The establishment of Mutapa Investment Fund, after rebranding the Sovereign Wealth Fund of Zimbabwe (SWFZ), was long overdue as ownership of a total 22 public institutions, will now fall under one agency hopefully bringing an end to turf wars and poor performance of state-owned entities.
On Wednesday, President Mnangagwa used Presidential Powers (Temporary Measures) (Investment Laws Amendment) Regulations, 2023, to gazette Statutory Instrument (SI) 156 of 2023.
A sovereign wealth fund (SWF) is a government-owned investment vehicle that invests in a wide range of assets over time, generating wealth for future generations. The Norway Government Pension Fund Global, the China Investment Corporation, and the Abu Dhabi Investment Authority are among the world’s largest SWFs. SWFs have risen in size and significance in recent years, making them increasingly essential.
Zimbabwe created its SWF in 2014 following the enactment of the Sovereign Wealth Fund Act which has since been replaced with Statutory Instrument (SI) 156 of 2023.
“There is hereby established a sovereign wealth fund, to be known as the “Mutapa Investment Fund. The Fund is a body corporate capable of suing and being sued in its own name and, subject to this Act, doing everything that bodies corporate can do by law,” reads part of the gazette.
The SI also established a board to administer the fund, which shall consist of the chief executive officer, the chief investment officer and eight members, including the chairperson, appointed by the President after consulting the Minister of Finance and Investment Promotion.
According to the Gazette, the SI vested the shares of certain companies’, most of them state enterprises, in the Fund.
Most of these entities have been draining on the economy due to poor corporate governance. Besides draining the economy, these firms have been used for personal enrichment by some unscrupulous people who used their influence in government to appoint cronies to protect their interests.
Economist and former member of the RBZ monetary policy committee, Eddie Cross, told Business Weekly that it is a big step moving forward and a tremendous idea to remove firms from some ministries and place them under one roof.
“It is a right move by the President because these important assets owned by the government have been underperforming, and this now puts the whole of these assets under the control of a professional agency, which should be able to remedy many of the problems that have been bedeviling this sector,” he said.
Cross said that at independence in 1980, the public sector contributed about 40 percent of the gross domestic product (GDP) but today it is less than 5 percent.
“Therefore, the move is the remedy because these assets cannot be allowed to waste away, which has been happening up until now.
“It’s a good idea, and if managed properly, it will make a tremendous difference. Issues of bad corporate governance will also be addressed,” he said.
Cross indicated that it will also lead to restructuring and reorganisation of these agencies for them to become more productive.
According to the SI, in appointing the members of the Board, the President shall endeavour to secure that at least half of the membership of the Board is made up of women.
The President shall appoint a female member of the Board (if the Chairperson is a man) or a male member of the Board (if the Chairperson is a woman) as the Vice-Chairperson of the Board, who shall exercise the functions of the Chairperson during any period that the Chairperson is unable to exercise his or her functions.
The companies whose shares will be vested in the fund are Defold Mine (Private) Limited Registration Number 6030/2015, Zimbabwe United Passenger Company Limited Registration Number 504/1980 and Kuvimba Mining House (Private) Limited Registration Number 13291/2020.
Silo Investments (Private) Limited Registration Number 3460/1992, National Oil Company of Zimbabwe (Private) Limited Registration Number 531/1983, Cold Storage Commission Limited Registration Number 716/1995 and Petrotrade (Private) Limited Registration Number 5608/2010 are also in the group.
Also included are; POSB: People’s Own Savings Bank; NetOne Cellular (Private) Limited Registration Number 2225/2000; National Railways Holding Zimbabwe Registration Number 10057/1998; and Tel-One Private Limited Registration Number 4658/2000.
Economist, Dr Prosper Chitambara, said the move was long overdue and was an important process in the restructuring and reform of government companies and state enterprises.
“We saw the importance of the sovereign wealth fund, especially during the Covid-19 pandemic period, when countries that had sovereign wealth funds managed to draw down to invest in various sectors of the economy in an effort to mitigate the adverse implications of the pandemic,” he said.
Other companies whose shares are vested into the Fund are Arda Seeds (Private) Limited Registration Number 21896/2007, Zimbabwe Power Company (Private) Limited Registration Number 6951/1996, Powertel Communications (Private) Limited Registration Number 5818/1999, Allied Timbers (Private) Limited Registration Number 3964/2000, Telecel Zimbabwe (Private) Limited Registration Number 360/1995, Air Zimbabwe Private Limited Registration Number 10852/1997, Industrial Development Corporation of Zimbabwe, Cottco Holdings Limited Registration Number 20924/2008, AFC Limited Registration Number 3339/2021, Hwange Colliery Company Limited Registration Number 381/1954 and the National Railways of Zimbabwe (Private) Limited Registration Number 10057/1998.
According to the SI, the shares held by the Government of Zimbabwe (whether in the name of the Government or on its behalf by any named Minister or Ministry) in the companies listed in the Fourth Schedule shall, on the date of commencement of these regulations, vest in and form part of the initial capital of the Fund without any transfer, conveyance, or other instrument.
An economist and member of the RBZ monetary policy committee, Persistence Gwanyanya, said investments in parastatals managed by a fund are a good move to the extent that you are having those with expertise do the job, unlike when it is done under different ministries, some of which do not have the expertise of managing corporations and investments.
“It’s part of the enhancement and support for the parastatal reform programme. We have been struggling to get our hands around the reform of parastatals,” said Gwanyanya.
He said the rebranding will ensure these entities are managed under one body that specialises in investment rather than different ministries.
“It fosters traction with regards to parastatal reform. These have been weighing down on the economy for a long time, and we really need proper management of parastatals at one centre rather than managed at different government agencies that are not in line with managing corporations and may not have the experience,” said Gwanyanya.
According to the SI, in terms of the transfer of funds with respect to investments made under this Act, the Fund may, without restriction or delay, freely convertible currency transfer funds into and out of Zimbabwe.
These funds include contributions to capital, such as principal and additional funds to maintain, develop, or increase its investment and proceeds, profits from the assets, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares, and other current income resulting from any investment of the Fund.
Other funds are proceeds from the sale or liquidation of the whole or part of an investment or property owned by the Fund and payments made under a contract entered into by the Fund, including payments made pursuant to a loan agreement and earnings and other remuneration of foreign personnel legally employed in Zimbabwe by the Fund or in connection with an investment of the Fund.
“Any transfer of funds shall be allowed only after paying all tax obligations imposed on the amount to be transferred in accordance with the stipulated tax laws,” reads part of the SI.