Mutapa Investment Fund could spur wealth creation

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Zimbabwe’s moves to fully activate and operationalise the national sovereign wealth fund — now known as the Mutapa Investment Fund is a step in the right direction that could generate wealth for future generations, stabilise the economy, and promote economic development.

For a long time, sovereign wealth funds (SWF) were thought of as a preserve for countries such as Norway and many others in the West.

It was seen as largely impossible to establish one in Africa. But over time, Zimbabwe and most other African countries have opened up to the idea of establishing their investment arms to fill critical gaps in financing projects and trigger increased investment in priority sectors. Economists say development finance institutions (DFIs), funded by national governments and multilateral organisations, are central to attracting investment by providing inexpensive equity and debt.

The largest African SWF is Ethiopian Investment Holdings (EIH), which launched in 2022 with $45 billion worth of state-owned assets. Nigeria, Egypt, and Morocco are among a few African countries with a strong portfolio of SWF, while Mozambique and Kenya are among the countries that have recently drafted bills for the creation of new SWFs.

They say SWFs are more like a hybrid between DFIs and private equity funds and are focused both on gaining returns and on investing for strategic development and impact.

The Mutapa Investment Fund (MIF) was a major upgrade and renaming done in September last year of the original 2014 Sovereign Wealth Fund (SWF).

This upgrade saw the relocation of Government shareholdings in a block of State-owned entities and former parastatals to the fund along with other Government investments.

Analysts say that MIF was a long overdue step. They say the establishment of the fund is a step in the right direction and spurs Zimbabwe’s economic growth.

“Hindsight has from time immemorial been shown to be the best teacher,” says Mr. Muchadeyi Masunda, an expert in corporate governance, stating categorically that following the advent of Uhuru in April 1980, “we either knew or ought to have known that our country has always been endowed and blessed with not only vast and diverse natural resources but also intellectual capital.

“It was, therefore, incumbent on us to galvanise those natural resources and make them sweat for the ultimate benefit of current and future generations.”

The country, he says, should have taken heed of what countries like Norway did with its greatest natural resource — oil deposits in the North Sea.

During the late 1960s, Norway went through its trials and tribulations of establishing what has now become the world’s largest and wealthiest sovereign wealth fund (SWF).

“As the old saying goes, wise people learn from mistakes made by others and thus not only avoid the need to make their own mistakes but also learn salutary lessons from the mistakes made by others,” says Mr Masunda.

Mr Masunda, a veteran lawyer and businessman who has garnered vast experience on several corporate boards, drew parallels with the SWF in Norway, which has been a resounding success, saying there is no rhyme or reason why a similar model should not work in Zimbabwe which, in any event, is blessed with infinitely greater and diversified natural resources than Norway.

“It’s not too late for us to get our own SWF — the MIF — off the ground and up and running,” he says.

“In this regard, it would certainly be in our interests to revisit a magnanimous offer of assistance that was made by Bard Hopland, the last resident Norwegian Ambassador to Zimbabwe, about 10 years ago.

“To the best of my knowledge, Zimbabwe has over the years enjoyed very cordial relations with Norway which, by the way, is not a member of the European Union (EU).”

The divestiture of RBZ companies, which have also been moved into Mutapa leaving the RBZ with its core central banking and regulation functions, dovetails with the IMF Article Consultation mission that also recommended that to deal with the RBZ quasi-fiscal operations, RBZ should divest from all its subsidiaries and transfer them to Government.

Such sovereign wealth funds are used in several countries to build up a portfolio of investments for the benefit of the people and at times have been used to ensure that any sudden temporary bursts of wealth, such as an oil strike, result in investments that will continue to provide national income when that resource is exhausted.

Ethical Holdings executive chairman Mr David Machingaidze agrees that the introduction of the MIF will bring financial security which will provide a financial cushion to the country when other income sources are not doing well.

“Moreso, economic growth will be enhanced as these funds invest in profitable projects which can boost the country’s economy by creating jobs, developing infrastructure, and supporting industries,” he says.

“The MIF will aim to stabilise currency; this can help prevent the country’s currency from becoming too strong or weak.”

With MIF, says Machingaidze, Zimbabwe as a country can plan for its future, and through the fund, the country will save money today to meet future needs like healthcare, education, or development projects. Consequently, diversification by putting money into different types of investments helps reduce risks. MIF invests in various assets, like stocks, real estate, or bonds.

“This protects the country from relying too much on just one thing. These funds can also make Zimbabwe a player in global markets,” he says.

“By investing internationally, they gain influence and build partnerships. MIF can be a source of quick funds during emergencies as there will be a reserve emergency fund.”

The concept of a sovereign wealth fund (SWF) is like a savings account but on a national level. It is a pool of money owned and managed by the government. Revenues from natural resources or foreign exchange reserves typically fund it.

This, says Mr Machingaidze, includes minerals, oil or gas, or foreign exchange reserves.

“SWFs act as a savings account for the nation. They play a vital role in managing a country’s wealth and ensuring long-term financial well-being.

