SA does not need a sovereign wealth fund, but many other African countries could use the financial instrument well as a means to bring greater transparency to their public finances, according to Mthuli Ncube, chief economist at the African Development Bank.
Addressing a press briefing on Thursday during the World Economic Forum on Africa, Ncube said: "What happens to the revenues received from oil and gas? That is where government should (manage the wealth generated) and that is where an instrument like this would allow greater transparency and accountability in revenues."
A sovereign wealth fund is defined as a state-owned investment fund composed of financial assets such as stocks, bonds, property or other financial instruments. They generally invest globally.
Ncube said he was a great fan of this instrument and had been pushing for its use by African governments.
He recommends that a sovereign wealth fund should be split into three parts. Firstly, it should have one part dedicated to funding national infrastructure projects, the second part should be used for government's current consumption and the third should be earmarked for future generations.
"Botswana is a good example of how such a sovereign wealth fund could be successfully managed. Maybe they could do more on infrastructure spending, but it is a good example," he said.
Ncube said reasons for why a sovereign wealth fund was not necessary for SA was that it already had good transparency and accountability for its public finances, that it had a diversified economy and that there was no large reserve of a natural resource such as oil and gas where the revenues went to government in a non-transparent manner.
Earlier this year, the International Budget Partnership announced that the National Treasury came first in its 2010 Open Budget Survey out of 94 countries surveyed.
Source: www.businesslive.co.za
Addressing a press briefing on Thursday during the World Economic Forum on Africa, Ncube said: "What happens to the revenues received from oil and gas? That is where government should (manage the wealth generated) and that is where an instrument like this would allow greater transparency and accountability in revenues."
A sovereign wealth fund is defined as a state-owned investment fund composed of financial assets such as stocks, bonds, property or other financial instruments. They generally invest globally.
Ncube said he was a great fan of this instrument and had been pushing for its use by African governments.
He recommends that a sovereign wealth fund should be split into three parts. Firstly, it should have one part dedicated to funding national infrastructure projects, the second part should be used for government's current consumption and the third should be earmarked for future generations.
"Botswana is a good example of how such a sovereign wealth fund could be successfully managed. Maybe they could do more on infrastructure spending, but it is a good example," he said.
Ncube said reasons for why a sovereign wealth fund was not necessary for SA was that it already had good transparency and accountability for its public finances, that it had a diversified economy and that there was no large reserve of a natural resource such as oil and gas where the revenues went to government in a non-transparent manner.
Earlier this year, the International Budget Partnership announced that the National Treasury came first in its 2010 Open Budget Survey out of 94 countries surveyed.
Source: www.businesslive.co.za
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