Mozambique takes decisive step towards Sovereign Fund transparency

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Mozambique takes decisive step towards Sovereign Fund transparency

11:11 CAT | 13 Mar 2024

FILE - For illustration purposes only. [File photo: Notícias]

Mozambique has approved a decree regulating the Sovereign Fund Law, establishing a robust legal framework for managing revenues from the country’s oil and natural gas exploration.

The new regulation represents a significant stride towards transparency, accountability, and good governance in the natural resources sector.

Established through Law 1/2024 of 9th January, the Mozambique Sovereign Fund aims to ensure responsible management of non-renewable resource proceeds, promoting sustainable socioeconomic development and generating savings for future generations.

READ: Mozambique approves law to govern how it spends natural-gas exports revenue

Mozambique’s Sovereign Fund is an “important step” toward transparent management – IMF

The recently approved decree is a standout, entrenching fundamental principles of transparency, accountability, legality, independence, prudence, and risk management, alongside mechanisms to address potential conflicts of interest. These guidelines form the pillars underpinning the Sovereign Fund’s governance.

A highlight is the establishment of an independent Supervisory Committee comprising civil society representatives. This body will oversee all operations related to revenues, deposits, resource allocation, and fund management. Its obligation to report directly to the Assembly of the Republic and publish quarterly findings is a key mechanism ensuring transparency and accountability.

Furthermore, the decree mandates an Investment Advisory Council comprising financial experts and independent government members. This consultative body will assess investment opportunities, analyse risks, and monitor the Sovereign Fund’s performance.

Incorporating an Investment Advisory Council with expertise and independence is crucial to ensuring investment decisions are based on technical criteria and aligned with the country’s interests. This addresses concerns raised by civil society over the choice of the Bank of Mozambique as the fund’s manager.

Governance and transparency aspects extend beyond these bodies. The regulation also requires independent internal and external audits of the fund’s accounts and operations. Detailed regular reports, including information on investments, revenues, profitability, and risk levels, must also be published.

READ: Technical Opinion on the Proposal for the Regulation of the Sovereign Wealth Fund of Mozambique

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Through this comprehensive approach, Mozambique is laying the groundwork for management based on international best practices.

There is no doubt that the decree approving the Sovereign Fund Law regulation represents a significant advancement for transparency and good governance in Mozambique’s natural resources sector. However, the effective implementation of this regulatory framework will depend on the joint commitment of the government, civil society, the private sector, and international partners to ensure compliance with the established guidelines.

This is the only way to ensure revenues from oil and gas exploration are responsibly managed and contribute to the country’s sustainable development in the medium and long term.

By Elizabeth Khumalo

Source: Further Africa