I have read the Sovereign Wealth Fund bill and it certainly looks good on paper. But I am afraid that most Zimbabweans have misplaced expectations on what it can achieve in the short to medium term.
It is certainly not a petty cash slush fund that can be used by government to fund empowerment as we saw being done with youth empowerment loans. It is not a pile of money that the Minister of Finance can dip into to fund operating expenditure of the government.
It is not a fund that can be used for patronage as we saw being done by Gideon Gono during his tenure as Reserve Bank Governor. It cannot be managed in the same manner as we now hear has been happening at NSSA -where the words accountability, transparency and conflict of interest do not exist. It cannot be a Sovereign Slush Fund.
A Sovereign Wealth Fund is a reserve that the country must save over a long period of time. This reserve must be used to create long-term wealth for the country. It must not be used to meet the national budget shortfalls or recurrent expenditure.
One can give here an example of personal savings, where you religiously save 10% of your monthly income for the future. It’s a discipline whereby you build wealth over time.
This implies that we must seek to maximise the returns on the savings, but we must invest them prudently so that the investment value of the Fund increases with time before we can start spending. We must achieve real returns.
Critical of course is that the management of this fund is removed from political interference, a habit we must unlearn as a country. This is not about to happen – given the culture of mis-governance and non-accountability of the current government. I am therefore hardly excited about this fund until we see a fundamental change of culture within the political leadership of our country.
Establishing a viable Sovereign Wealth Fund will take time and discipline. What must happen first is the maximisation of resource revenues and transparency and accountability within the mining sector. These resources must first be managed differently, and not as we have seen in the diamond sector, before we can create viable long-term saving mechanisms. We must also see a government that takes its responsibilities seriously and has a genuine interest in developing the country.
I have argued before that, if we cannot even manage our social security contributions – our aids levies for example – there is no way we can expect a professionally and competently managed fund such as the Sovereign Wealth Fund to emerge.
The morality of a government plays a significant role. A government that is broke and has a history of misallocation and mismanagement of money does not create any confidence; a government that is run like a political party instrument, as we have in Zimbabwe, can hardly be expected to have the discipline to sacrifice for future generations. At the end of it all that is what will determine whether we truly have a Sovereign Wealth Fund 10 or 20 years from now.
So my argument here is that this may be the wrong timing for such a fund. We need to clean up our act first – and mange corruption first as a country. We need leaders who are truly dedicated to a better future for all Zimbabweans before we can seriously save for the future. We also need a viable government that manages revenues and expenditures prudently.
Without this, the Fund will be just another good idea implemented badly – not a new thing in Zimbabwe. – Vince Musewe is an economist and author based in Harare. You can contact him at vtmusewe@gmail.com
Post published in: Analysis