PRESIDENT Hage Geingob said that the Welwitschia Sovereign Wealth Fund which was launched on Thursday represents a commitment to improving the livelihoods of current and future Namibians and ensuring socio-economic progress in the country.
Emphasising that the fund is for the Namibian people, he said that ownership is vested in the government with the Ministry of Finance acting as trustees on behalf of the nation. He further explained that the fund will have operational independence, with the Bank of Namibia (BoN) acting as the primary custodian responsible for the fund’s administrative function.
“The decision to have the Fund managed by the Bank of Namibia was informed by best practice and the need to keep its establishment costs as low as possible, in accordance with the government’s fiscal consolidation drive,” the President explained.
Geingob also said that the fund will commence with about N$262 million and funding sources will be comprised of a combination of streams, which include a portion of royalties collected from the sale of natural, renewable and non-renewable mineral resources, taxes, divestiture from public investment holdings as well as contributions from identified State Owned Enterprises and other parts.
“Furthermore, we are looking forward to the prospects and opportunities that will emanate from the recent discoveries of oil and the green hydrogen energy, which have the potential to further boost the Fund’s capital and ultimately contribute to the development of the Namibian economy,” Geingob added.
The President further explained that given the country’s macroeconomic stance, he is aware that the establishment of the fund may be questionable to some as the fiscal space is presently constrained and growth is subdued. However, according to him, the timing is perfect.
“Evidence has shown that, when well managed and guided by clear objectives, withdrawal rules and a prudent investment strategy, a Sovereign Wealth Fund’s asset and the returns it generates can have a significant beneficial effect on domestic public finances, monetary conditions, external accounts and balance sheet linkages with the rest of the world,” he explained.
This, he said, means that a Sovereign Wealth Fund can be a potent tool in achieving economic growth and can also act as an important fallback and stabiliser during times of extreme shocks.
The president also pointed out that the commonly accepted rationale for establishing an SWF is to save some of the revenues generated from the sale of a country’s non-renewable resources for future generations and – although the country has not completely recovered from the tough economic times – he is optimistic about the future.
“A sovereign wealth fund can contribute to better income risk sharing between generations. The commonly accepted rationale for establishing a sovereign wealth fund is to save some of the revenues generated from the sale of a country’s non-renewable resources for future generations,” he added.
This, he continued, means that if one generation is negatively affected by an income shock, fiscal policy can redistribute income between those affected by an income shock, generations using resources from the sovereign wealth fund; thus, smoothing the cost among many generations.
“As we launch this Welwitschia Fund, we should be cognizant of the reality that this is only the beginning of the actual work. Namibians expect us to deliver on the core objectives of the Fund and we need to commit ourselves to doing exactly that!”