Govt allocates $500k for wealth fund

HARARE - Government has allocated  $500 000 to operationalise its Sovereign Wealth Fund (SWF).

The Fund was set up as part of strategies to facilitate the harnessing of resources towards broader developmental objectives.

“I propose to allocate $500 000 in support of the initial operations of the SWF, while exploring other measures to augment the Fund’s start-up capital,” Finance minister Patrick Chinamasa said in his 2015 National Budget.

He added that the SWF “will be primarily resourced from 25 percent of all royalties on mineral exports on the sale of diamonds, gas, granite and other minerals through the Zimbabwe Mining Development Corporation.”

“This funding strategy is appropriate as it diverts resources away from recurrent expenditures towards capital development projects,” Chinamasa said.

He said the President’s Office, Treasury and the central bank were currently in the process of operationalising the SWF, and a board and fund manager will soon be appointed.

Last month, Senate passed the SWF of Zimbabwe Bill, leading to its establishment.

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

However, analysts say authorities must be transparent and accountable in managing the SWF.

Recently, an investment banker Nesbert Ruwo said Zimbabwe 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.

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.

 

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