Botswana has established a new sovereign wealth fund aimed at driving economic diversification, creating jobs and strengthening the management of state companies.
The move comes as the Southern African nation faces a prolonged downturn in the global diamond market, which accounts for about three-quarters of its exports and one-third of its fiscal revenue.
The new fund will have a different role from the existing Pula Fund, which has been managed by the central bank for over three decades to preserve diamond revenues for future generations and stabilize government finances.
The Pula Fund has been drained by recurring deficits, prompting the need for a new approach.
The initial board of directors of the new fund comprises local and international experts, who will focus on growth and asset management, including state-owned entities.
According to Farouk Gumel, the fund’s board chairperson, “The Pula Fund is a liquidity stabilization fund… This sovereign wealth fund will not be only about stabilization, it’s about growth.” The fund plans to invest in both domestic and international assets, drawing only from returns generated, not capital investments.
This move is part of Botswana’s broader economic diversification strategy, which includes developing manufacturing, agriculture, financial services and tourism sectors.
The government has launched the Botswana Economic Transformation Programme to shift the country’s economic base beyond diamonds and position it as a regional financial hub.
With dozens of state firms currently losing money and requiring government support, the new sovereign wealth fund is expected to play a crucial role in managing these entities and driving economic growth.
