BANK of Namibia governor, Johannes Gawaxab has said that the central bank undertakes to execute its statutory mandate and is strongly committed to managing the Welwitschia Fund in line with the Bank of Namibia Act (1) of 2020 section 4 which expands on the holding and managing of the foreign exchange reserves of Namibia.
At the launch of the Fund last week, Gawaxab said the Bank had an excellent governance structure already in place and the management of the Fund will therefore be complementary to the work the Bank does already as the designated manager of the country’s foreign exchange reserves.
Inspired by Article 95 of the Constitution, the Bank of Namibia is entrusted to manage the newly founded Welwitschia Fund. The assets of the Welwitschia Fund belong to the Government of the Republic of Namibia and will be independently managed by the Bank of Namibia in consultation with the Ministry of Finance who will act as the representative of the Government.
“Worthy of note, our governance structure is aligned to international best practice which has also paved the way for a robust new Strategic Plan over the next three years. Due to the rapidly changing environment, we are operating in, the Bank of Namibia will focus on its Strategic Plan while continuing to execute on its mandate with aspirations to be a leading, future-fit central bank committed to a prosperous Namibia. This Strategic Plan ensures that the Welwitschia SWF is prioritised in both our current and future organisational strategy,” Gawaxab said.
Based on Namibia’s country-specific circumstances there are two objectives that will be targeted by the Welwitschia Fund. The first component is aimed at achieving short-term objectives relating to balance of payments and fiscal stability. The second will be geared towards the attainment of long-term intergenerational wealth transfer earned mainly from Namibia’s natural resources.
Accordingly, the Welwitschia Fund will comprise two independent investment accounts or portfolios, namely (a) the Stabilization Account and (b) the Intergenerational Savings Account. Each of these portfolios will have different risk and return characteristic commensurate with their investment objectives and constraints.
“The creation of the Welwitschia Fund will, without doubt, strengthen Namibia’s fiscal stability and resilience to the external shocks that stem from Namibia’s interconnectedness with the global economy. The Welwitschia Fund will facilitate the transfer of wealth sourced from Namibia’s abundant natural resources so that generations to come also benefit even long after the current resource base is depleted,” Gawaxab said.
Some 13 years ago in 2009, in the thick of the global financial crisis, the Financial Markets Department of the Bank of Namibia undertook a study titled: “Sovereign Wealth Fund – A Proposal for Namibia”. This proposal started a discussion between the Bank of Namibia and the Ministry of Finance on the need for establishing a sovereign wealth fund in Namibia. These discussions did not yield much fruits.
A few years later in 2018, the Bank of Namibia again, this time around through the Research Department, commissioned a study titled: “The viability of establishing a Sovereign Wealth Fund in Namibia”. The findings of this paper were subjected to several technical debates between the Bank of Namibia and the Ministry of Finance, but the discussions also did not go far.
The High Level Panel on the Namibia economy also made similar recommendation for the establishment of a Sovereign Wealth Fund in 2020. Subsequently, the President instructed the Ministry of Finance to start the groundwork for the establishment of the Fund. After much back-and-forth discussions, the findings of the Bank of Namibia study were dusted off and afterwards approved by Cabinet in June 2020.
“Consequently, on direction from Cabinet, a cross institutional Task Team consisting of staff members from the Ministry of Finance, Bank of Namibia, Ministry of Industrialisation and Trade, National Planning Commission and Ministry of Public Enterprises was put in place to draft the Policy Framework for the proposed sovereign wealth fund. This framework laid out the key tenets of the Welwitschia Fund that we are launching here today,” Finance Minister, Iipumbu Shiimi said at the launch event last week.