Nam goes for sovereign wealth fund

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Tiri Masawi

Windhoek – Namibia’s government has stepped into the world of big finance by announcing concrete plans to launch a sovereign wealth fund.

A sovereign wealth fund, sovereign investment fund, or social wealth fund is a state-owned fund that invests in real and financial assets such as stocks, bonds, real estate and precious metals. It can also invest in alternative assets and vehicles such as private equity or hedge funds.

Sovereign wealth funds invest globally and countries like Norway and Saudi Arabia have built multi-billion dollar sovereign wealth funds that have been key to their social protection nets and financing of the development of modern infrastructure, among many other areas.

Namibia’s government spokesperson, Dr Peya Mushelenga, said cabinet had opened the door for establishment of the sovereign wealth fund.

“Cabinet approved in principle the establishment of a national sovereign wealth fund and cabinet directed the Ministry of Finance to constitute an inter-institutional team to finalise the appropriate model and implementation of the sovereign wealth find for cabinet’s consideration and approval,” Dr Mushelenga said.

Only five African countries have to date successfully established sovereign wealth funds, with the results being seen in their rapid industrialization and progress towards economic modernisation. These are Libya under Muammar Gadhafi, Angola, Rwanda, Morocco, Nigeria and Botswana.

Namibia’s quest for its own sovereign wealth fund is part of the Southern African country’s plan to find long-term solutions for its economic challenges that have seen GDP figures contracting for the past three years.

Since 2016, the country’s economy has battled headwinds that include volatile commodity prices and low productivity. These have been compounded by the outbreak of the novel coronavirus, which has strained public resources of countries across the globe, more particularly emerging economies.

Namibia’s government hopes that a sovereign wealth fund will not only allow the economy to diversify, thereby reducing the reliance on international commodity prices, but will also provide a buffer for unexpected problems such as the COVID-19 pandemic.

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