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The Sovereign Wealth Fund of Zimbabwe Act


The Sovereign Wealth Fund of Zimbabwe Act

Senior Staff Writer

In Bill Watch 38/2023 we examined the Sovereign Wealth Fund of Zimbabwe Act and saw how the Fund has been mismanaged since 2015. In this bulletin we shall continue our examination by looking at the amendments the President has made to the Act in SIs 156 of 2023 [link] and 165 of 2023 . We shall also assess GN 1546 of 2023 , which exempted the Fund from complying with the Public Procurement and Disposal of Public Assets Act.

Validity of SIs 156 and 165 of 2023

SIs 156 and 165 of 2023 were made in terms of the Presidential Powers (Temporary Measures) Act, which empowers the President to make temporary regulations [lasting for a maximum of six months] to deal with urgent situations. The Act gives the President almost plenary [full] legislative powers, and his regulations can amend or repeal Acts of Parliament.

Ever since the present Constitution came into force in 2013, Veritas has considered the Act to be unconstitutional in that it gives the President primary law-making power in violation of section 134(a) of the Constitution. If the Act itself is unconstitutional then all regulations made under it are also unconstitutional and void. The Government obviously does not share Veritas’s view about the unconstitutionality of the Act, however, and the Constitutional Court has not ruled on it. Hence in this bulletin we shall assess the effect of the two SIs as if they were legally valid.

Effect of SIs 156 and 165 of 2023

SI 156/2023 makes the main amendments to the Sovereign Wealth Fund of Zimbabwe Act; SI 165/2023 merely corrects the names of some of the assets which the first SI transfers to the Fund.

The amendments made to the Act are as follows:

Changing the name of the Fund and the Board

The name of the Fund is changed to the Mutapa Investment Fund. The change has no legal significance, but the new name is not obviously better than the old – unless it is intended to conceal the Fund’s link with Zimbabwe.

The name of the Board which manages the Fund is also changed, to the Mutapa Investment Fund Board. Again, the change is legally unimportant.

Changing the legal nature of the Fund and the Board

Before the amendments, section 3 of the Act established the Fund as a trust and section 5 established the Board as a corporate body. The amendments make the Fund a corporate body and the Board a body without corporate status. This is the usual pattern with our parastatal bodies: the parastatal is the corporate body and the board or committee that manages it has no separate status.

Membership of the Board

The amendments change the membership of the Board significantly:

· A new officer, the Chief Investment Officer, becomes a member.

· Members are appointed by the President after consulting the Minister, whereas previously they were appointed by the Minister with the President’s approval. In practice the change does not make much difference, though it makes the President’s control over the Fund more explicitly clear.

· Members of Parliament, members of government and State employees were all debarred from being members of the Board. Now only Members of Parliament are debarred: members of government and State employees can be appointed. This will bring no obvious benefits to the Fund – the Auditor-General’s reports in recent years have shown that civil servants are not good at managing public money – but the amendment will certainly extend the President’s control over the Fund.

Staff of Fund

Before the amendments the Board appointed the Chief Executive Officer of the Fund. Now the CEO is appointed by the President in consultation with the Minister. Again, this obviously increases the President’s power.

A new post of Chief Investment Officer is created; he or she will be appointed by the CEO [not the Board] in consultation with the Board. This new officer will be responsible for developing investment strategies and policies and ensuring that sound investment policies are followed. Unlike the CEO, this new officer is not stated to be subject to the Board’s general control.

Minister’s control over the Board

Section 11 of the Act allowed the Minister of Finance, with the President’s approval, to give the Board general directives in the public interest. This section is now repealed, which seems to give the Board more independence. The independence may be more apparent than real, however, because the Board members and the Fund’s principal officers are now appointed directly or indirectly by the President.

Reports of the Board

The Board now has to send its annual reports to the President as well as to the Minister. This is appropriate because the President is the trustee of the Fund, but it does make the President’s powers of supervision and control more apparent. The other reporting provisions remain the same as those in the original Act, so the Board will still have to send quarterly reports to the Minister and all reports will have to be laid before Parliament.

Assets and investment of Fund

The amendments do not change the provisions of the Act setting out the Fund’s income –mineral royalties and special dividends, as we explained in Bill Watch 38/2023 – but in other respects they make far-reaching changes to the Fund’s holdings and investments:

· The Board will not have to get the Minister’s approval before investing the Fund’s surplus income. This will probably speed up investment decisions, even if it does not significantly increase the Board’s independence (because as we have said, the Board’s members and senior staff are all appointed by the President).

