‘Transparency key to Zim’s wealth fund’

via ‘Transparency key to Zim’s wealth fund’ – DailyNews Live 13 October 2014 by John Kachembere

HARARE – Zimbabwe must be transparent and accountable to its citizens with the newly established Sovereign Wealth Fund (SWF), a leading South African banker has said.

Nesbert Ruwo, an investment banker said the country needs to engage its people first before it rushes to create the wealth fund.

“The key ingredients to a successful SWF include transparency and accountability. Citizens, who are the ultimate beneficiaries, need to be appraised continuously before and after a SWF is set up. Public awareness and support is of paramount importance,” he said.

This comes as Senate last month passed the Sovereign Wealth Fund of Zimbabwe Bill that will see the establishment of the country’s SWF.

The proposed fund is supposed to be created through pooling together profits from the exploitation of non-renewable resources, such as minerals, into a savings pot for use by future generations.

The Zimbabwe SWF will support fiscal or macroeconomic stabilisation, including long-term economic and social development objectives, and smoothen national income of the southern African country during times of commodity fluctuations.

However, there are fears that with the Zanu PF-led government’s legacy of corruption, plunder and economic mismanagement, the fund would be abused by officials in the ruling party.

Zimbabwe has vast mineral resources but continues to struggle to realise value from its resources as evidenced by high unemployment, breakdown in social services delivery system and high levels of poverty in the country.

Ruwo said Zimbabwe was rushing to create a wealth fund when there are other critical and pressing demands that urgently require huge capital injections — these include investment in social and economic infrastructure.

“My research shows that most countries that set up SWFs were in a budget surplus position. It does not make sense to create a SWF and fund it by increasing the budget deficit,” he said.

“SWF should effectively be used to generate wealth for future generations, provide a buffer against external macroeconomic shocks and to support specific developmental goals. Outside of these objectives, the motives for establishing a SWF become questionable,” added Ruwo.

Economic experts pointed out that countries wishing to establish new funds must learn from those that have managed successful funds such as Norway, which has assets close to $900 billion.

Meanwhile, information from the National Indigenisation and Economic Empowerment Board shows that thousands of Zimbabweans had secured $3 billion worth of shares in foreign companies since 2010.

Nonetheless, economic commentators said there was need for transparency to ensure that all the people in the country benefit from national policies such as the Indigenisation Act.

“It is very important for the country to benefit from its resources, but the most important thing is for the benefits to cascade down to the village and ordinary man in the street,” said business analyst Sebastian Mubvumbi.

“We do not want a situation where only the well-connected benefit at the expense of the majority,” he added.