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New Development Bank urged to be more transparent about project finance

10 March 2021 at 1:41 pm

  • How do we hold multilateral institutions like international financial institutions (IFIs) accountable for the kind of development they fund in countries?
  • How can communities and women especially participate in international financial institution (IFI) funded development projects in meaningful ways for positive change when they can’t even access information related to IFI projects?

The CER and Oxfam South Africa launch briefing paper on the “Information and Grievance Mechanisms of the New Development Bank (NDB)”.

This paper reviews the local frameworks that relate to projects funded by the NDB in terms of access to information, consultation, and grievance mechanisms. It considers the challenges which face communities and civil society organisations who are concerned about or directly affected by the development projects which are being financed by the NDB.

Since the NDB African Regional Centre was launched in Johannesburg in August 2017, the NDB has approved 9 projects for South Africa (8 projects in SA and 1 project in Lesotho) valued at an estimate USD 3.2 billion. However, there is little knowledge about how the NDB includes people and communities in project consultations and how affected communities can access information.

Zahra Omar, Attorney at the CER’s Corporate Accountability and Transparency Programme explains, that “while the NDB commits to promoting the highest levels of transparency, the briefing paper demonstrates areas in which the NDB can improve on making its policies and processes clearer, including making NDB project information accessible to the public”.

Sipho Mthathi, Executive Director of Oxfam South Africa states, “Given the continued challenges in South Africa regarding good governance, including accountability and the proper use of public funds (both internally and externally sourced), and ongoing reports of corruption, over-pricing and the delivery of sub-standard PPEs (Personal protective Equipment), it is clear that public access to information is a critical aspect of the transparency of multi-lateral development banks (MDBs), especially by affected communities where MDB investments are located. Such information is the cornerstone for ensuring that MDBs adhere to the social and environmental standards, which include community consultations.

The NDB has a unique opportunity to uplift the lives of people living in poverty in South Africa and the rest of the continent, particularly given its aspirations to expand NDB membership beyond the BRICS. Access to information and citizen engagement, including community consultations would ensure that development projects financed by the bank, are environmentally and socially responsible. A considered, consultative and transparent approach to development, which places people and the planet at the centre of decision making by the bank, could address poverty in a meaningful and sustainable way, paving the way for infrastructure that is responsible, while protecting the environment for generations to come.

Marianne Buenaventura Goldman from Oxfam South Africa explains further, “Oxfam has been looking into ways to hold IFI’s accountable for unfair and exclusive development for over five years. We find that IFI’s often exclude women and communities in development with little to no consequences because of the challenges that communities face in accessing information about IFI loans, which is needed to hold IFIs accountable. This is what inspired us to conduct research on information access mechanisms at NDB”.

Since the outbreak of the COVID-19 pandemic, the public has become more aware of IFIs and its role in financing sustainable economic growth. While a fifth of the R500bn fiscal stimulus package comes from budget reprioritisation within departments, the South African government has approached the World Bank, the IMF, the NDB and the African Development Bank to finance the fiscal stimulus package deficit. The total amount to be funded for emergency assistance is US$7 billion (around ZAR 107.5 billion). This includes USD 1 billion (around ZAR 15.3 billion) secured from the NDB in July 2020 to support South Africa’s emergency response to COVID-19.

The NDB is one of the youngest multi-lateral development banks (MDBs). In its five years of its existence, the NDB has approved 65 infrastructure and “sustainable development” projects worth USD 21 billion across the BRICS countries, with efforts now to expand NDB membership and project support to other countries. The NDB also recently announced that it is providing up to USD 10 billion in crisis-related assistance and economic recovery projects through its emergency COVID-19 response programme.

Leanne Govindsamy, CER Programme Head of Corporate Accountability and Transparency states, “As a development finance institution operating for and in the global south, the NDB presents stakeholders with a number of challenges and opportunities in relation to the financing of infrastructure and sustainable development projects. Opportunities include socioeconomic and other social benefits which accrue from appropriate, well-considered and environmentally sustainable projects in harmony with nature. However, development finance projects can also create unintended environmental, social and governance impacts and negatively affect the marginalised and the poor in a disproportionate manner.”

It is hoped that this paper, which provides more detail on the NDB, its institutional character, processes, and policies, with a focus on its transparency and grievance mechanisms, will be useful to those who are directly affected by the NDB’s development projects as well as those who are concerned about such projects, whether from an environmental or social perspective. Given the role that the NDB will play in financing South Africa’s stimulus package, it is hoped that this paper will also provide useful guidance to those engaged with national policy debate on issues of reconstruction and recovery. The question that remains, is whether the NDB will finance change for the good of people and planet and redefine what development means for South Africa and the continent? Will it consult with those most affected, providing detailed and accessible information so as to enable meaningful consultation and responsive decision-making or will it to finance potentially destructive, unsupported and unsustainable projects?

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Section 24of the Constitution of the Republic of South Africa, 1996

Everyone has the right to an environment that is not harmful to their health or well-being; and to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that prevent pollution and ecological degradation; promote conservation; and secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development.

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