South Africa's sovereign fund plan has its sceptics, but it can work

finance.yahoo.com

- finance.yahoo.com | 3 months ago

FILE PHOTO: Supporters of President Cyril Ramaphosa's ruling African National Congress (ANC) celebrate election results at a rally in JohannesburgMore By Tom ArnoldLONDON (Reuters) - South Africa's push to set up a sovereign wealth fund (SWF) seems like a stretch for a country with few resources to spare, but precedents show a well-managed seed fund could help attract and focus foreign investment.

The ruling African National Congress proposed an SWF in its manifesto for May's election but has not explained much about how it would be financed or what its strategic aims would be. Minister of Trade and Industry Ebrahim Patel was nevertheless reported as saying at the recent G20 meeting in Japan that South Africa should immediately start the process of setting up a fund to prepare for future revenue streams.

SWFs range from intergenerational savings funds favoured by commodity-rich nations to stabilisation funds to help plug budgetary holes and strategic funds aimed at powering growth by supporting state-owned firms or bringing in foreign investment.

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