South Africa Wants ‘Africa Development Fund’

Ashby Monk

South Africa’s Economic Development Ministry has finally released the much-anticipated ‘New Growth Path’ report. As the title suggests, it offers up a ‘new path’ for facilitating economic development and creating millions of new jobs in South Africa:

“The shift to a new growth path will require the creative and collective efforts of all sections of South African society. It will require leadership and strong governance. It takes account of the new opportunities that are available to us, the strengths we have and the constraints we face. We will have to develop a collective national will and embark on joint action to change the character of the South African economy and ensure that the benefits are shared more equitably by all our people, particularly the poor.”

Some lofty ambitions there! So, what’s on this ‘path’ exactly? It turns out that the new proposal combines a variety of micro- and macroeconomic interventions. And, since you are reading about this report on this blog, you’ve no doubt already guessed that one of the key recommendations is to establish a new SWF:

The “Government will launch an appropriately structured Africa Development Fund to assist in financing…infrastructure, and at the same time play the role of a sovereign wealth fund in helping to achieve a more competitive rand.”

According to the Economic Development Minister Ebrahim Patel:

This “…document recognizes the challenges of an uncompetitive currency and sets out clear steps for government to address the impact of the rand on the economy and jobs…This includes a somewhat looser monetary policy with lower interest rates, greater building of foreign reserves and a sovereign wealth fund to manage foreign reserves more actively.”

That’s all well and good, but it sounds to me like the Africa Development Fund may have a multitude of objectives and constraints (e.g. domestic infrastructure investments and investing of foreign reserves on global financial markets), which means it will be quite challenging to get the design and governance ‘right’ so this fund can be successful in this complex environment. But it’s early days yet, so I’ll chill out on the governance jibber jabber and just say: Welcome to the SWF club, South Africa!

1 Response to “South Africa Wants ‘Africa Development Fund’”

  1. 1 Number of New SWFs is Staggering « Oxford SWF Project Trackback on December 3, 2010 at 9:58 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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