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Wallace Ruzvidzo-Herald Reporter

JUST like Zimbabwe, South Africa is establishing a holding company under which State-owned enterprises will operate as is the standard practice across the globe.

Following in the footsteps of Zimbabwe, South Africa’s cabinet announced a bill that will establish a holding company under which State-owned companies will operate.

Similar to Zimbabwe Mutapa Investment Fund, South African media reported that the National State Enterprises Bill, has been approved for tabling in the country’s parliament.

In the Bill, South Africa is seeking to follow the model used in Malaysia, Singapore and Zimbabwe for the governance and management of its parastatals.

Just like in Zimbabwe, the South African’s National State Enterprises Bill will consolidate all the state’s shareholdings in state-owned enterprises in the state asset management company.

It will also remove the prerogative of ministers to appoint boards for SOEs.

South African Minister in the Presidency Hon Khumbudzo Ntshavheni was quoted saying the establishment of the fund will give state-owned companies stability.

“You need people who are objective so that they can put boards that are effective, that are skilled, that are not beholden not only to a minister or the administrators in a particular department.”

Hon Ntshavheni said it was yet to be decided which SOEs would be first to be placed under the oversight of the new state company. The bill has already been published in the Government Gazette for public comment.

Countries including Singapore, Malaysia and Ethiopia have realised exponential gains from such funds, with the latter having reached a value of US$50 billion in a space of 12 months.

The Mutapa Investment Fund, which is an upgraded and renamed Sovereign Wealth Fund, includes mines, major power stations, the National Railways of Zimbabwe, Air Zimbabwe, NetOne and TelOne, Cottco and Zupco.

Some of the newer entities, such as Kuvimba Mining House, were set up from shares already held by the old Sovereign Wealth Fund, but many arose a couple of decades ago from the conversion of parastatals into State-owned companies.

The State-owned shares in these now move to the Mutapa Fund.

The original Sovereign Wealth Fund, created in 2014, was designed to build up a portfolio of State-owned investments for the benefit of future generations. These could be in companies owned entirely by the State, or in joint ventures with outside or private shareholders.

Although the fund was created in 2014 following the enactment of the Sovereign Wealth Fund Act, it was only funded when the Second Republic decided to make budgetary provisions and resurrect what had been just a name without assets.

It is a State-owned investment fund established from the balance of payment surpluses, official foreign currency operations, the proceeds of privatisation, Government transfer payments, fiscal surpluses and resource earnings. Economist and former member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee Mr Eddie Cross told The Herald yesterday that the establishment of such funds is not unique to Zimbabwe, but rather has played an instrumental role in growing other countries’ economies and attracting investments. 

He described the Mutapa Investment Fund as “a game changer” for Zimbabwe.

“In the case of Singapore it has been one of the key elements in their success. They built their fund up into one of the largest in the region and it has played a key role in promoting investment and managing their debt. More interesting to us is that Ethiopia did the same things as us about 18 months ago, they established an organisation exactly the same as us.

“Mutapa is based on the Singapore model but the Ethiopians have done the same thing and in the 12 months they have established it in Ethiopia their fund has reached a value of US$50 billion so that gives you some idea of the potential,” he said.

Mr Cross said the establishment of the fund would pay huge dividends for Zimbabwe if it is well managed, while also expressing confidence in Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube’s abilities.

“I think the Minister of Finance is basically looking to establish a similar model here and achieve the same kind of results.

“It is critical for Zimbabwe and could be a game changer, if it is managed properly it could be a complete game changer,” he said.