Sovereign wealth fund to allow future generations to also enjoy the fruits of the resource endowment launched
A state-owned sovereign wealth fund, known as the Welwitschia Sovereign Wealth Fund was launched on Thursday at an event in Windhoek.
The Welwitschia Fund is set to become one of Africa’s newest sovereign wealth funds and will be administered by the Bank of Namibia.
Speaking at the launch, the Minister of Finance Iipumbu Shiimi said, through the fund, they would like to put aside a portion of the revenue they collect from the present exploitation of mineral resources for future generations of Namibians to also enjoy the fruits of the resource endowment of their country.
“The diamonds we are mining today, are non-renewable resources, at some point, they will be depleted from our shores. What are we then to bequeath to the next generations of Namibians as a representation that they are citizens of a country that was once blessed with such mineral resources?” he added.
Shiimi believes the establishment of the Welwitschia Fund is timely to ensure that Namibia has a solid framework in place to preserve revenues from the present and future exploitation of both renewable and non-renewable resources.
According to Shiimi the second objective of the Fund, which will be served by the Stabilisation Account, is fiscal and official reserve stabilization.
“This is borne out of the need to enhance national resilience by insulating the socio-economic structure against cyclical shocks as well as contributing to the macroeconomic stability objectives. A country needs to have fiscal buffers to stave off vulnerabilities arising from business cycles and shocks,” he added.
Meanwhile, Shiimi said one of the critical success factors for any sovereign wealth fund lies in its governance framework.
“To support the smooth operations of the Fund, we need a clear framework that outlines the responsibilities of the various parties, including the funding rules as well as the circumstances under which withdrawals can be made from the Fund,” he said.
The Welwitschia Fund meanwhile will serve as an automatic shock absorber and enable the country to maintain stable expenditure patterns over time.