President Cyril Ramaphosa says one way of establishing a sovereign wealth fund is through the reform and consolidation of State-Owned Enterprises (SOEs).
Ramaphosa was answering questions in the National Assembly during his oral reply session.
He says with the current fiscus position of South Africa and its focus on service delivery, South Africa cannot establish a sovereign fund at this stage.
Ramaphosa says there are various options with some countries relying on SOEs.
He says other countries use revenue from exploiting their natural resources to establish and sustain sovereign wealth funds.
“In our country, however, public revenues or royalties that we derive from mineral resources have historically not been very reliable or have not been very consistent. Therefore, we suggested that one of the possible routes toward establishing a sovereign wealth fund is through the reform and consolidation of State-Owned Enterprises. This is the route that several countries have used and the one example I got to know of is Singapore, through Temasek, Dubai, or the UAE through their Investment Dubai Fund.”
Ramaphosa says currently it is not a favorable time for South Africa to establish a sovereign wealth fund.
“It is currently not the most opportune and favorable time for us to establish a sovereign wealth fund. However, several options are under consideration. Funding for service delivery remains under pressure for us. Additional resources are required to improve the recruitment of key personnel such as police and teachers. We also need to increase investment in the maintenance of basic services maintenance or infrastructure. In light of these realities, the most appropriate policy path is to use any additional resources, at their moment to reduce the debt burden that our country carries and improve the delivery of service.”
