Staff Reporter
A TUG of war has erupted in the porous inclusive government with ministers pulling in different directions over the management of a proposed Sovereign Wealth Fund (SWF).
The divisions were exposed by Deputy Prime Minister Arthur Mutambara in his address to a Mining Sector Stakeholders Briefing held in Harare last week. Currently, Youth Development, Indigenisation and Empowerment Minister, Saviour Kasukuwere has been at the forefront of establishing a US$5 billion SWF to warehouse shares in various entities acquired by government under the country’s hostile empowerment law.
Kasukuwere had hoped to house the SWF under his ministry.
But last week, Mutambara revealed that the inclusive government was still undecided on which ministry should manage the fund.
“Our problem in government is that we fight too much. Right now there is a fight (over the SWF). Is it something for Kasukuwere? Is it for the Minister of Finance (Tendai Biti) or is it for (Tapiwa) Mashakada (the Minister of Economic Planning)?” said Mutambara.
“The idea of having a SWF is a good one and let us establish it and not fight over it. It’s a means of empowering our citizens”.
The deputy premier is of a strong view that the Mines Ministry, headed by Obert Mpofu, should spearhead the creation of the fund given the vast mineral resources in the country that can anchor the SWF.
“Minister Mpofu, why don’t you work together (with) diamond, platinum and gold mining companies and create a SWF because we don’t have any other asset that can drive the fund?” he said.
Saddled with a huge debt overhang of US$7 billion, Mutambara jokingly said Zimbabwe is currently operating with a “Sovereign Poverty Fund” adding that leveraging the country’s mineral resources to create a SWF would turnaround the country’s economic prospects. A SWF is a State-owned investment fund composed of financial assets such as stocks, bonds, real estate or other financial instruments funded by foreign exchange assets.
SWFs may be created through commodity exports, either taxed or owned by the government or non commodities through transfers of assets from official foreign exchange reserves.
The funds can be used to stabilise economies without piling pressure on taxpayers.
These assets can include balance of payments surpluses, official foreign currency operations, the proceeds of privatisation, fiscal surpluses, and receipts resulting from commodity exports.
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I agree with Deputy Prime Minister Mutambara when he emphasized the need to establish the SWF instead of fighting. However, given the situation fighting is inevitable and thus why I suggest the following:
Minister of Youth and Indigenization will continue to spearhead the creation of the SWF through implementation of the Indigenization law. The framework will be a cabinet joint outcome especially from economic ministries, which include finance, economic planning, industry and mines.
Once the SWF is operational, the minister whose portfolio contributes the bulk into the SWF will automatically chair the “board” of SWF on behalf of government and real shareholders of the SWF- the communities. Currently and for some time to come, mineral wealth will be the anchor of the fund and Mines Minister will automatically become the chairman.
To improve oversight and transparency, the Ministry of Finance through treasury will provide the administration role to the fund.
The minister of economic planning has vested interest in the fund for planning purposes, whilst the minister of industry and commerce whose sector also contributes to the fund will be involved immensely.
Monitoring
The monitoring of the performance of the fund, its compliance with mandate and achievement of goals as expected by “shareholders” i.e. communities at large will be done by parliament. The Auditor General’s Office will also provide independent oversight as per its mandate. The funds will naturally be monitored by the Reserve Bank of Zimbabwe for monetary policy including balance payments mechanisms.
Distribution
How do we distribute the funds to communities? A suggest a framework whereby the communities come up with priorities for their areas and this will be carried by parliamentary representatives to the legislature. The combined needs of communities will then be funded by treasury through the budget e.g. Community Development Funds. This mechanism is sustainable because communities located in rich mineral regions will ordinarily not require a lot of funds since they get resources from their direct investments in resources extracting companies.
Ideal Situation
Ideally when the infrastructure of Zimbabwe has been developed SWF will start to acc*mulate excess funds. At that stage cash distribution to widows, orphans, elderly, the infirm and unemployed will commence. Furtherm*re, the SWF should fund research and development resulting in Zimbabwe producing her own brand of cars, tractors, s**ce craft, working robots etc. Excess funds from now on will be carried forward for future generations as it is truly their legacy.