· The Government’s shares in 23 parastatal bodies and companies listed in a new Schedule are transferred to the Fund and form part of the Fund’s “initial capital”. This means that the fund has acquired 20 state-owned mining, transport, oil, railways, communications, power and agricultural companies. The acquisition of mining companies is particularly significant as Zimbabwe has the largest lithium resources in Africa and the fifth-largest in the world, as well as vast deposits of platinum, gold, coal, diamonds and chrome. However, some of the implications of the transfer are not very clear:

· Although the new section 14(4) of the Act now says that the shares of “companies listed in the Fourth Schedule” are transferred to the Fund, the Schedule lists several parastatals which are not companies, for example the National Railways of Zimbabwe [see SI 165/2023], the People’s Own Savings Bank and the Industrial Development Corporation. What this means in regard to the management of those parastatals is anyone’s guess. Does the Fund’s Board take over the functions of the boards of the parastatals concerned, or the functions of the Ministers responsible for the parastatals? If so, why have the Acts setting up the parastatals not been amended? If not so, then what is the role of the Fund’s Board?

· Some of the companies are heavily indebted. The Zimbabwe Power Company, for instance, owes US$1,5 billion to a Chinese company. Other companies are unprofitable. How will their shares add value to the Fund’s portfolio?

· The shares are said to form part of the Fund’s initial capital. But the Minister said in March that the Fund had “assets” in coal, oil, gas and lithium, and it already held shares in Kuvimba Mining House. See Bill Watch 38/2023. What has happened to those assets if the new shares are part of the Fund’s initial capital?

· The President is given power “for the sake of public information” to amend or replace the schedule of parastatals and companies transferred to the Fund. Again the implications of this are unclear. If the President removes a company from the schedule, where do its shares go? And if he publishes a notice removing a company from the Schedule, how can such a notice be merely “for public information”? More seriously, the President is given power to add assets to and remove assets from the Fund’s portfolio. The Fund will have no protection against being stripped of its assets.

Externalisation of funds

Under a new section 20A which SI 156/2023 will insert in the Act, the Fund will have the right to transfer money in and out of Zimbabwe without having to comply with exchange control laws. The Reserve Bank will however be able to restrict the Fund’s transfer if the country encounters serious balance of payments or financial difficulties.

This provision has worried many commentators, and rightly so. If we are to have exchange control laws at all – and a respectable case can be made for abolishing them – then the laws should apply to everyone. No justification has been given for exempting the Fund. The lack of transparency, the secrecy, that has attended the Fund’s activities so far suggest that the exemption will be misused and that the Fund may become a conduit through which the country’s wealth is externalised.

Other amendments

The President’s amendments make other changes to the Act but they are immaterial, for the most part are consequential on making the Fund rather than the Board a corporate body. This also applies to one amendment that has caused concern, namely the new section 28(1) of the Act which prohibits members and employees of the Fund from disclosing information about the Fund’s affairs. The old section 28(1) was the same but applied to members and employees of the Board, so the change is really immaterial – though it raises the question whether such a secrecy provision should be in the Act at all.

GN 1546 of 2023

SI 156 of 2023 amended the Public Procurement and Disposal of Public Assets Act by inserting a new section 3(9) which empowers the President to publish a notice in the Gazette exempting “a prescribed public entity operating in competitive markets” from the provisions of the Act “for such period as shall be specified in the notice”.

On the 29th September the President made use of this provision to publish General Notice 1546 of 2023 exempting the Mutapa Investment Fund from the application of the Act.

The effect of the notice is that the Board of the Fund will not have to go through lengthy procurement processes when acquiring assets such as shares, nor will it have to appoint a disposal committee to deliberate and make recommendations whenever it sells the Fund’s shares.

To that extent the notice is eminently sensible, but it goes too far:

· The exemption is unlimited, and applies not just to the buying and selling of shares and other assets in the Fund’s portfolio, but also to the acquisition and disposal of everything else. The Board will not have to go through procurement procedures when it acquires (as it inevitably will) vehicles for its members and staff, stationery, office supplies, and so on. Nor will it have to dispose of those assets in a transparent manner.

· The exemption is also unlimited in time. Although the new section 3(9) says that the exemption must be for a specified period, the President has not specified any period.

Furthermore, the notice is unnecessary, because there are other provisions in the Public Procurement Act that could provide the Fund with an adequate exemption. Under section 3(7) of the Act, the Procurement Regulatory Authority can exempt entities from complying with unduly onerous provisions of the Act, and under section 3(8) the Minister can exempt entities from appointing disposal committees when selling assets such as shares.


The President’s amendments to the Sovereign Wealth Fund of Zimbabwe Act will do nothing to remedy the defects in the Act which we noted in Bill Watch 38/2023. Instead, they will increase the President’s personal control over the Fund.

The amendments were made under the Presidential Powers (Temporary Measures) Act so they will last for only six months and, if they are to be made permanent, will have to be embodied in an Act of Parliament. When a Bill for that Act comes before Parliament we hope that Members will raise the serious governance issues we have set out in this bulletin and in Bill Watch 38/2023, and refuse to pass the Bill until all their concerns have been put to rest.

Furthermore, one of the first tasks of the new Parliament’s Public Accounts Committee should be to question everyone involved in the Fund, from the Minister downwards, to find out what the Fund has been doing since it was established in 2015, what its current assets are, who has been managing it, why its managers have flouted the clear provisions of the law, and how the President’s amendments can possibly improve the situation

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