

International Relations Minister Maite Nkoana-Mashabane says each of the BRICS members comes away with a piece of control over the $100 billion bank launched at the grouping' summit in Fortaleza, Brazil.

Russia will chair the first board of governors of the BRICS Development Bank. Brazil will supply the first chair of the board of directors.

The first bank president will be Indian.

Shanghai will be the permanent headquarters and South Africa has the permanent seat of the Africa Regional Centre, ensuring the continent's infrastructure projects are financed.

Finance Minister Nhlanhla Nene joins Nkoana- Mashabane in describing the outcome of the BRICS summit as a win-win for the five-nation grouping.

The long-awaited bank is the first major achievement of the BRICS countries - Brazil, Russia, India, China and South Africa - since they got together in 2009 to press for a bigger say in the global financial order created by Western powers after World War Two and centred on the International Monetary Fund and the World Bank.

The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus.

The new bank reflects the growing influence of the BRICS, which account for almost half the world's population and about one-fifth of global economic output.

The bank will begin with a subscribed capital of $50 billion divided equally between its five founders, with an initial total of $10 billion in cash put in over seven years and $40 billion in guarantees. It is scheduled to start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55 percent.

The contingency currency pool will be held in the reserves of each BRICS country and can be shifted to another member to cushion balance-of-payments difficulties. This initiative gathered momentum after the reverse in the flows of cheap dollars that fuelled a boom in emerging markets for a decade.

China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.

If a need arises, China will be eligible to ask for half of its contribution, South Africa for double and the remaining countries the amount they put in.

AGREEMENT REACHED 11TH HOUR

An agreement over the headquarters and first presidency were reached at the eleventh hour due to differences between India and China. The impasse reflected the trouble Brazil, Russia, India, China and South Africa have had in reconciling stark economic and political differences that made it hard for the group to turn rhetoric into concrete action.

Negotiations to create the bank dragged on for more than two years as Brazil and India fought China's attempts to get a bigger share in the lender than the others.

In the end, Brazil and India prevailed in keeping equal equity at its launch, but fears linger that China, the world's number two economy, could try to assert greater influence over the bank to expand its political clout abroad. China, however, will not preside over the bank for two decades.

Facing efforts by leading Western nations to isolate Russia for annexing Crimea and stirring revolt in eastern Ukraine, the BRICS summit provided President Vladimir Putin with a welcome geopolitical platform to show he has friends elsewhere, economic powers seen as shaping the future of the world.

The BRICS abstained from criticising Russia over the crisis in Ukraine and called instead for restraint by all actors so the conflict can be resolved peacefully.

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