• Amendment to Sovereign Wealth Fund Amended the Act to allow the Mutapa Investment Fund to use state-controlled assets as collateral for debt financing
  • Impact on State-Owned Enterprises: Will this revive struggling state-owned enterprises like National Railways of Zimbabwe, Air Zimbabwe?
  • Transparency and Governance Concerns: The success hinges on transparency and good governance

Harare- The government has implemented a strategic amendment to the Sovereign Wealth Fund Act, effectively enabling the Mutapa Investment Fund to leverage state-controlled assets as collateral for debt financing.

This regulatory revision is ostensibly designed to grant the fund greater flexibility in terms of investment and asset growth.

Will the government's latest move to amend the Sovereign Wealth Fund Act be the magic bullet that breathes new life into struggling state-owned enterprises like National Railways of Zimbabwe, Air Zimbabwe, Hwange Colliery, and Bindura Nickel Corporation? Only time, coupled with transparency and good governance, will tell.

The Mutapa Investment Fund is currently valued at US$16 billion, reflecting the fund's extensive portfolio of state-owned assets across various sectors, including mining, energy, and telecommunications.

It boasts a diverse portfolio of state-owned interests spanning various sectors, including mining, agriculture, ICT, transport, banking, real estate, energy, and trading.

The fund's holdings include National Railways of Zimbabwe, Air Zimbabwe, TelOne, Cottco, Defold Mine, National Oil Company of Zimbabwe, Petrotrade, POSB, ZESA, Fidelity (the country's sole gold refinery), Zimbabwe Power Company, PowerTel, Allied Timbers, Telecel, and Hwange Colliery.

However, most of the companies under the Mutapa Investment Fund are struggling financially, with huge debts and poor management leading to subpar performance.

The National Railways of Zimbabwe (NRZ) and Air Zimbabwe are facing significant financial challenges, while Hwange Colliery is struggling to stay afloat due to mismanagement and debt while Bindura Nickel Corporation, is also facing financial d and production difficulties.

These companies, along with others under the fund, are in dire need of restructuring and effective management to return to profitability.

Meanwhile, the amendment entails the repeal of Section 22 of the Sovereign Wealth Fund Act, which had previously prohibited the government from utilizing the fund's assets as collateral for loan agreements.

While this development is expected to enhance the fund's investment capabilities, it also raises concerns regarding the potential risks associated with borrowing and the lack of transparency in the fund's activities.

The government last year exempted the Mutapa Investment Fund from the Public Procurement and Disposal of Public Assets Act, to facilitate expedited investment decision-making without the need for oversight by the Procurement Regulatory Authority of Zimbabwe.

This, officials said, was meant to help Mutapa make investment decisions quicker.

However, this exemption has been criticized for its broad scope and potential for abuse.

Also, the valuation of the fund's assets at US$16 billion by Mutapa CEO John Mangudya has sparked controversy, with concerns surrounding the lack of transparency in the valuation process.

This lack of transparency leads to concerns about accountability and the potential for conflicts of interest.

This year, the government extended a US$1.6 billion loan to the Mutapa Investment Fund to facilitate the acquisition of a 35% stake in Kuvimba, implying a valuation of US$4.5 billion for the mining company, the valuation also questioned.

Kuvimba's portfolio includes several prominent mining operations, including Freda Rebecca Mine, Shamva mine, and Jena Mine, with the company poised to redevelop several mothballed operations.

To contextualize the valuation concerns, one must examine the market capitalization of other major mining enterprises in the region.

The government’s valuation of Kuvimba suggests it would surpass Impala Platinum, the world’s second-largest platinum producer which was valued at US$3.7 billion during the time.

Moreover, Kuvimba's valuation exceeded that of other mining titans, including Sibanye Stillwater and Patrice Motsepe’s African Rainbow Minerals, positioning it nearly on par with Harmony Gold, South Africa’s leading gold producer by output.

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