PDF: Sovereign Wealth Fund

Wikipedia defines Sovereign Wealth Funds as follows:

A sovereign wealth fund (SWF) is a state-owned investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally.

As of 2013, although there were 15 Sovereign Wealth Funds in Africa (see here), none of those 15 wealth funds are in South Africa.  We think that is disgracefull.  The Direct Democracy Forum (DDF) intend changing that.

It has been said that you cannot have a sovereign wealth fund when you have Sovereign Debt, that these are the opposite sides of the same coin.  It might equally correctly be said of many huge corporations that you cannot have debt and hold assets, that they are also opposite sides of the same coin.  Yet that is the way most businesses operate.  They borrow money and invest in income earning assets and activities, and none think the worse of them for doing so.

OK – a sovereign nation is not the same as a corporation but the same principles can apply, and in fact, be applied in reverse, so that the establishment of a sovereign wealth fund is a perfectly legitimate endeavour even when the nation is awash in debt.

South Africa has a sort of Sovereign Wealth Fund in the Public Investment Corporation (PIC) but its principle client (by almost 90%) is the Government Employees Pension Fund (GEPF).  Government owns the PIC and is represented in the PIC by the Minister of Finance. The PIC web site says of the PIC: “Established in 1911, the Public Investment Corporation (SOC) Limited is one of the largest investment managers in Africa today, managing assets of over R1.6 trillion and still growing.”

Wouldn’t it be nice to say that of a South African Sovereign Wealth Fund?

What the DDF will initiate is a true sovereign wealth fund, but not accountable to government, instead accountable to its shareholders, the adult citizens of South Africa, who will each hold one non-negotiable share in the fund.  The share will only be redeemable on death, when its net worth will be paid out to the deceased’s estate, and the share will go back into the pool of unallocated shares and will be issued to the next South African who attains adulthood.  This SWF will be under the protection of Chapter 9 of the South African constitution

The fund will account to the nation monthly and board members will be elected, probably annually and probably on a regional basis.  In effect, every adult South African will become a shareholder in SA Limited, and will become a share watcher and financial expert along with the best.

They will also start caring about how their actions effect the share value of SA Limited and, we suggest, become model citizens and have zero tolerance for those who damage South Africa, and by extension, damage SA Limited and its share value and its ability to pay dividends and support and pay for the Basic Income Grant (BIG), which we suggest, should be one of SA Limited’s principle functions.  In addition to all the traditional sources of funding for SWFs (see here for a brief view of SWF funding), SA’s SWF will be the recipient of every fine and penalty levied in the land and, if we have sin taxes, of every sin tax in the land.

The DDF believe that a Sovereign Wealth Fund as outlined above will be a much better investment than the National Lottery (Lotto).  What do you think?