Mboweni clarifies funding for Sovereign Wealth Fund
Finance minister Tito Mboweni says the newly established SA Sovereign Wealth Fund could be funded from allocation of spectrum and mineral-rights royalties among other things.
Mboweni said in his budget speech on Wednesday that the target capital for the fund was R30bn.
While the Budget Review said only that the Treasury was conducting a feasibility study for a sovereign wealth fund, which could “possibly” be capitalised from the allocation of spectrum and the sale of noncore assets, Mboweni filled in some of the gaps for what would essentially be a savings vehicle for SA and form part of the fiscal framework.
Mboweni was charged with giving details of the fund by President Cyril Ramaphosa during his state of the nation address, in which he said it was decided that a sovereign wealth fund would be established as a means to preserve and grow SA’s endowment, which would give “practical meaning to the injunction that the people shall share in the country’s wealth”.
The creation of a sovereign wealth fund is a long-standing ANC resolution that has for years not been implemented.
Mboweni said on Wednesday that a sovereign wealth fund was an important long-term tool for saving and investment for future generations.
“We must learn to save during the good times, and a fund can play an important role as a countercyclical fiscal tool,” he said.
He said that, given the legal, administrative and procedural issues involved, a bill would be submitted during this parliament.
“There are a variety of possible funding sources such as the proceeds of spectrum allocation, petroleum, gas or mineral rights royalties, the sale of noncore assets, future fiscal surpluses and money we set aside,” Mboweni said.
He said the fund would ensure that SA “continues to invest in the future generations of this country in a fiscally prudent manner”.
In a media briefing ahead of his speech, Mboweni could not be drawn on the timeline for the establishment of the sovereign wealth fund.
Besides asking for details on the fund, Ramaphosa had also said that Mboweni would give more details on the establishment of a state bank as part of the government’s effort to extend access to financial services to all South Africans.
The establishment of a state bank is also a long-standing ANC resolution, which was reaffirmed by delegates at the governing party’s 2017 elective conference at Nasrec, Johannesburg, where Ramaphosa was elected president of the party.
In 2019, parliament passed legislation to allow for state-owned companies to apply for banking licences and the Post Bank was in the process of applying for one.
Mboweni said in his speech that he had made David Masondo, his deputy, responsible for the “state bank project”.
He said he was “pleased” to inform the house that preferred options for the establishment of the bank were now ready.
Mboweni said the architecture of the bank would be that of a retail bank operating on commercial principles.
The state bank would be subject to the Banks Act and have an appropriate capital structure and performance parameters on investments and loan impairments. It would be regulated by the Prudential Authority, Mboweni said.
He said the currently fragmented system of national and provincial development finance institutions would be consolidated.
Masondo said the state bank would address various market failures.