Zimbabwe's Own Sovereignty Wealth Fund-The Mutapa Investment Fund

In a bid to revive the ailing economy, the Zimbabwean government recently launched a Sovereignty wealth fund. However, this move has been met with significant criticism, with many expressing concerns over potential corruption. As an expert in the field, I would like to share my thoughts on the matter and provide clarity to the general public.

The Mutapa Investment Fund is a special fund set up by Zimbabwe. It was initially established under the Sovereign Wealth Fund Act (Chapter 22:20) and was renamed the Mutapa Investment Fund through Statutory Instrument 156 of 2023. What is it? It is like a savings account for the country, where they put extra money that would have been generated from trade and fiscal surpluses, or when they sell off government-owned businesses (Privatisation) (GoZ, 2023).

According to the government, the purpose of the fund is to safely invest money. This money will benefit future generations in Zimbabwe. The fund will also help the government achieve its development goals, including long-term economic and social growth. It will help stabilize the country’s economy and add to the government’s income.

The Mutapa Investment Fund is Zimbabwe’s version of a Sovereign Wealth Fund (SWF). Like other SWFs, it’s a state-owned investment fund that invests in a variety of assets. Thus, Zimbabwe is not the first country to have an Investment fund. Many countries have these funds and they can be very successful. For example, Norway has one of the largest and most successful funds in the world, which is funded by oil revenues. Have you heard about Norway's Government Pension Fund Global? The Government Pension Fund Global of Norway is the world’s largest sovereign wealth fund, with over US$1 trillion in assets, including 1.4% of global stocks and shares (The fund | Norges Bank Investment Management (nbim.no)). It also has real estate and fixed-income investments. The fund was created to protect the economy from fluctuations in oil revenue and serves as a financial reserve and long-term savings plan for current and future generations of Norway. Other countries with successful funds include China, Abu Dhabi, Singapore, Saudi Arabia, and Kuwait (https://www.visualcapitalist.com/visualizing-the-worlds-largest-sovereign-wealth-funds/).

These funds can be really beneficial for a country. They can help save extra national wealth, generate income for future use, stabilize the national economy, and promote economic development. For Zimbabwe, the Mutapa Investment Fund could help stabilize their economy by managing excess capital and reducing dependence on agricultural and minerals prices that rapidly changes. Furthermore, it could also generate income for future use and finance various government initiatives or projects to promote economic development.

However, there are also some challenges with having a fund like this in Zimbabwe. The country’s economic and political instability could make it difficult to manage and oversee the fund properly. There is also a risk of lack of transparency or accountability in investments which could undermine confidence both domestically and abroad. There are concerns about potential interference from ministers and delays or reversals of government-approved reforms due to vested interests within some line ministries. Lastly, there is a risk of mismanagement or corruption which could lead to losses or misuse of funds. Zimbabwe has a well-documented history of corruption and mismanagement. The real risk or possibility of losses due to misuse of funds cannot be eliminated. Therefore, the authorities should address the transparency and accountability concerns in order to increase the confidence and buy-in from the citizens both domestic and abroad.

In summary, the Mutapa Investment Fund represents a significant milestone for Zimbabwe, not just as a financial instrument but as a harbinger of economic potential. By understanding its foundation, based on the Sovereign Wealth Fund Act and the recent Statutory Instrument 156 of 2023, we gain insights into Zimbabwe's economic ambitions. Moreover, the fund serves as a unique "savings account" for the nation, which could play a critical role in stabilising its economy and fostering development.

While the concept of sovereign wealth funds is not new, Zimbabwe's approach brings its own set of opportunities and challenges. The country can learn from successful models like Norway's Government Pension Fund Global but must also navigate its unique economic landscape.

Lastly, the social and economic impacts of this fund on the average Zimbabwean cannot be overstated. From potential job creation to improved public services, the Mutapa Investment Fund could be a game-changer in elevating the standard of living.

While corruption is a valid concern, the government has assured the public that measures will be put in place to ensure transparency and accountability. It is also worth noting that the fund will be managed by an independent board of trustees, which will further mitigate the risk of corruption.

As we continue to observe the growth and utilisation of this fund, one thing is clear: its success or failure will be a telling indicator of Zimbabwe's economic future. Therefore, it's not just a topic for economists and policymakers; it's a subject that holds relevance for every Zimbabwean citizen.

So, whether you're a fiscal expert or a casual reader, the unfolding story of the Mutapa Investment Fund is undoubtedly one to watch.

?

Tawanda Chabara is an Adult education practitioner and ?Lecturer in Finance and Investment