President Cyril Ramaphosa. Photo: Dwayne Senior/Getty Images
PResident Cyril Ramaphosa said on Thursday that the government had reached the “basic” stage of setting up a national wealth fund, but that maintaining and upgrading infrastructure and recruiting key civil servants were priorities.
“Our current fiscal situation, with significant current account and budget deficits, is not the most favorable and favourable time to set up a sovereign wealth fund,” he said.
“Funding for service delivery remains under pressure and additional funding is needed to improve recruitment of key staff such as police and teachers. We also need to increase basic maintenance of infrastructure.”
He made the remarks during an oral question and answer session in parliament.
The idea of a sovereign wealth fund has long been floated, but in 2020 then-Finance Minister Tito Mboweni said steps were finally being taken to make it a reality.
President Ramaphosa said the government would continue to work towards the goal of the National Wealth Fund because it would ensure “our national wealth is effectively deployed to support economic and social development for years to come”.
In follow-up questions, the Democratic Alliance said it had concerns about the implementation and management of the fund “particularly given the track record of mismanagement and corruption within state-owned enterprises” and that the fund would place a further burden on already overburdened taxpayers.
But President Ramaphosa said he would “argue that there is no need to utilise money from National Treasury to create a sovereign wealth fund” if the fund was properly “structured”.
He said the fund's income would come from assets held by the government and “through dividends and other processes.”
President Ramaphosa pointed to the government-owned Public Investment Corporation (PIC), which manages assets such as government pensions, as an example of where the state can park money. He said the PIC has more than R7 trillion under its control.
The PIC invested its money “very effectively” in bonds and equity, and supported economic development by funding numerous business development projects, he said.
President Ramaphosa said the sovereign wealth fund would be made up of state-owned enterprises and would have a state-owned enterprise holding company which would receive dividends.
“And I would like to believe that the funds would be properly managed through good corporate governance processes, just as they have been through the PIC.”
He said money from the fund would be used for economic development.
He acknowledged that many of the country's state-owned enterprises are “in the doldrums” but said a process was underway to restructure them.
“And then once those assets are redeployed, and this will take time, we will be able to extract dividends from them and those dividends will flow into the sovereign wealth fund and start to bolster the fund.”
He said the fund was no longer just a dream or a hope: “We are now in the process of concretely determining how this sovereign wealth fund will be operated.”
