Making Africans benefit from the resource boom through Sovereign Wealth Funds

By Patrick Mayoh

Mother Africa is actually a resource-rich place. That, many Africans are aware of. Nigeria alone produces 2.09m barrels of oil a day, not to mention Angola which is experiencing an unprecedented oil boom. But mismanagement of revenues has always been the issue with resource-rich nations of Africa. The money goes into the hands of unscrupulous leaders and the people never benefit. It is no wonder oil and other resources in Africa have been considered as a curse for Africa. In most cases instead of improving living conditions resources have shown just how much Africa is corrupted with leaders unwilling to do anything to share the bounty with people.

But that might be changing. Take Ghana for example, now an oil producer since 2009, which embarked on a series of measures designed to better manage revenues and leading to the revenue management act. Or Angola and Nigeria having respectively set up sovereign wealth funds designed in both cases to save and invest oil revenues. With new oil discoveries being made across African Nations including Cameroon, Gabon and Sierra Leone just to mention these ones they are at least three reasons why resource-rich nations should have Sovereign Wealth Funds including:

•   To boost domestic growth
•  To improve sovereign credit rating
•   To invest in future generations

Boosting domestic growth

Instead of keeping the money in foreign accounts in Switzerland and other fiscal havens, a better idea would be to form an independent board made up of investment experts to harness the wealth in order to grow the economy. It is time for money made in Africa to stay in Africa and circulate within Africa. Oil money could be kept within states to fund projects, initiatives and small business. This would be much better than keeping it in a Western account so it can generate meager interests. Setting up a fund with strong accountability requirements to better use the money within the resource-rich nation is definitely the way.

Improving sovereign credit rating

Nigeria received its first Moody rating, a Ba3 thanks to the establishment of it sovereign wealth funds. Angola’s outlook moved from positive to stable on Moody’s rating thanks to the establishment of its Funde Soberano de Angola. Credit rating agencies usually deem nations with Sovereign wealth funds to be financially secure and stable. Financially stable and secure nations easily borrow from financial markets.

Investing in future generations

Most importantly funds should be designed to help future generations. Through various schemes the money made from oil and other resources from mining examples could be used through a combination of schemes for investing in education or consolidating the financial position of a nation so future generations can benefit. This is what I call sustainable economics. Managing a country’s wealth with the future generations in mind is how things should be done. Planning for the long term and encouraging initiatives that will benefit the youth is the kind of mindset we now need in Africa.

To guarantee accountability it might be wise like in Ghana to have members from the civil society. The Public Interest and Accountability Committee (PIAC) in Ghana is in charge of making sure the Government abides by the standards set in place for the management of oil revenues in the nation. So time for other nations; Cameroon, Sierra Leone and Chad to follow the bandwagon

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