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Wednesday, 14 November 2012

Africa and Sovereign Wealth Funds


Photo courtesy of e-architect.co.uk

For Africa to develop there is need for billions of dollars. Sadly there is one source from which this capital can be obtained. Think sovereign wealth funds. These are investment funds owned by governments that invest in large projects and other asset classes.

What is a Sovereign Wealth Fund?

Sovereign wealth funds are just like any other fund like a pension fund. These difference is ownership and size. While pension funds are small and owned by pensioners, sovereign wealth funds are owned by governments and are very large, with billions of dollars of assets.

Sovereign wealth funds are usually owned by oil-rich nations of the Middle East or East Asian export champions like China. These nations have huge trade surpluses that they put into these funds. Some of these funds have hundreds of billions of dollars under management.

The funds are professionally managed and invest in a wide range of assets, even outside the country where the fund is based.

Sovereign Wealth Funds by Size

The top five largest sovereign wealth funds (assets in billions of dollars)as at October 2012 were;

Government Pension Fund – Global (Norway) $656.2 billion
Dhabi Investment Authority(UAE – Abu Dhabi Abu) $627 billion
SAFE Investment Company (China) $567.9 billion
SAMA Foreign Holdings (Saudi Arabia) $532.8 billion
China Investment Corporation (China) $482 billion

Source: SWF institute.

This is where Africa should be looking for development capital not Europe or America with their debt problems.

Sudan is actively courting the Middle East funds to invest in agriculture, after the loss of oil revenues to South Sudan.