New wealth fund eyes SOEs

Mbongeni Mguni - Sharon Mathala | Monday September 15, 2025 12:39

Few details were made available at the SWF’s initial press briefing this week, but statements from the new board of directors indicate that Botswana Sovereign Wealth Fund Limited plans to kick off its portfolio of investments with SOEs.

Registered as a private company on May 27, the Botswana Sovereign Wealth Fund has one shareholder – government – and seven directors who include Permanent Secretary to the President, Emma Peloetletse, deputy central bank governor, Lesego Moseki, De Beers executive, Malebogo Mpugwa, local attorney, Boingotlo Toteng and several external experts.

“The sovereign wealth fund is meant to bring under its umbrella most of the key state-owned entities,” new chair, Farouk Gumel, told media on Wednesday. “Those state-owned entities are going to be reformed and restructured not only to become profitable but efficient while creating jobs for the teeming youth population of this country. We know the task ahead is very, very enormous for us and we have made our own commitment to Mr. President to ensure that we deliver this mandate.”

For her part, Peloetletse spoke of bringing SOEs together under the mandate of the SWF.

“One of the areas that we thought we should do is really to look at our state-owned enterprises and bring them together for efficiencies and economies of scale, so that we are able to expand and even create more value using the collaborations between these entities,” she said.

Mmegi was unable to get details on how the SWF will be seeded or initially capitalised as well as its planned investment strategy, as officials said the organisation is still in its very early stages.

“Currently, we are building the structures for the fund,” Peloetletse said. “Hopefully very soon, we'll be meeting again now to structure and come up with opportunities and our strategy in going forward, so that we can socialise it with the rest of the government, especially the top leadership.”

Mmegi is informed that with the appointment of the board of directors, attention will now go to establishing a secretariat or management of the new company as well as appointment of the CEO.

The mandate over SOEs is reminiscent of Zimbabwe’s $16 billion Mutapa Investment Fund, a SWF which leverages the balance sheets of the 30 or so state-owned entities it controls across including mining, energy, infrastructure, financial services, and agriculture and others.

Analysts following the local SWF said it is likely the local entity would take the same approach.

“Most likely, government would cede its shareholding in certain SOEs to Botswana Sovereign Wealth Fund Limited, which would then work with management teams on strategic direction and maximisation of returns. “Essentially, government’s financial interest in these SOEs is turned over to the SWF to manage as a strategic investment. “The returns from these would then go towards growing the Fund for investments in other sectors,” one market watcher told Mmegi.

Peloetletse hinted at a similar arrangement.

“It's not going to be drawing down from the capital investment, but rather from the returns that would have been generated through the investment that we would have made,” she said during the media briefing. “So this is just going to be the difference, because we are not going to be fully blowing for our future generation.”

The Zimbabwe SWF, besides taking over mandates of some SOEs, was seeded through 25% royalties from special mining grants and other levies. Botswana Sovereign Wealth Fund Limited directors were unable to provide details on the route its capitalisation would take.

The seeding, capitalisation of the SWF as well as the investment strategy and withdrawal rules are critical to distinguish it from the Pula Fund, which was initially set up to be a type of SWF, but generally acts as an overflow account.

“The Pula Fund is a liquidity stabilisation fund or a fund that takes cash and keeps it for a rainy day. “This sovereign wealth fund is not only about stabilisation, it's about growth, which means we are not only going to be managing cash, which is one aspect of it, but there is also management of assets,” said Gumel.

The latest developments are in line with recommendations by the IMF which published a 20-page report last year, saying that Botswana should transform the Pula Fund into a sovereign wealth fund that would be funded by a set commitment to budget surpluses, have fixed withdrawal rules and be used to boost the country’s weakening savings.

The Pula Fund, established in 1993 and managed by the BoB and global asset managers, is designed to act as a fiscal buffer and nest egg for future generations who will live in an era without strong diamond revenues.

However, government often dips into its portion of the Pula Fund, known as the Government Investment Account (GIA), to fund various needs such as the 2016 Economic Stimulus Plan and budget shortfalls. Frequent withdrawals from the Pula Fund are also made to support the country’s import bill.

Peloetletse said government wanted to make a clear distinction between the Pula Fund and the new SWF.

“If maybe later we find out that maybe we can just absorb what is in Pula Fund, we will readily advise accordingly and make sure that there is that synergy. “For now, we wanted to be very independent to create something that we know that will take us somewhere, just like it has been done in other countries.”