'Wealth fund should not be like SME Bank'

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THE launch of Namibia’s sovereign wealth fund yesterday had many applauding the initiative, though concerns were expressed the fund could turn out to be another SME Bank, which was robbed under the same regulator and state.

The Welwitschia Fund is Namibia’s first formalised attempt at saving as a country for future generations and fiscal stability.

It carries three themes – longevity, resilience and inclusivity.

Although the legislative governing structure, the Welwitschia Fund Act, has not been drafted yet, the fund was launched with the Ministry of Finance granted an oversight role, and its management to be under the Bank of Namibia.

The fund, which is to be financed by about six sources, was launched by president Hage Geingob, who said it will start off with a capital amount of N$300 million.

The fund’s sources include part of Southern African Customs Union revenue, 33% of the proceeds of the sale of state assets, 15% of mining royalties, 50% of budget surpluses, and 10% of all revenue obtained from the sale of fishing quotas.

And recently added to the list, 10% to be drawn from green energy.

Launched under the Bank of Namibia Act, the fund will have two accounts – a stabilisation account and an intergenerational account.

The two accounts will be housed as a combined reserve account with the central bank to serve two purposes: saving for future generations and stabilising the fiscus.

At the launch yesterday minister of finance Iipumbu Shiimi said the conversation around the establishment of the fund started in 2009, but the officials at the time did not see the need to save up, nor provide for stability.

Learning the hard way, and attending to recent recommendations of the private sector, the government finally adopted the concept and put together an intergovernmental team to draft a framework, he said.

The fund was designed to have operational independence, which Geingob said would not have the state asking for withdrawals whenever it “gets broke”.

Geingob said housing the fund under the central bank was informed by best practice and the need to keep its establishment costs as low as possible.

According to the policy framework seen by The Namibian, the fund’s sources can be changed as time progresses, which Geingob said, should include proceeds from oil.

“Furthermore, we are looking forward to the prospects and opportunities that will emanate from the recent discoveries of oil and from green hydrogen energy, which have the potential to further boost the fund’s capital and ultimately contribute to the development of the Namibian economy,” he said.

National debt is currently at record levels and expected to reach N$140 billion this fiscal year, budget deficit is above N$11 billion, and the national borrowing requirement is well over N$18 billion.

Geingob said it is under these circumstances that a fund should be established, calling the timing “perfect”.

The framework shows finances will not start flowing to the fund immediately, but only once public revenue reaches 33% of national output – subject to review.

For funding sources that are budget dependent, the funding rules show this would only accrue to the fund once government spending reaches 33% of national output.

The policy framework further shows the fund would not be allowed to take out loans, nor would it be used by the government as a guarantee to take out any loans on behalf of the state.


Although managed by the Bank of Namibia, the fund will also use local asset managers who will invest the capital in various asset classes.

According to the framework, the invested money will be to the benefit of future generations and will be invested with a longterm view – most likely in shares, government bonds – preferrably in international markets as the fund is “not allowed to invest directly in domestic assets and instruments”, the framework reads.

Up to 2,5% of the portfolio can, however, be invested in Namibia.

The policy framework states that withdrawals can only be made once the fund’s assets have accumulated to 20% of the national gross domestic product.

This is about N$40 billion of currently estimated national output.

The capital will not be withdrawn, and only up to 10% of the accumulated returns will be withdrawn.

The policy framework does not specify who has the signing rights to withdraw from the fund, but a provision is made that all withdrawals made from the fund and their usage would be made public through a press release.

While many have applauded the launch, analysts, politicians and civil society said the event was only the beginning of the actual work.


Political analyst Graham Hopwood yesterday said the launch was an important development for Namibia because it is part of a responsible approach to government saving for the future.

He, however, said there are concerns around the governance of the fund.

“We remember the SME Bank, which was also approved by the Bank of Namibia, but then collapsed. We really need to make sure the way this is managed and governed is really robust so that there is no possibility of any funds being mismanaged,” he said.

His comments come as no legal framework exists for the fund yet.

Attorney general Festus Mbandeka yesterday said the technical work is underway, and his office has advised that the document receives priority.

He said they have urged the relevant departments to fast-track the process to ensure all instruments are put in place.

“I was assured by the (finance) ministry and the bank that the technical team is seized with the matter to work out the principles of the bill. Therefore, we look forward to receiving the layman’s draft within the coming months. We hope it is something that will not take too long,” he said.

Independent Patriots for Change leader Panduleni Itula said the launch should have happened 30 years ago.

“ . . . and the manner in which it’s going to be managed is going to be critical,” he said.

Itula suggested an independent monitoring system.

“Without that, we will not be able to have the degree of independence, because very often we have seen the Bank of Namibia doing things in order to satisfy political goals. That is extremely dangerous.

“The independence of the Bank of Namibia is critical here, and I do not believe it is independent,” Itula said.

Rally for Democracy and Progress president Mike Kavekotora said despite its importance, he was concerned about the country launching a fund without a legal framework.

“It is concerning that there is no legal framework. It is like putting a cart before a horse. Why would you want to launch a fund without the legislature knowing exactly the objects of the fund, how the fund would be administered, how the fund would grow, the whole legal framework?” he asked.

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