A Blueprint for Setting Up a Sovereign Wealth Fund: Lessons for South Africa

Abstract

The South African government has expressed interest in setting up a sovereign wealth fund (SWF). This study examined the views of experts in various fields regarding their perceptions of whether the proposed SWF is desirable, feasible and sustainable. The research was based on a qualitative research design, where interviews, secondary data and credible documents were triangulated. Employing economic institutionalism as an analytical framework in which societal actors act within a system that defines relationships between formal and informal actors of society regarding how they influence behaviour and transact, the study concluded that South Africa is in a weak economic position to establish an SWF. The findings suggest that South African policymakers would benefit from integrating long-term economic plans into the country’s fiscal and monetary frameworks, as the country has neither the capability nor has it defined the need for an SWF. By investigating the elements that can determine the desirability, viability and sustainability of an SWF for South Africa, the implication is that for African SWFs to be successful, particularly in South Africa, governments must improve governance, transparency and investment strategies. SWFs are not a panacea for the issues that resource-rich nations face and are not a substitute for the rule of law or badly crafted rules. South African policymakers have not defined the rationale and financing of the proposed SWF. Against this background and findings, the study proposes a blueprint for an SWF, predicated on six key considerations that serve as critical success factors for sustaining an SWF.