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Tanzania Sovereign Wealth Fund - Good idea but bad timing!

Discussion in 'Jukwaa la Siasa' started by Mdondoaji, Sep 14, 2012.

  1. M

    Mdondoaji JF-Expert Member

    Sep 14, 2012
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    Tanzania: time for a SWF

    August 2, 2012 | Ruona Agbroko


    Impeccable timing. That's the only phrase that can describe this week's announcement that Tanzania is to set up a sovereign wealth fund – just hours before another significant gas discovery was unveiled.

    Sovereign wealth funds have been used by countries such as Norway, China and Libya as a way of putting excess reserves to better use than sitting in government coffers. Now, with oil and gas finds building up, several countries in sub-Saharan Africa are looking to set up SWFs as well.

    President Jakaya Kikwete (pictured above) said in a television broadcast that Tanzania would look at other countries which have set aside revenue generated from energy resources for investment, often in infrastructural development. "We want to learn from them by setting up our own fund to ensure we similarly benefit," he said.

    Tanzania may not find an ideal case study in Nigeria, which has tried for months to build a fund on its oil sales. However, the move may be gathering pace. Ngozi Okonjo-Iweala, Nigerian finance minister, said on Monday the country was shopping for a management team for the fund, which it plans to set up with an initial $1bn.

    The SWF should come on-stream before the end of 2012 but, she said, "the issue is how much goes into the fund, not whether the fund exists," according to Reuters.

    Nigeria's SWF will replace its Excess Crude Account, which currently holds almost $7bn but is being used to offset fuel subsidy debts of about the same amount. In the past, excess crude oil revenues have been used to pay off $12bn of Nigeria's Paris Club debt.

    The Tanzania announcement came just before exploration firm Ophir Energy declared a sixth discovery of gas off shore. An Ophir spokesperson told beyondbrics: "exploration drilling will continue into the second half of 2012 and into next year," so there may be more gas discoveries to come.

    The World Bank initially estimated Tanzania's proven natural gas reserves at about 15tn cubic feet – worth approximately $150bn, or six times the east African country's GDP. But six months and several discoveries later – by Ophir Energy and its British partner BG Gas, Norway's Stat Oil, and US group ExxonMobil – and Kikwete has claimed that his country's recoverable gas reserves could be as big as 28.9tn cubic feet.

    Ghana discovered oil in 2010 and subsequently created two SWFs: the Ghana Stabilization Fund, with $54.8m assets, and the Ghana Heritage Fund, with $14.4m. If Tanzania gas discoveries hold true, its SWF could be a lot bigger than that.

    According to Preqin, a research company, sub-Saharan African sovereign wealth funds make up just 0.2 per cent of global SWF assets under managment. Expect that to change in 2012.

    Source: Financial Times

    My view:

    This idea is very good idea but I am hesitating whether it is the right time to start this and whether we have the correct regulatory framework to supervise this fund and competent management team. Failure to have such environment it is going to be one of the biggest embezzlement hole than EPA of the central bank. Time will tell
  2. Ndahani

    Ndahani JF-Expert Member

    Sep 14, 2012
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    Nigeria kila kitu kinakuwa kigumu...sababu kila mtu mjanja. Hapa itakuwaje?
  3. M

    Mdondoaji JF-Expert Member

    Sep 14, 2012
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    Na kama Magamba wakiendelea na uongozi kuna watu watatajirika na this SWF. Wazo zuri but are we prepared? I am very skeptical with this one.