Abstract
Over the past decade, many natural resource-rich developing economies have deployed commodity-based Sovereign Wealth Funds (SWFs) to manage their natural resource revenues. However, many of these efforts were premature. Establishing a commodity-based SWF only makes sense in a country that possesses robust mechanisms for capturing and accounting for resource rents and a budgetary framework that channels those rents to broad-based and inclusive social and economic development. In 2009, the United Nations Development Programme (UNDP) encouraged the government of Zimbabwe to establish an SWF to ameliorate challenges associated with the natural resource curse. However, the International Monetary Fund (IMF) advised the government of Zimbabwe to re-examine the fiscal regime of its extractive industries before launching its SWF. Zimbabwe’s extractive industries are captured by a comprador securocrat bourgeoisie that feels entitled to rule and loot the country in perpetuity. Consequently, very little natural resource revenue is deposited in government coffers. Contrary to the advice of the IMF, the government of Zimbabwe rushed to establish an SWF before it had re-examined the fiscal regime of its extractive industries. Resultantly, Zimbabwe’s SWF is a premature fund. Existing literature defines what premature funds are. However, it does not go onto explain why some governments rush to establish SWFs before acquiring the prerequisite conditions required to successfully operationalise one. Using Zimbabwe as a case study example, this qualitative study explains why some governments prematurely establish SWFs. Data were collected using elite interviews and unobstructive methods. Moreover, data were presented using thematic and qualitative content analysis. Research findings reveal that the government of Zimbabwe rushed to establish an SWF because of the fear of being the odd one out among its structural equivalents, it felt obliged to implement the recommendations of its biggest development partner the UNDP, it needed to look modern and sophisticated through finance and it also needed to widen its patronage turf. Moreover, research findings also reveal that the design of Zimbabwe’s SWF as a financial institution is not designed in such a way to make it an effective investment fund, as compared with global standards of investment management. The study recommends that the government of Zimbabwe needs to re-examine the fiscal regime of its extractive industry and the governance architecture of its SWF before it can successfully operationalise its SWF.
Ph.D. (Public Management and Governance)