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Mozambique’s Sovereign Fund: Civil society challenges government to improve structural issues
4:51 CAT | 12 Oct 2022
File photo: Lusa
The Centre for Public Integrity (CIP), an anticorruption “watchdog” civil society organization, has challenged the government to improve the actual configuration of the Sovereign Wealth Fund (SWF) draft submitted to the Assembly of the Republic, the Mozambican Parliament.
According to CIP researcher Rui Mathe, the draft legislation published recently by Mozambique’s Central Bank fails to prioritize the investment component, which could promote “accelerated” country’s development.
Also, CIP claims that the argument of savings, put forward by the Central Bank, with a view to meet the needs of future generations and fiscal stabilisation with the aim of “insulating” the State Budget (SB) from external shocks, “makes it clear that development was relegated to second place.
Mathe, who was speaking on Monday (10), in Maputo, during a press conference, believes that development has to be seen as a macro objective that will diversify the Mozambican economy.
“Mozambique has a Gross Domestic Product (GDP) per capita of around 500 US dollars and is starting with a fund that pursues stabilisation and savings, but is not looking, in depth, at what is development, which could create incentives for diversification of the economy”, Mathe said.
“The draft has to go forward, we have to establish the Sovereign Fund, but there are issues associated with development that have to be taken into account”, he added.
It is important, according to the researcher, to strengthen issues such as investments for country’s development, with the establishment of an independent entity to manage the Sovereign Wealth Fund like some countries, like Norway, Singapore, Hong Kong, among others.
He says that CIP disagrees with the idea of a Sovereign Fund being managed by the Finance Ministry because “it will be susceptible to political influences exerted by the government”.
Looking at the draft presented by the government, according to the source, about 60 percent of revenues coming from the extractive industry will be channelled to the Finance Ministry, “an entity which comes under heavy political pressure every five years.”
Therefore, an entity that is dependent on a political agenda, it is not going to look at the national agenda to say that any investment is always going to suffer from this political pressure and this can be minimised if this Sovereign Fund draft includes a specific unit for its management,” he explained.
According to Mathe, the draft indicates that the Fund will be financed by revenues from hydrocarbon exploration projects, in the areas 01 and 04 offshore, in the Rovuma basin, in the northern province of Cabo Delgado.
Mathe also said that the government excluded, in the draft all onshore areas, such as the projects led by TotalEnergies, one of the largest private investments in Africa, suspended in March 2021, due to the terrorist attacks in Cabo Delgado.
“The Sovereign Fund should include all mineral resource exploration. The government is saying that these projects are not going to be part of the Fund’s financing and there is no very clear explanation regarding this issue. We have coal projects and others that are not going to be part of the fund”, he said.
Production of liquefied natural gas will bring challenges to the country from a macroeconomic and financial management point of view. It is estimated that the country will raise about 96 billion over the lifetime of the natural gas projects.
The main challenge is how to maximise the gains from natural gas and other non-renewable natural resource revenues and develop functional and transparent institutions without stunting the economy.
Proposta do Fundo Soberano de Moçambique Negligencia a Componente de Desenvolvimento
-É Importante Reforçar os detalhes do Investimento para o Desenvolvimento
Leia o texto na íntegra: https://t.co/68QJflrhF7 pic.twitter.com/1qkjJw4XXL— CIP-Mozambique (@CIPMoz) October 10, 2022
Source: AIM
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