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

- | 3 months ago

With the economy frequently beset by blackouts and state-owned power supplier Eskom bleeding money, the country’s creaking power industry would seem a potential starting point.

A problem with that is that any such fund could duplicate the work of existing institutions like South Africa’s Industrial Development Corporation and Development Bank of Southern Africa, said Neville Chester, portfolio manager at Coronation Fund Managers. “Very few foreign investors are going to commit real foreign direct investment — a lot of our FDI tends to be portfolio flows rather than building factories, creating jobs — without certainty on wider government policy and unfortunately that’s where we have a vacuum,” he added.

    Governance concerns given corruption allegations against other state-owned institutions like PIC and Eskom and former President Jacob Zuma might also be off-putting for investors.

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