Renamed the Mutapa Investment Fund after the vast kingdom that covered modern Zimbabwe, Zimbabwe’s sovereign wealth fund is expanding rapidly raising concerns that President Emmerson Mnangagwa is building an empire beyond the remit of the constitution.
New executive regulations made substantial amendments to the Sovereign Wealth Fund of Zimbabwe Act 2014 that substituted the Sovereign Wealth fund of Zimbabwe with the new fund. In the first six years after it was created in 2014, the fund was inactive. In 2020, it was seeded with US$100 million of capital, but has continued to remain quiet and its portfolio was opaque. Projects have included proposed investment in a floating solar power station in Kariba and rights in Invictus’ Muzarabani gas prospect. It is also involved in plans to buy sugar estates and raise the government’s stake in financial services conglomerate ZimRe Holdings.
As part of the changes revealed in recent weeks, the reconstituted fund has acquired 20 state-owned mining, transport, oil, railways, communications, power and agricultural companies. The move is significant as Zimbabwe possesses the largest lithium resources in Africa and the fifth biggest in the world, as well as huge deposits of platinum, gold, coal, diamonds and chrome. Mnangagwa has the power to add and remove companies to the list as and when he pleases, without parliamentary oversight. As a para-statal holding company, the fund’s operations are not subject to public procurement laws, parliamentary scrutiny or disclosure to the public.
Similar to other funds in Africa, notably the Nigerian Sovereign Investment Authority (NSIA), the purpose of the original fund was to invest for inter-generational savings, advance strategic economic development and support fiscal stabilisation. While the NSIA has largely been a success in addressing its mandates, if the Mutapa Investment Fund is run opaquely and fails to meet good standards of governance, the president’s critics fear it will share the same fate as the Fundo Soberano de Angola (FSDEA) which was caught up in the endemic corruption of the Dos Santos regime.
The statutory instrument Mnangagwa used last month to change the fund’s name also gave him the supreme power to appoint the Chief Executive Officer, the Chief Investment Officer and all eight members of the fund’s board. Previously, the appointments were made by the Minister of Finance. The edict also removed the obligation of the board to report to parliament, thereby taking away public scrutiny over the fund’s operations and investments – and the management and divestment of state enterprises. Additionally, the fund can now bypass stringent forex control laws and currency regulation to stabilize the Zimbabwean dollar and prevent capital flight, allowing it to transfer money abroad without limitations.
Given the swirl of concern around cabinet appointments and allegations of nepotism, the unbridled power Mnangagwa now has over a fund that holds a major chunk of the national economy is prompting concerns that the fund will follow the fate of FSDEA. The lack of checks and balances on the powerful head of state makes the fund vulnerable to corruption.
Mutapa will have a lot of work to do to convince co-investors and the Zimbabwean public that governance and scrutiny are sufficient to ensure the fund does not follow its historical namesake into oblivion.