SADC flirts with sovereign wealth funds

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Windhoek - Several Southern African Development Community (SADC) members have had their heads turned by the allure of sovereign wealth funds.

This year, Mozambique, Namibia, South Africa and Zimbabwe have all gone to varying lengths to establish a sovereign wealth fund (SWF) to finance their respective national economic priorities and at a time that the COVID-19 pandemic is militating against efforts to meet the SADC objective of seven percent GDP growth.

An SWF is a state-owned investment in tangible (real estate, minerals and metals) and financial assets (stocks and bonds, private equity funds and hedge funds) on global scale.

In Namibia, Cabinet has directed the Ministry of Finance to establish a team to create an SWF.

Neighbouring South Africa has gone further, and has already indicated that its SWF could be worth as much as R30 billion by using proceeds of state assets sales, gas royalties and other sources.

In his 2021 National Budget presentation, South Africa’s Minister of Finance, Mr Tito Mboweni, said a sovereign wealth fund was an important long-term tool for saving and investment.

"It can also contribute to strengthening the fiscal framework. We must learn to save during the good times, and a fund can play an important role as a countercyclical fiscal tool."

In Mozambique, the government has formulated an ambitious plan for its Sovereign Wealth Fund aimed at generating as much as US$96 billion. The figure is six times the country’s gross domestic product.

Mozambique is hoping to boost the fund with operations at liquefied natural gas fields that have attracted investments from global energy giants such as Total and Exxon Mobil.

Information released by Mozambique’s central bank this week show that the SWF will build savings and contribute to fiscal stability when commodity prices fluctuate. While it would be managed by the Ministry of Economy and Finance, lawmakers would be tasked to regulate it.

Economic analyst Dr Omu Kakujaha-Matundu told The Southern Times Business that SWFs offered a viable long-term investment option for the SADC region.

“I think it is a noble idea not just for Namibia but for other SADC countries. Norway is a great example of a country that has leveraged well on a sovereign wealth fund. If well managed it could go a long way to help our countries in the future.

“For example, proceeds from the mining sector can go to that Fund.  However, if it is created in the name of corruption it won’t benefit the citizens. The Fund has to be managed well so that we won’t have to run like headless chickens when we are confronted by problems like the new coronavirus pandemic,” he said.

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