The International Forum of Sovereign Wealth Funds (IFSWF), together with Franklin Templeton - a global leader in asset management- released a report that focuses on the challenges and opportunities of sovereign wealth funds on the African continent.

The report outlined three key issues that Africa’s sovereign wealth funds are facing: governance, social impact, and environment. These have shaped a new and innovative sovereign wealth fund model in Africa.

“The sovereign wealth funds of Africa are at the forefront of a new breed of state-owned investors that are looking to attract capital into their home economies to accelerate economic development, rather than deploy capital into global financial markets,” the report revealed.

Though aiming to attract foreign direct investment, facilitate economic growth, develop modern industries and create jobs, these goals are not left without challenges; among which investment in more than fifty African countries is being observed to be extremely risky, struggling with widespread domestic and international mistrust, and a high perception of corruption and effects of climate change.

The disruption of most economies today caused by the novel corona virus has made way for policy makers in Africa to think innovatively about all available sources and options of development finance. In this light, In June 2020, Namibia announced its intentions to set up a sovereign wealth fund. If implemented, the country will join a select group of fifteen African countries already using this mechanism to finance development.

Sovereign wealth funds continue to be influential and also represent a key source of financing for the Sustainable Development Goals (SDGs), as per a report published by the United Nations. Most of its activities are linked to the seventeen core targets of the UN’s SDGs, and there remains great potential for African SWFs to lead the way in facilitating long-term, inclusive, and sustainable development. 

Solange Che.