Mozambique: Oversight of sovereign wealth fund to include civil society

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Mozambique: Oversight of sovereign wealth fund to include civil society

2:24 CAT | 07 Oct 2022

File photo: Notícias

The draft law on the Mozambique sovereign wealth fund (FSM) provides for the participation of social organisations in monitoring accounts, along with a number of oversight mechanisms, according to the document seen on Thursday by Portuguese news agency Lusa.

“The Supervisory Committee of the FSM is an independent body, of the Mozambican parliament, and includes representatives of civil society, the business community and other stakeholders,” states the document that the government plans to see discussed this year in parliament.

READ: Mozambique: Sovereign Fund not on the agenda as Parliament resumes sitting

Several non-governmental organisations (NGOs) had criticised in recent years the absence of civil society from the structures that were being designed to manage a fund with revenues from the oil and gas sector.

The draft law now states that “the Oversight Committee of the FSM controls and monitors matters relating to the revenues of the FSM” and its accounts and movements, reporting directly “to the plenary of parliament and its conclusions are public”.

Article 27 of the proposal states that management and governance should be guided by “the Generally Accepted Principles and Practices (GAAP), better known as the Santiago Principles”, a set of 24 principles for the performance of sovereign wealth funds, approved by a working group in 2008.

In terms of transparency, the law requires the Bank of Mozambique to produce quarterly reports of the fund that must be published on the internet within 15 days of delivery to the finance ministry, as well as the annual report and other documents.

On the other hand, the law provides for the creation of an Investment Advisory Board, with financial experts and independent members of the government, who have experience in managing investment portfolios, according to criteria to be regulated by the Cabinet.

Management of the FSM “should be carried out through a dedicated unit at the Bank of Mozambique” and “asset management should be separate from the management of other assets and operations” of the central bank, the law details.

The proposed law on the FSM states that its objectives are to use revenues from gas and oil to “leverage the country’s development,” “contribute to the stabilisation of the state budget against the volatility of oil revenues and accumulate savings for future generations.

In 2020, Mozambique expected to receive US$96 billion (roughly the same amount in euros) in the life of Rovuma gas, almost seven times the annual gross domestic product (GDP), but in the meantime, armed violence in Cabo Delgado has put investments on hold.

Thus, of the three liquefied natural gas projects approved for the region, only the smallest (Coral Sul platform, 3.4 million tonnes per year) is active, shrinking forecasts and leaving them uncertain.

The other two projects, about four times larger each, are awaiting decisions from the oil companies.

The bill provides for the FSM to start operating already with this year’s revenues from the Coral Sul platform.

Source: Lusa