Zimbabwe’s Sovereign Wealth Fund Raises Concerns

by Adenike Adeodun

The 14th-century downfall of the Mutapa State serves as a warning for Zimbabwe’s recently renamed Mutapa Investment Fund. This fund, originally known as the Sovereign Wealth Fund, underwent a name change on September 19, 2023, through a directive from President Emmerson Mnangagwa.

Zimbabwe’s journey toward the establishment of a Sovereign Wealth Fund began in 2012 with a mining sector policy study. According to a report by Newsday Zimbabwe, this study proposed a fund to promote long-term investment in mining, natural resources, and other sectors for holistic economic growth. Zimbabwe boasts significant mineral wealth, including Africa’s largest lithium deposits and globally important platinum, gold, chrome, coal, and diamond reserves.

In response to the 2012 study, Zimbabwe’s Parliament initiated the Sovereign Wealth Fund of Zimbabwe in 2014, as outlined in the Sovereign Wealth Fund of Zimbabwe Act. While the fund aimed to invest in future Zimbabwean generations and aid the government’s development goals, it remained largely inactive until Mnangagwa’s term.

Globally, sovereign wealth funds are gaining traction, influencing capital markets. When managed transparently, they can be powerful tools for national investment. However, mismanagement can lead to significant federal losses.

A sovereign wealth fund essentially acts as a state-owned investment pool, sourcing its assets from state revenues, trade surpluses, foreign currency operations, or privatization projects. Given their public nature and future-oriented goals, they demand robust governance, independent operations, and immunity from political interference.

However, recent shifts in Zimbabwe are concerning. The renaming of the fund to the Mutapa Investment Fund obscures its state-owned nature. Furthermore, President Mnangagwa now holds unprecedented power over the appointment of the fund’s executive team and board members. This centralization, combined with past critiques of Mnangagwa’s appointments, raises concerns about governance and the potential misuse of state resources.

Additionally, recent changes eliminated the fund board’s obligation to report quarterly to the Finance Minister and, subsequently, to Parliament, further reducing transparency and oversight.

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