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Commentary on the government proposed sovereign wealth fund
National Youth Development Trust
June 07, 2011

Youths have described as ludicrous and untenable the government of Zimbabwe's plan of setting up what is called a Sovereign Wealth Fund (SWF) to "save proceeds of exhaustible resources for future generations", the Minister of Youth Development Indigestion and Economic Empowerment, Saviour Kasukuwere was quoted as saying.

SWFs are normally set up by economically stable governments with little or no international debt as a form of investing their budgetary surpluses.

There are two types of SWFs, the saving funds and the stabilization funds. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy. Zimbabwe wants to establish the savings SWF, which are meant to build up savings for future generations. In a normal situation, this is a good investment for Zimbabwe as SWFs are recommended for mineral wealthy nations such as those dependent on oil, copper or diamonds exports. Zimbabwe is indeed a mineral wealthy nation that could consider the option, but only if this mineral wealth has already benefited current generations.

The government is currently failing to use the Chiadzwa diamond returns to fund civil servants' salaries let alone to fully account for the proceeds. Ordinary citizens cannot afford basic (currently substandard) health care. The education sector although improving is still a shadow of what it once was while unemployment levels are souring at over 75%. How then can this 'mineral wealthy' government say it has surplus returns to put into a savings SWF?

Furthermore, a party like ZANU PF has a legacy of abusing public funds for the benefit of its 'comrades' while propelling populist party agendas. State institutions have been used for partisan benefit to the extent that no-one but Kasukuwere and his party know about the youth fund. There seems to be secrecy surrounding how all young people can access it if at all. It is only heard of during the budget speeches and never again. The reserve bank is another classic example of the institutional weaknesses. Gideon Gono, its former almighty governor, is particularly known for taking foreign funds belonging to non-governmental organizations for quasi-fiscal notoriety such as the so-called sanctions-busting programs by ZANU PF. What then can stop this government from abusing the SWF system for partisan benefits?

An economic research paper done on Zimbabwe by Benson Zwizwai, Admore Kambudzi and Bonface Mauwa for the International Development Research Centre (IDRC) cites several failed economic stances taken by the Zimbabwean government since 1980. They state that "In pursuing its development objectives, the government developed several plans: the Transitional National Development Plan (TNDP), the First Five Year National Development Plan (FFYNDP), the Second Five Year National Development Plan (SFYNDP), the Economic Structural Adjustment Program (ESAP), the Zimbabwe Program for Economic and Social Transformation (ZIMPREST) and, more recently, the Zimbabwe Millennium Economic Recovery Programme. Most of the objectives of these plans were never realized and in almost all cases, the targets, particularly growth targets, were never met. Some aspects of the plans were never implemented and an outstanding example is an aspect relating to science and technology policy for industrial development that was first mentioned in 1981. The second Five Year National Development Plan was sidelined in favour of ESAP."

SWFs have also been viewed as strategic for eventualities such as the creation of war chests for sudden military expeditions. For example, the Kuwait Investment Authority during the Gulf war managed excess reserves above the level needed for currency reserves. In the Zimbabwean case, this could be a great cause for concern given its past questionable military expeditions like the Congo war that put the country's economy in a slump during the 1990s. The secretive nature of government on its military expenditure can also leave room for fears that once an SWF fund is set up, it could be abused in future for dubious military expeditions that the previous Zimbabwean government is notorious for.

In light of the above, and other damning economic analyses by various economists locally and abroad, there is very little to convince ordinary Zimbabweans that the SWF will be possible let alone work for the benefit of future generations. Admittedly, Kasukuwere did mention that the plan would be "operational as soon as it is practical" however judging from past equally spontaneous, badly planned and botched economic policies, this could mean immediately. It is thus prudent to state categorically that long as industries in Bulawayo continue to shut down or relocate, leaving tens of thousands of youths unemployed and desperate for survival, SWF will not be practical. As long as college fees remain exorbitantly high to the extent that students have to drop out or spend semester breaks doing piece jobs in South Africa and Botswana to raise tuition fees because the government is failing to subsidize their fees, SWFs will not be practical. As long as primary, secondary, and high schools are not free in Zimbabwe, saving for future generations will not be practical. As long as government is failing to provide anti-retroviral drugs for the hundreds of thousands of Zimbabweans that need them and are still on the waiting list, this SWF will not be practical.

In other words, what is the use of saving for future generations when current generations are drowning in poverty. If these funds are not cleverly invested now, on this generation, then there will be no future generations to talk about Mr Minister. Besides, as has been said in the past, decisions such as this, must never be unilateral but inclusive of all members of society. Therefore, before even thinking about such a fund, Kasukuwere has to clarify how these funds are going to be collected and by whom. Where and how will they be invested and managed. NYDT shall continue to call upon the government to be accountable and to develop the capacity of youths to demand accountability and transparency in policy formulation and implementation. The organization also calls upon youths and stakeholders to reject unilateralist and self-serving policy formulation and demand multi-stakeholder approach and accountability.

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