Soon-to-be launched sovereign wealth fund targets R30bn in capital

Treasury to conduct feasibility study on source of capital.
President Cyril Ramaphosa delivering the State of the Nation Address in February. Image: GCIS

The government is forging ahead with the launch of a sovereign wealth fund, which will initially have a targeted capital amount of about R30 billion, Finance Minister Tito Mboweni said in his 2020 budget speech on Wednesday.

Plans by the government to launch a sovereign wealth fund as a means to preserve and grow the country’s national endowment were initially announced by President Cyril Ramaphosa during his State of the Nation Address two weeks ago.

Mboweni plans to take it a step further, saying the government is serious about plans to establish a sovereign wealth fund, which will be an “important long-term tool for saving and investment for future generations”.

“It [the sovereign wealth fund] can also contribute to strengthening the fiscal framework. We must learn to save during the good times, and a fund can play an important role as a counter-cyclical fiscal tool,” the finance minister said during his speech.

Mboweni said parliament will be responsible for formulating the legal, administrative and procedural issues involved in launching the fund, although he didn’t give a timeline for this process.

Ramaphosa’s wealth fund proposal has drawn criticism due to the dire state of SA’s public finances.

Countries that launch sovereign wealth funds usually have low government debt and run budget surpluses. Excess government funds are usually channelled into the fund to capitalise it. 

Norway is often used as a case study for a successful sovereign wealth fund. The country’s fund has $1 trillion in assets that were built from the country’s oil reserves.

Sovereign wealth funds can however also be used as a vehicle for looting and corruption, an example of which is Angola, where the fund has been used to benefit patronage networks in the state.

SA doesn’t run a budget surplus and has debt problems, which economists say will make it difficult for the government to successfully run such a programme.

Mboweni revealed that SA’s gross national debt is expected to increase to 71.6% of GDP over the next three years, while the budget deficit is expected to drop by a small margin to 5.7% over the same period, from the current 6.8%.

National Treasury says it is conducting a feasibility studies on the viability of such a fund. Funding may need to come from “the proceeds from the allocation of spectrum and the sale of non-core assets to capitalise such a fund”.

“In addition, a fiscal rule that saves fiscal surpluses in the fund could help to manage volatile revenues.”

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Feasibility study? Do they even know what it is?

Do you know what positivity and a great mental attitude is?

It’s a good thing to implement a sovereign wealth fund but the lowest hanging fruit is already taken. Also the fund has to be for all and not run like the lotto fund is currently, which is corruption on steroids.

The bankrupt SOEs and municipalities will take one bite at the sovereign wealth fund, and there won’t be anything left….nothing left for future generations. The potential future wealth of the nation disappeared into the Luthuli House gravitational black hole.

“The real cost of the State is the prosperity we do not see, the jobs that don’t exist, the technologies to which we do not have access, the businesses that do not come into existence, and the bright future that is stolen from us. The State has looted us just as surely as a robber who enters our home at night and steals all that we love.” Frederic Bastiat.

This fund can be well served by the assets nature SA has been endowed with. Notably our nature, wild life and weather. For example, the SA wild life ranching is very well established and is almost, if not larger than the National Parks in land and herd size. Promoting tourism and eco-tourism is very sustainable and a levy would be well placed. For example, the President has a very prized buffalo which very few people have seen, let alone South Africans.

Can someone not please find CR a board or a chair or something to sit on.

He seems to think he is running some sort of business.

He should be fixing what he broke.

Running a government should be run like a business. Zuma didnt know how to pass school let alone run a business. Hence we are broke. A business needs to be profitable and Cyril knows how to make money. This is a brilliant idea!

It sounds like a sovereign peanuts fund that will grow the government wage bill.

Whether it is a peanuts fund or not, at least we have changed our mindset to become wealthy. It is most welcome

End of comments.

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