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Low government trust calls for effective Wealth Fund accountability

Staff Writer

Economists at Simonis Storm has said that the currently low levels of public trust in the government calls for effective accountability to provide peace of mind for Namibians that money in the Welwitchia Fund will not be misappropriated.

The economists have however highlighted that the importance of a sound governing framework has been pointed out by the President, Bank of Namibia’s governor and the Minister of Finance.

While a draft for the governing framework has been prepared, they said this must still be submitted for final approval so that it becomes a separate legal document.

“Once legislated, rules and regulations governing the withdrawal of funds will have to be enforced properly and effective accountability will have to be established to provide peace of mind to the public that money in the Fund will not be misappropriated, given that public trust in government is fairly low.”

“About 68% of Namibians believe that “some” or “a lot” of the resources intended for the pandemic response/relief was lost or stolen due to government corruption according to a survey done by Afrobarometer (released in February 2022),” said Simonis Storm.

Namibia recently joined the group of 24 Sovereign Wealth Funds (SWF) in existence in the Sub-Saharan Africa (SSA) region.

“However, depending on the definition used, the United Nations estimates only sixteen African SWFs, whereas the Sovereign Wealth Fund Institute (SWFI) estimates 24. For example, some include South Africa’s Public Investment Corporation which has over R2.3 trillion in assets under management as a SWF, when others do not classify it as such.”

“The United Nations estimate that African SWFs have combined assets of USD 159 billion compared to an estimated USD 10 trillion for all global SWFs. African SWFs are largely funded from surpluses from commodity exports,” said Simonis Storm.

About half of all African SWFs were created within the last decade according to the United Nations.

Most of the African SWFs invest mainly in Asia, North America and Europe, with great exposure to real estate investments. On the other hand, SWFs in Asian countries (mainly China) invested most in Africa compared to SWFs from other overseas countries.

Certain African SWFs are pioneering investments in green solutions (e.g. Morocco and Senegal) and financing social impact projects (e.g. Angola and Nigeria)

The same team who currently manages Namibia’s foreign reserves, the Financial Markets Department at BoN, will be managing both accounts and will follow a blend of both internal and external resources for managing the investments.

The firm submits that so far, it seems unlikely that a local asset manager will be approached.

In the meantime, they said the Stabilisation Account will invest 100% in offshore securities.

A small component of the account will be in cash (e.g. money market fund) to provide liquidity for any potential withdrawals as and when it is needed in the shorter term.

The remainder of the account will invest in offshore fixed income securities as this account is lower risk in nature.

Staff Writer

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