Andrew Kathindi
The Finance ministry has indicated that it will soon begin the process of looking for sources of funding for the sovereign wealth fund proposed by Finance Minister, Iipumbu Shiimi.
A sovereign wealth fund is a fund owned by the state tasked with managing a nation’s savings. It is typically composed of various investments.
This comes as the Finance ministry submitted a proposal to cabinet for its establishment. This proposal was approved last month.
Finance Ministry Spokesperson, Tonateni Shidhudhu, stated that the aim of the will be to strengthen the national responsiveness capacity to mitigate the negative impacts of recurrent external shocks on the economy, a position which has found the country wanting, despite having an array of natural resources such as diamonds, uranium and fish.
“The Ministry, as mandated by Cabinet will soon start with the process of sourcing funding, total size of the investment needed, institutional structure and operational rules. All those issues will be developed at the design phase,” he told the Windhoek Observer.
He further noted that the ministry is preparing for the design phase of the fund. “Cabinet has just approved the proposal in principal, but there is a lot of work that is still to be done with other stakeholders, before the implementation stage.”
Quizzed on the viability of such a fund in Namibia, Economic Analyst, Klaus Schade told Windhoek Observer that, “it would take a robust governance and investment framework that details what revenue should be channeled into the Fund and how and where to invest funds for it to work.”
“These frameworks should be based on international best practices and information about the operations of the fund should be shared with the public regularly in order to ensure transparency and avoid the misuse and diversion of funds.”
He further noted government could consider investing funds from its Southern African Customs Union receipts or revenue generated from the auctioning of various licences and rights.
“Any ‘windfall gains’ from tax revenue (for instance from mining companies during periods of high commodity prices), SACU transfers, etc. as well as proceeds from the alienation and divestiture of state assets including state-owned enterprises or the auctioning of licenses for the use of natural resources such as minerals and marine resources could be channeled into the Fund,” Schade said.
Norway has one of the most lucrative Sovereign Wealth Funds with a Government Pension Fund Global, also known as the Oil Fund, established in 1990 to invest the surplus revenues of the country’s petroleum sector. It has over US$1 trillion in assets, including 1.4 percent of global stocks and shares, making it the world’s largest sovereign wealth fund.
