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Could South Africa really benefit from a Sovereign Fund?

Earlier this month saw reports from the African National Congress (ANC) that the establishment of a Sovereign Wealth Fund (SWF) could be underway. But is this merely an election ploy? And can South Africa afford it?

28 August 2018 · Danielle van Wyk

Could South Africa really benefit from a Sovereign Fund?

Earlier this month saw reports from the African National Congress (ANC) that the establishment of a Sovereign Wealth Fund (SWF) could be underway. But is this merely an election ploy? And can South Africa afford it?

While the SWF is not unique to global economies it is a new introduction into the volatile South African eco-political space.

The SWF is essentially an investment pool made up of money from the country’s reserves. Used to boost the economy, it relies on investments that are diversified and high risk and offers high returns.

This fund is aimed at growing South Africa’s economy by acting as a mechanism to save and redistribute wealth while stimulating economic growth. Another benefit is found in its ability to lead investments in the infrastructure space specifically that the annual budget of a state cannot reach, said Floyd Shivambu, deputy president of the Economic Freedom Front (EFF).

The ANC announced that mining and energy resource royalties might be used in lieu of available funds. This vision allows for 15% of the fund’s gross profits to be deposited back into the national revenue fund.

According to Shivambu there are other possible ways of garnering the start-up funds:

  1. Direct appropriation of R100-billion with allocated shares in strategic state-owned companies (SOC’s).

    “It will be easier to grow the fund from a basis of R100 billion, and if the National Budget is properly re-prioritised, the it can carry and afford this direct appropriation. The SWF will also provide the necessary equity partnerships to potential investors, so the amount should be adequate and possible,” Shivambu stated.
  1. The second approach could be the establishment of the SWF as a subsidiary of the Public Investment Corporation. The PIC is a state-owned asset management firm that invests across the economy.
  2. The third option could be to allocate key shares in South Africa’s mineral and petroleum resources. The proceeds of these could be invested in different portfolios all over the world.

The DA expressed its concerns regarding such a fund as it would normally be established where there are significant surplus savings. According to David Maynier, DA-MP and shadow minister of Finance, this is not the case in South Africa with its low levels of savings and high levels of debt.

“We have reservations about the establishment of a Sovereign Wealth Fund because in practice it will concentrate control of more than R100 billion. This money in the hands of the governing party could lead to even more corruption in South Africa,” said Maynier.

While most opposition parties have not reacted positively to the possibility of a SWF, the EFF has welcomed it. 

However, Maynier accused Shivambu of trying to position himself as the authentic voice of the left by monopolising the ANC’s economic policy, including the SWF proposal.


Whether this could be a successful venture is dependent on South Africa dealing with the current lack of infrastructure in its energy, transport, education and health systems.

*The African National Congress and the Freedom Front were contacted but failed to deliver commentary at the time of publication.

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