With the recent changes to the Sovereign Wealth Fund (SWF), the Mutapa Fund, President Emmerson Mnangagwa is building a new empire of parastatals away from the influence of his Ministers.
For Finance Minister Mthuli Ncube, this is what he has been craving for over the past three years.
In 2020, presenting the 2021 budget, Ncube complained that his failed effort to privatise state enterprises had been resisted by “vested interests” in government. The solution, he proposed then, was to remove the companies from the control of ministries and have them housed under a single entity.
He argued that having parastatals scattered across different ministries was an old model that other countries are moving away from.
“This ownership model has been associated with a number of challenges, including inconsistencies in governance practices, Ministerial interferences, delays and/or reversals of Government-approved SEPs reforms due to vested interests within some line Ministries,” Ncube said.
Having one entity run state enterprises was a “more progressive” ownership model, he claimed, citing examples of such models in the region and elsewhere. Still, he never got his way. In 2018, he had announced an ambitious plan to reform or sell over 30 state enterprises. The bulk of the proposed sales never took off, with companies unable to pay consultants and the process caught in red tape.
Attempts to merge some parastatals had failed “due to diverging views of the parent ministries in as far as the merger is concerned” Ncube said.
Now, changes to the laws governing the Sovereign Wealth Fund will help him get his way.
Among the changes, some 20 enterprises will now be owned by the SWF, now renamed the Mutapa Fund. They range from mining to telecoms, energy and agriculture, which will make Mutapa influential in the economy.
The companies include Defold, the vehicle into which government has controversially put some of its mining assets, previously held under the Zimbabwe Mining Development Corporation. Mutapa will also hold government’s interests in Kuvimba, which is now one of the largest mining operations in Zimbabwe. When Kuvimba issued its maiden dividend in 2021, the government had 21.5% in the company while the sovereign wealth fund had 6.5%.
As he chaired his first post-election Cabinet meeting on Tuesday, President Emmerson Mnangagwa primed his ministers for the changes the new regulations will bring to how parastatals are managed.
“The recently gazetted Statutory Instrument No. 156/2023 on the Mutapa Investment Fund has far reaching implications to our State Owned Enterprises as well as the state of our economy as a whole. I expect Cabinet to play its part in line with the overall vision of this new development,” Mnangagwa said.
The latest change suggest that Ministers will no longer appoint boards and managers to the affected parastatals, a right that gave them great influence in the past. According to the SI, the transfer of these assets must be done within 21 days.
The government is to appoint fund managers to advise on Mutapa’s investments.
Mutapa: an empire built on clay?
However, questions remain on Mutapa’s governance and funding. The SWF was formed in 2014, then became inactive.
Mutapa is supposed to be funded by a quarter of earnings from mineral royalties. In 2020, Ncube announced he had granted the SWF the equivalent of US$100 million as seed capital to get it going. Since then, however, the government has never disclosed how much money the fund currently holds or what assets it holds in total. Many of the enterprises being taken under Mutapa were already bleeding the taxpayer. With no seed capital, no institutional reform or better oversight, there is no reason to believe that the same parastatals will start working only with the transfer to Mutapa.
Former RBZ deputy governor Kupukile Mlambo was appointed CEO of the fund last December, but he has reportedly since left.
The government’s strategy on Mutapa has been to use it as its representative in investments. The projects government has pushed on Mutapa are broad, from a proposed floating solar power station in Kariba, where Mutapa would hold 10%, to proposed partial rights in Invictus’ Muzarabani gas prospect. Currently, the government is pushing for Mutapa to buy Tongaat Hullet’s sugar estates. Last year, the Fund also proposed to buy the majority 33.8% stake in ZimRe Holdings from Dayriver Corporation, owned by the Rudland family.
Mutapa companies will be able to move foreign currency “without restriction or delay”. This is not unusual for sovereign wealth funds; they are free to move forex in and out of the country for uses such as capital investment, profits from investments, paying suppliers or loans, or even paying foreign staff. However, there will need to be stricter oversight given Zimbabwe’s history of weak governance on financial flows and arbitrage.
The list of companies whose government shares will now fall under Mutapa:
- Defold Mine
- Silo Investments (GMB commercial arm)
- National Oil Company of Zimbabwe
- Cold Storage Commission
- Netone Cellular
- National Railways of Zimbabwe Holdings and NRZ Ltd
- Arda Seeds
- Zimbabwe Power Company
- Allied Timbers
- Telecel Zimbabwe
- Air Zimbabwe
- Industrial Development Corporation
- AFC Limited Registration Number 3339/2021
- Hwange Colliery