Getting value from sovereign wealth funds.

Author:Deau, Olivier
Position::THE AFROCHAMPIONS INITIATIVE: Accelerating the transformation of Africa - Interview

Michael Kottoh Managing Director of Konfidants

The African Sovereign Wealth Funds Index 2018 provides an overview of Africa's sovereign wealth funds and how they can be used to leverage growth. Michael Kottoh, co-author of the report and strategic director of AfroChampions, explains its approach.

What is the goal of the African Sovereign Wealth Funds Index 2018?

The idea was not only to get an overview and comparison of Africa's sovereign wealth funds, but also to examine how they are used, and how suitable they are for helping to finance African economies. Worldwide, sovereign wealth funds represent a total of $7 trillion. We listed 12 sovereign wealth funds in Africa, totalling $90bn. This is far too small an amount, especially when we look at the need to finance infrastructure throughout the continent. This need represents $90bn just by itself. At the same time, it's clear that these funds, as an idea, are becoming more prominent in Africa. Of the funds we looked at, five have been created since 2011 and seven countries currently plan to create one. We can expect to have around 20 sovereign wealth funds in the near future.

What goals need to be set for these funds in order for them to contribute to transforming African economies?

Sovereign wealth funds have to fulfil certain national objectives, which depend on the country in question. We found three main objectives. The first is putting money aside for future generations, the second is stabilising public investment or expenditure during economic downturns, and the third is financing infrastructure. African economies need the funds to be used much more for the third objective. The funds need to be invested in infrastructure, but this also needs to be productive. This isn't happening enough. Some funds are being invested in international capital markets instead of within the country that owns them.

The main topic of your report and your index is "relevance". How do you go about measuring this?

It's all based on the idea that sovereign wealth funds should contribute towards economic development in their country, or in the continent as a whole. We divided the index into four indicators. First is governance, which is a key point as the funds need to be managed competently, transparently and effectively. The second indicator is the size. Sovereign wealth funds need to have significant leverage when it comes to financing expensive infrastructure. The third is serving the public. Sovereign...

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