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Legislation to establish the Sovereign Wealth Fund is now in place following the gazetting of the Sovereign Wealth Fund Act on Monday, a landmark development which seeks to establish a facility whose objective is to reserve income from the country’s finite mineral resources for the benefit of future generations.
The fund will be driven primarily by 25 percent of all royalties on mineral exports, which will be deposited, along with special dividends on the sales of diamonds, gas, granite and other minerals through the Zimbabwe Mining Development Corporation.
The Reserve Bank of Zimbabwe will be the primary custodian of the fund.
A board to govern the fund, made up of nine members, including a chairman and CEO, will soon be appointed by the Ministry of Finance, with the CEO post carrying a maximum term of five years.
The Ministry of Finance said the objectives of the fund are to make secure investments for the benefit and enjoyment of future generations and to support the development objectives of the Government, including its long term economic and social development.
“This development constitutes a significant milestone in the attainment of the goals of Zim-Asset and more particularly, in ensuring that the country leverages on its rich natural resource endowment for sustainable development,” said the ministry.
Economic analysts welcomed the gazetting of the legislation, saying that it was long overdue.
Economist and businessman Joseph Sagwati said the fund will act as a State pension utility that will invest in local and regional bourses. This would be with a view to hedging against the expropriation of the minerals and welfare challenges from local market gyrations.
“Belated though it is, the constituting of a Sovereign Wealth Fund to harness mining resources into a structured investment vehicle is a welcome development,” said Mr Sagwati.
The move to base the fund on minerals is a step in the right direction because all this does, in comparison to other funds, is that it appropriates a portion of the royalties away from recurrent expenditure and towards capital expenditure, said another economist.
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