Monday, September 12, 2011

Empowerment rules: Zim to set up equity fund

ZIMBABWE is set to establish a Sovereign Wealth Fund (SWF) to hold shares in various entities acquired by the government under the empowerment legislation signifying its intentions to move ahead with the programme that has rattled foreign investors.

The move comes after major mining companies buckled under pressure and resolved to sell controlling shareholding to locals in line with the Indigenisation and Economic Empowerment Act.

Initially, mining houses under the Chamber of Mines umbrella had offered 26% to locals. According to information obtained last week, the country’s SWF, Zimbabwe Investment Corporation (ZIC) will be launched before the end of the year to house resources for the future generation.

The fund will be the baby of the Ministry of Youth Development, Indigenisation and Empowerment with oversight responsibility from the Ministry of Finance. ZIC will hold shares in various entities acquired by government as part of the empowerment legislation as well as revenue from an SWF super tax of 5% on mineral production.

It also seeks to raise over US$5 billion in assets over the next three to five years. An independent body would be established to oversee the management of the fund.
Before the fund is lau-nched, the promoters would visit renowned funds in Asia and the Middle East.

In Asia, the team would visit the Singapore Investment Corporation and China Investment Corporation. In the Middle East, the team would visit Abu Dhabi Investment Authority (ADIA) and Qatar Investment Authority.

ADIA is the world’s largest fund with assets of over US$620 billion. There are currently 51 funds with combined assets of over US$4 trillion. According to the Sovereign Wealth Fund Institute (SWFI) since 2005, at least 19 funds have been created.

SWFI studies the funds and their impact on global economics, politics, financial markets, trade and public policy. It said globally, the financial and utility sectors in direct investments were white hot for sovereign investors.

“In the first half of 2011, US$7, 09 billion was invested by SWFs in the financial sector. “This was followed by U$3,13 billion in utilities. Year-to-date from 2011, we have recorded US$3, 41 billion in energy sector direct transactions,” it said.


An 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.

SWFs may be created through commodity exports, either taxed or owned by the government or non commodities through transfers of assets from official foreign exchange reserves.