“They are managed by professional investment teams.”

Various countries like Norway, China, Kuwait, and Abu Dhabi among others have Sovereign wealth funds which have stabilised their economies.

Zimbabwe adopted it in 2013 and revised the act through Statutory Instrument 156 of 2023.

For Mr Busisa Moyo, the most progressive states have a sovereign wealth fund that owns and holds assets of strategic importance and MIF is no different in that it will hold strategic assets.

The Norwegian Sovereign Wealth Fund, which is the largest sovereign wealth fund, owns USD1.6 trillion in assets under management, having started in 1998 just 26 years ago, says Mr Moyo, chairman of the Zimbabwe Investments and Development Agency. (ZIDA).

“This ideally will benefit future generations,” says, adding, “Our sovereign wealth has a good starting point with quite a few assets having been placed under MIF.”

Mr Moyo, however, says the challenge is that the assets are mostly loss-making and have been a drain on the fiscus and are mostly distressed and lack working capital.

“The Mutapa team will have to get cracking to attract alliances, strategic partnerships, and investments into those as-sets to stop the bleeding,” he says.

“MIF is better off holding minority stakes in functional and profitable assets and the Cabinet has set the stage for this to be done.”

Another challenge, he says, lies in finding the right investors, partners, executive operator leaders, and teams to run the business differently and crafting fair and equitable agreements with those partners for long-term value.

The ZIDA boss, however, shares the same sentiments with Mr. Masunda who is suitably impressed with the calibre of the inaugural MIF board members comprising Chipo Mtasa, John Panonetsa Mangudya, Charity Chiratidzo Jinya, Thembelihle Ngcimezi Ruth Khumalo and Bart Mswaka.

“Under chairperson Chipo Mtasa and her board I am confident we will see a “no nonsense” attitude towards corruption and the executive team has the challenge of setting this tone from the get-go because investors and partners will always try to test this resolve and inflexibility towards being corrupted,” says Mr Moyo.

They have all been tried and tested in our country’s corporate services sector, added Mr Masunda saying the team should be given unfettered leeway to get on with the attainment of the lofty goals which are encapsulated in the IMF’s Mission Statement.

One of the main objectives of the MIF is to ensure the long-term management of revenues generated from our country’s God-given resources so that the wealth created from these resources benefits both current and future generations.

“Needless to say, the investments to be made by the MIF should be spread across local, regional, and international markets to achieve as broad an exposure as possible to sustainable growth and creation of value whilst, at the same time, achieving judicious risk diversification,” says Mr. Masunda.

“The other critical role which the MIF should prioritise is the resuscitation of government and municipal bonds on the back of which this country’s infrastructure was built.”

According to Mr. Masunda, before 1980, State-Owned Enterprises (SOEs) and local authorities used to contribute 40 percent to the Gross Domestic Product. Regrettably, this contribution, says the veteran corporate lawyer, dwindled post-1980 largely due to mismanagement and other economic factors to a point where the SoEs have become a debilitating drain on the nation’s fiscus.

He opines that in our endeavour to come up with sustainable solutions going forward, we should take a leaf out of the book of the late Lee Kuan Yew (LKY), the founding prime minister of Singapore.

Over the years, the prosperous city-state built a meritocracy that identifies talent early on and channels resources to those so identified.

Furthermore, academic achievement and professional expertise are singled out as the defining attributes of meritocracy in Singapore.

As a result of the rigorous implementation of non-discriminatory criteria, LKY managed to create a highly effective anti-corruption government and civil service; eschew populist policies in favour of long-term social and economic planning; champion civic nationalism through meritocracy and multiracialism as the overarching governing principles.

To this end, Mr. Masunda advises that the MIF should not lose sight of the importance of walking the talk to overcome a whole raft of negative perceptions and fears arising from the scourge of corruption which has bedevilled our country.

Mr Masunda says MIF should plug loopholes and build accountability and transparency to enhance investor confidence.

Plugging any glaring or potential financial leakages; implementing transparent and robust corporate governance systems, and identifying and rectifying any financial improprieties are critical.

Economist Mr. Percy Gwanyanya says: “As a country, we cannot afford to continue carrying the burden of state-owned enterprises. I want to believe that even in your family you cannot afford to support your offspring forever. There is time for adding value and it is now. We want the SoEs to sign up their balance scorecards and promise us the future we deserve.”

MIF chief executive Dr John Mangudya with all his experience, connections, and knowledge as a former Governor of RBZ, measures up to the challenges ahead of him.

“In fact, in my honest opinion and without suggesting that corporations, especially Government entities, should rely on personalities, the outgoing Governor, (Dr Mangudya), can be trusted with the task at hand,” says Mr Gwanyanya.

With many governments assuming — either by design or by circumstance — the role of guardians of substantial amounts of their countries’ financial assets, effective wealth management has become an important public sector responsibility, said Mr. John Lipsky, first deputy managing director of the International Monetary Fund at a seminar 2008.

Source: Herald