FINANCE minister Mthuli Ncube (pictured) says plans are underway to revive Zimbabwe’s dormant Sovereign Wealth Fund which will be backed by the country’s mining resources.
Nearly 10 years ago the government launched the country’s first-ever Sovereign Wealth Fund, an initiative meant to benefit future generations even when finite natural resources eventually get depleted. At its launch, the fund was expected to be financed through proceeds of the government’s shareholding in mining assets. Experts say Zimbabwe is endowed with over 40 base minerals and several precious stones.
A sovereign wealth fund is a pool of money set aside by a government to benefit an economy and citizens. The money from a sovereign wealth fund comes from the country’s reserves that have grown due to budget surpluses, trade surpluses and revenue gained from exporting natural resources.
Ncube, who is attending the ongoing Dubai Expo, told The NewsHawks that government would soon appoint a board to run the institution following years of redundancy.
“It’s a very important institution for preserving wealth for future generations of Zimbabwe and as government we are really strengthening this institution. It was created a few years ago, but has not been as active,” Ncube said.
“The Sovereign Wealth Fund is being strengthened. We are appointing a new board as a first thing to lead the institution. Secondly, we are going to add more assets under the institution in the form of gold assets, coal assets and then oil and gas assets, among other assets, so that it becomes a safe of future generations in terms of wealth preservation which will deal with inter-generational issues in the country.”
Experts say sovereign wealth funds are gaining ground in Africa, although urgent financial reforms are needed to boost foreign investment following the Covid-19 pandemic.
Munashe Matambo, an associate research scientist at the Zimbabwe-based Scientific and Industrial Research and Development Centre, last year told delegates attending the 2021 African Economic Conference in Cabo Verde that there are at least 117 sovereign wealth funds currently operating or in the pipeline around the world, managing US$9.1 trillion – equivalent to 10% of global gross domestic product.
Matambo said currently 24 African countries have established or are considering establishing sovereign wealth funds, but the process is not advanced. He referred to funds established in Botswana and Zimbabwe. According to Matambo’s paper, the Pula Fund in Botswana has strong management and is governed well. In Zimbabwe, the sovereign fund was “unable to perform its role” given the existing governance framework.