adminproperly for future generations to benefit.
Zimbabwe has various other resources including gold, coal and platinum which are believed to be the second largest known reserve after South Africa. These resources are finite and can run out.
The proceeds from these resources must be invested wisely in properly structured institutions such as the Zimbabwe Sovereign Wealth Fund (ZSWF).
The creation of a SWF is a critical step in achieving broad based-economic empowerment since the SWF seeks to achieve equity on distribution of wealth at a national level.
The successful launch of the Community Ownership Schemes will ensure that the immediate community where the natural resource has been found will benefit. In addition, the employee share ownership trusts and schemes ensure that staff and management interests are in line with shareholder interests achieving a win-win situation while achieving Government policy of broad-based economic empowerment.
There is need to ensure that communities whose areas are not endowed with mineral resources also benefit from the mineral wealth. This should be achieved via the SWF to achieve an indisputable broad-based economic empowerment result.
According to the Sovereign Wealth Fund Institute, a Sovereign Wealth Fund (SWF) is defined as a state-owned investment fund composed of financial assets such as stocks, bonds, real estate or other financial instruments funded by foreign exchange assets.
Generally, these assets include balance of payments surpluses, official foreign currency operations, the proceeds of privatisations, fiscal surpluses, and/or receipts resulting from commodity exports. Sovereign wealth funds can be structured as a fund, pool or corporation.
There are two major types of SWF: saving funds and stabilisation funds. Stabilisation SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles’ adverse effect on government spending and the national economy.
Savings SWFs build up savings for future generations according to Wikipedia. Traditionally, SWF tend to prefer returns over liquidity, thus they have a higher risk tolerance than traditional foreign exchange reserves.
This is in line with their goal to create long-term value and build wealth for future generations that may not have the same mineral resources at their disposal.
In theory SWF have their origins in commodities – funded through commodity exports, either taxed or owned by the government and non-commodities – usually created via transfers of assets from official foreign exchange reserves. Zimbabwe’s Sovereign Wealth Fund would naturally be from commodities and exports of minerals and royalties from diamonds, gold, platinum etc.
A few SWFs, such as the Government of Singapore Investment Corporation (GIC) and China Investment Corporation (CIC), invest wealth from fiscal surpluses or foreign currency reserves.
According to The Economist magazine: “The world’s largest sovereign-wealth fund belongs to the United Arab Emirates, whose Abu Dhabi Investment Authority manages assets worth US$627 billion. No single Chinese fund is nearly as big: the chunkiest, the SAFE Investment Company, has holdings worth US$347 billion. But taken together China’s sovereign funds are worth an estimated US$831 billion, more than any other country’s holdings. Many of the biggest sovereign funds belong to oil exporters.”
Many emerging nations that have significant natural resources have turned to SWFs as a way to broaden and deepen their capital markets.
SWFs provide long-term capital similar to what the National Social Security Authority (NSSA) has been able to do in Zimbabwe’s capital and money markets over the last decade.
The ZSWF will have a critical role in ensuring that there are more deep pocketed institutions in Zimbabwe with capacity to underwrite huge transactions while furthering national economic vision and goals and achieve national economic financial independence.
Some African countries as well such as Libya, Nigeria, Botswana and Mauritania have also developed and established SWFs.
SWFs have historically been accused of being too secretive and lacking in transparency which the ZSWF should be structured to address and ensure it has the support of all stakeholders as it will be holding assets and resources on behalf of the nation including future generations. The fund structure should outline the management composition, where and how funds can be invested and how it will further the national economic nision of achieving economic independence.
Domestically, people want to know how their money is being invested, whereas internationally SWFs face challenges investing in companies that fear their motives may be politically driven. These are areas that need to be critically looked at before the ZSWF concept is fully implemented.
There is a great need to ensure transparency and accountability to ensure that the SWF gets support from all stakeholders.
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