President Ramaphosa Reaffirms Commitment to Establishing Sovereign Wealth Fund

The President addressed the topic during his first oral reply session in the National Assembly under the Government of National Unity, held in Cape Town on Thursday.

President Cyril Ramaphosa has reiterated the government's commitment to creating a Sovereign Wealth Fund aimed at benefiting future generations, despite current conditions not being conducive for its immediate establishment. The President addressed the topic during his first oral reply session in the National Assembly under the Government of National Unity, held in Cape Town on Thursday.

In response to a question from Member of Parliament Joseph Maswanganyi about the development of the Sovereign Wealth Fund and its potential benefits for South Africans, President Ramaphosa affirmed that the government is dedicated to establishing the fund. However, he acknowledged that it will take time to build such a facility, emphasizing that the conditions for its immediate creation do not yet exist.

"We are committed to creating a Sovereign Wealth Fund, and we believe that the architecture we are currently developing will assist us in this endeavor. This fund will be established for future generations, as it takes quite a while to build a facility like a Sovereign Wealth Fund," the President said.

He further explained that the Sovereign Wealth Fund is intended to support economic and social development in South Africa, ensuring that the nation's wealth is effectively utilized for long-term benefits. The fund is envisioned as a contributor to economic growth, serving as a vehicle through which the state can invest surplus funds in various economic projects, specific sectors, or even in international ventures.

"The fund, in my view, is the way to go, and we now have a better architectural opportunity to do so. We need to move beyond just talking about it and start working on its structure and funding sources. Establishing a Sovereign Wealth Fund is a project we will pursue as we continue to improve our state-owned enterprises (SOEs)," Ramaphosa stated.

The President also highlighted how Sovereign Wealth Funds are used globally to harness national resources for economic and social development, often preserving and growing a country's wealth for the benefit of future generations. He referenced a document published by the National Treasury in December 2021, which outlined some features of such a fund. Typically, a Sovereign Wealth Fund is a state-owned entity that accumulates resources for capital investment, often drawing from a dedicated revenue stream.

However, Ramaphosa noted that South Africa's current fiscal challenges, including substantial current account and budget deficits, make it an inopportune time to establish the fund. He emphasized that, for now, additional resources should be directed towards reducing the country's debt burden and improving service delivery, particularly in the recruitment of essential personnel like police and teachers, and in maintaining basic service infrastructure.

In addition to discussing the Sovereign Wealth Fund, the President also briefed Parliament on the steps the government is taking to encourage private sector investment in ports, railways, and other infrastructure projects to drive economic growth.