Audaciously, says this writer, what Finance Minister Tito Mboweni calls the “new economic recovery strategic plan” seeks to achieve the opposite: retrench state workers, reduce government spending overall, privatise SOEs and raise taxes. Photo: Sumaya Hisham/Reuters
Audaciously, says this writer, what Finance Minister Tito Mboweni calls the “new economic recovery strategic plan” seeks to achieve the opposite: retrench state workers, reduce government spending overall, privatise SOEs and raise taxes. Photo: Sumaya Hisham/Reuters

Budget Speech 2020: R30bn earmarked for formation of Sovereign Wealth Fund

By Sizwe Dlamini Time of article published Feb 26, 2020

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CAPE TOWN – Finance Minister Tito Mboweni on Wednesday announced the formation of the South African Sovereign Wealth Fund with a target capital amount of about R30 billion.

When delivering the 2020 National Budget Mboweni said given the legal, administrative and procedural issues involved, a relevant bill would be submitted during the course of Parliament.

“There are a variety of possible funding sources, such as the proceeds of spectrum allocation, petroleum, gas or minerals rights royalties, the sale of non-core state assets, future fiscal surpluses and money we set aside. This will ensure that we continue to invest in the future generations of this country in a fiscally-prudent manner.

“Mr President, a Sovereign Wealth Fund is an important long-term tool for saving and investment for future generations. It can also contribute to strengthening the fiscal framework. We must learn to save during the good times, and a Fund can play an important role as a counter-cyclical fiscal tool,” said.

Mboweni also announced that the preferred options for the establishment of a state bank were now ready.

“Last year, this House passed legislation which will allow state-owned enterprises to apply for banking licences. In July 2019, I tasked the Deputy Minister of Finance with the responsibility to undertake the state bank project. Madam Speaker, I am pleased to inform the House that preferred options for the establishment of a bank are now ready.

“The architecture will be that of a retail bank operating on commercial principles. The state bank will be subject to the Banks Act, and will have an appropriate capital structure and performance parameters on investments and loan impairments. It will be regulated by the Prudential Authority on its own merits.

“We will also consolidate the currently fragmented system of national and provincial Development Finance Institutions,” the minister said.

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