Mutapa Investment Fund: Zim’s pathway to economic justice

THE Justice Foundation commends Government’s recognition of the need to lay a robust foundation for the achievement of internally anchored investment growth and intergenerational justice in the use of the country’s natural resources through the Mutapa Investment Fund (MIF).

Through promulgations under Statutory Instrument 156 of 2023, which deepened the practical scope of the letter and spirit of the Sovereign Wealth Fund Act of 2014, Government has firmly established a robust institutional framework for intergenerational equity in Zimbabwe’s extractive industries.

The MIF creates a sure pathway for Zimbabwe to achieving intergenerational justice in the use of its natural resources, as well as ensuring that current socio-economic and developmental programmes pre-emptively cater for the needs of future generations.

Under the well-established public trust doctrine, a ruling government must act as the principal trustee that must broker equitable usage of all natural resources such as minerals, forests, farmlands, wildlife and fisheries between present and future generations.

As much as possible, the present Government must ensure intergenerational equity by promoting proficiency in the productive investment and saving of revenues coming out of Zimbabwe’s extractive industries, particularly in the mining sector.

The returns from extractive industries must be carefully ring-fenced and exponentially grown in ways that lay a solid foundation for future generations to have a better life than past or present generations.

MIF goes beyond the extractive industries and embraces the critical mass of Zimbabwe’s State- owned enterprises (SOEs), whose true shareholders are the people of Zimbabwe — present and future generations.

The letter and spirit of the MIF’s formulation is also to bring both allocative and productive efficiencies across all major SOEs that will boost Zimbabwe’s overall economic performance, as well as relieve the fiscus of the burden of subsidies and grant bailouts to these SOEs.

Benefits of the MIF

Collection of royalties from the mining sector will create a critical mass of pooled investment funds that will anchor Zimbabwe’s financial sector towards greater stability. The Reserve Bank of Zimbabwe’s lender of last resort function in the country’s financial system will be strongly underwritten by the MIF. This will boost confidence in the country’s financial system.

Pooled financial liquidity under the MIF will provide Zimbabwe with an inbuilt source of long-term internal direct investment (LTIDI), as opposed to overreliance on foreign direct investment, which sometimes comes with unpalatable strings that are costly to future generations.

The transfer of shareholding in SOEs to the MIF will usher in productive and allocative efficiencies in the SOEs. Greater efficiency and private sector-driven decision-making will significantly uplift Zimbabwe’s overall economic performance.

SOEs are major market movers, both on the supply and demand sides of the economy, as well as on the job-creation market. The direct and indirect trickle-down and multiplier effects of the financial and economic activities of the MIF will create new jobs, contribute to overall economic productivity, as well as boost tax revenues.

By its nature, the fund has a long-term perspective, such that its investments would lead to sustained socio-economic growth and development, which will contribute to intergenerational justice in the enjoyment of the fruits from Zimbabwe’s natural resources and SOEs.

The SOEs pooled under the MIF will have brighter prospects of attracting well-funded partnerships and joint ventures from regional and international capital markets. The broader and deeper balance sheet of the fund will have an unparalleled positive signalling effect on regional and international financiers of longterm productive and infrastructure projects.

The placement of the SOEs under the care of the MIF will create more legroom for Government’s line ministries to focus their attention on other top priorities that will improve overall efficiencies in governance as a whole.

Experiences elsewhere on the globe

Contrary to shallow-minded and uninformed views by some commentators who mischaracterise the MIF concept as allegedly “a looting and illegal scheme”, this intergenerational macroeconomic and financial anchorage is well-established across most world economies.

For example, in America, some states have their own versions of Zimbabwe’s MIF. These are the Permanent

Wyoming Mineral Trust Fund; North Dakota Legacy Fund; and the West Virginia Future Fund, among several others. These are anchored in oil, gas, minerals and public funds revenues.

In South Korea, the Korea Investment Corporation is, in essence, a sovereign wealth fund in its character. In Russia, they have their Russian National Wealth Fund and the Russian Direct Investment Fund, which are anchored in oil, gas and other non-commodity revenue streams.

In Canada, they have their Alberta Heritage Savings Trust, which is anchored in oil and gas revenues. In India, they have their National Investment and Infrastructure Fund. Also, Nigerians have the Nigeria Sovereign Investment Authority, which is anchored in oil and gas revenues of that country. In Ghana, they have the Ghana Petroleum Funds/Ghana Infrastructure Investment Fund, with anchorage in oil and gas revenues. There are a lot more examples of the likes of the Mutapa Investment Fund in the world, and Zimbabwe has made a giant step in the right direction. Recommendations to Government In order to realise even greater benefits from the MIF, it is recommended that Government prioritises deployment of the fund’s resources towards the following investments:

◆ Generation of clean energy — solar power plants, hydropower plants and wind farms. Eradication of energy supply gaps will further propel Zimbabwe’s socio-economic and development trajectory.

◆ Construction of more dams for expanded irrigation as a weatherproofing strategy to boost the agriculture sector.

◆ Expansion of the financial services sector into rural areas for financial inclusion of the bulk of Zimbabwe’s population.

◆ Restoration and expansion of Zimbabwe’s railway system.

◆ Boosting Air Zimbabwe’s cargo

and passenger fleets.

◆ Reviving and boosting the iron and steel production sector.

◆ Capitalising the mining and manufacturing sector.

◆ Expansion of roads rehabilitation and expansion programme. ◆

Financing of real estate sector growth — both commercial and residential immovable properties. ◆ Building a stockpile of diamonds, gold and platinum reserves as gross savings for future generations. The MIF Board would then exercise intensive oversight, monitoring and reviewing the operations of the fund on an ongoing basis, with specific performance targets set across all strategic areas of operation. With the MIF, Zimbabwe’s developmental trajectory looks even brighter and unstoppable.

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