BancABC is lobbying government to set up a Sovereign Wealth Fund (SWF) and implement a broad-based empowerment policy amid a deadline extension for foreign-owned companies to submit their empowerment plans to government.
Blessing Mudavanhu, BancABC group chief risk officer, told journalists and investment analysts at a seminar last Friday that treasury could take a leading role on the country’s empowerment policy.
“We advocate for a creation of a Sovereign Wealth Fund as a way of indigenous economic empowerment,” Mudavanhu said. “Zimbabwe can empower locals without indigenisation of companies. Government should set up sovereign wealth funds like Temasek Holdings of Singapore. The SWF will be owned by government through the ministry of Finance and an independent board of directors. Thus the fund is private but effectively owned by the people of Zimbabwe.”
Temasek is a US$122 billion Asian investment company founded in 1974. As at December last year the company had a 38% interest in large listed blocs, 34% in other listed and liquid assets and 28% in unlisted assets.
The SWF, according to Mudavanhu, would be financed through dividends received from portfolio companies, divestment proceeds, commercial borrowings, bond issues and occasional capital injections from its shareholder. He added that SWF can be used as a post global financial crisis measure to stabilise the financial market without putting the tax payers’ money at risk.
“Although SWF are usually created in times of surplus, government can create such a fund at the back of its assets,” he added. Zimbabwe has abundant platinum resources, third after Russia and South Africa.
The Youth, Indigenisation and Empowerment ministry, which gazetted regulations compelling foreign-owned companies valued at US$500 000 to “cede” a 51% stake to black Zimbabweans, is in charge of the policy. Empowerment minister Saviour Kasukuwere could not be reached for comment as he was reportedly attending a meeting.
A SWF is a state-owned investment fund composed of financial assets such as stocks, bonds, real estate, or other financial instruments funded by foreign exchange assets.
These assets can include balance of payments surpluses, official foreign currency operations, the proceeds of privatisation, fiscal surpluses, and receipts resulting from commodity exports.
SWFs can also be structured as a fund, pool, or corporation. The funds have been used by numerous governments to diversify from non-renewable commodity exports.
Apart from SWF, Mudavanhu, a former Merrill Lynch director of global risk management, said government should empower local companies by granting them state-tendered projects.
“In banking, government must seek to maintain the domestic bank share of deposits above 50%, and the majority of domestic bank board members must be Zimbabwean citizens and residents. Foreign banks are more likely to be risk averse to lending to domestic small to medium enterprises than domestic banks.”
Since 2005, at least 17 sovereign wealth funds have been created on the back of skyrocketing commodity prices on the global market.