President Cyril Ramaphosa says government remains committed to creating a Sovereign Wealth Fund which will benefit future generations, however, the conditions do not currently exist to establish an immediate one.
The President was responding to questions for oral reply in the National Assembly in Parliament, Cape Town on Thursday. This was his first such session under the Government of National Unity.
Member of Parliament Joseph Maswanganyi asked President Ramaphosa how government will develop the Sovereign Wealth Fund and ensure that its development benefits the majority of the people of the Republic.
“We are committed to create a Sovereign Wealth Fund and we believe that the architecture that we are putting together now will be able to assist us in building a Sovereign Wealth Fund. This we will be doing for future generations because it takes quite a while to build a facility like a Sovereign World Fund.
“While conditions do not currently exist for the immediate establishment of a Sovereign Wealth Fund, this is an objective which we should continue to work towards. Such a fund could help to ensure that the national wealth of our country is effectively used to support economic and social development for years to come,” the President said.
On whether the fund will benefit the majority of the people of South Africa, President Ramaphosa said the fund is meant to achieve precisely that purpose.
“The Sovereign Wealth Fund should be seen as a contributor to economic development and as a vehicle through which the state can invest money that is in surplus and can be utilised for various economic projects. It could be specific economic sectors that it focuses on and could also be funding, or surplus money utilised to invest in other countries and companies.
“The fund in my view is the way to go and we now have better architectural opportunity to be able to do so rather than just to continue talking about it without knowing exactly how it will source money and how it will be structured.
“Setting up a Sovereign Wealth Fund is a project we will work on as we improve our state-owned enterprises (SOEs),” the President said.
Explaining how the Sovereign Wealth Fund will work, he said they are by nature often used by many countries across the world to harness national resources for economic as well as for social development.
He added that they are often used to preserve and to grow a country's wealth for the benefit of future generations.
A document published in December of 2021 by the National Treasury described some of the features of a Sovereign Wealth Fund, saying that such a fund is often a state-owned company that would accumulate resources for capital investment through a dedicated revenue instrument or instruments.
“It will then invest these resources in different asset classes. Countries with Sovereign Wealth Funds - there is quite a number of them around the world - often maintain surpluses in their current accounts and balance sheets or balances, this provides the fiscal space to establish a Sovereign Wealth Fund.
“At present, with our current fiscal position, with substantial current accounts and budget deficits it is currently not the most opportune or favourable time for us to establish the fund, however, there are a number of options that are under consideration,” the President said.
He emphasised that funding for service delivery remains under pressure, with additional resources required to improve the recruitment of key personnel such as police and teachers.
He said that the country also needs to increase investment in the maintenance of basic service infrastructure.
“In light of these realities, the most appropriated policy path for us is to use any additional resources at this moment to reduce the debt burden that our country carries and improve the delivery of services.
Among other questions, the President also briefed Parliament on steps government is taking to encourage private sector investment to improve ports, railways and other infrastructure to drive economic growth. – SAnews.gov.za
