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The Oberlin Wealth Fund has become a vital vehicle for economic development and diversification across Africa. Although Africa is rich in natural resources, many of Africa’s sovereign wealth funds are not traditional savings funds used to manage fiscal surpluses. Rather, the majority of these funds are strategic investment funds, conceived in a context of scarce resources available. These institutions are funded from the budget and other government revenues and are used to promote economic growth, development, and diversification. We therefore aim to achieve a dual impact: financial profitability, contribution to sustainable development and job creation. Therefore, the investment strategies of these funds are often aligned with national economic plans and priorities. Strategic investment funds have been established by governments around the world, but Africa is a melting pot of some of the most innovative strategies in partnership and investment, setting new boundaries for what these funds can achieve.
strategic partnership
Most of Africa’s sovereign wealth funds are often born out of scarcity rather than abundance. As a result, partnerships with foundations, development finance institutions, the private sector and other government agencies are central to our strategy. Partnerships allow sovereign wealth funds to leverage additional resources and expertise to increase their effectiveness. We can also position ourselves as the partner of choice for these players by de-risking projects through access to government connections, local expertise and differentiated deal flows.
For example, the Government of Egypt Fund (TSFE) has entered into strategic alliances with Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi Development Holding Company (ADQ) to stimulate private investment in essential industries. These partnerships aim to unlock the value of national assets and foster economic growth in strategic areas, and TSFE has dedicated sub-funds that can facilitate investments.
Senegal’s FONSIS has also entered into a strategic partnership with COFIDES, Spain’s strategic investment fund, to promote Spanish private investment in Senegal and the wider West African region. The partnership focuses on strengthening cooperation between Spanish companies and the Senegalese private and public sectors, particularly in renewable energy and infrastructure. We are also working with the African Climate Foundation (ACF) and the Global Green Growth Institute (GGGI) to launch the Renewable Efficiency Energy Fund to support small-scale renewable energy and energy efficiency projects in Senegal by providing subordinated debt, enabling these projects to secure financing from local commercial banks.
Other sovereign wealth funds focus on building partnerships with the private sector. For example, the Mohammed VI Investment Foundation in Morocco is pioneering innovative financing mechanisms tailored to the needs of Moroccan companies. For every $1 invested by the fund, at least $2 must be raised from private investors to ensure significant synergies. This approach not only increases the fund’s impact but also fosters a collaborative investment environment.
Another example is Ethiopian Investment Holdings (EIH), which was established in 2022 with $45 billion worth of state-owned assets. EIH demonstrates a proactive approach to economic development with a focus on leveraging these assets to foster private sector expansion. The fund actively seeks partnerships with foreign direct investors to increase its impact and demonstrates a forward-thinking strategy in its operations.
strong governance
African sovereign wealth funds often operate in environments where public trust in institutions is low and there is a perception (warranted or not) of widespread corruption. However, in order to build strong and impactful partnerships, African sovereign wealth funds have had to maintain a strong focus on developing and strengthening their governance structures. They had to take safeguards to ensure transparency, accountability, and alignment of the Fund’s activities with national development goals.
The first is to ensure independent oversight of operations. For example, the Nigerian Government Investment Authority (NSIA) has a board that includes representatives from various sectors, ensuring diverse perspectives and accountability. The Directors ensure that NSIA has a robust risk management framework in place to ensure the success of the institution. This includes setting investment floors and diversifying your portfolio to reduce risk and ensure predictable returns. Independent oversight helps maintain transparency and trust in the Fund’s operations and ensures that decisions are made based on financial rationality.
Second, transparency is a cornerstone of good governance for sovereign wealth funds. Over the past decade, public reporting by African sovereign wealth funds has improved dramatically. Savings funds, such as the Botswana Pura Fund and the Ghana Petroleum Fund, which are funded by diamond mining revenues, regularly issue detailed reports on their activities, investments, and financial performance. Strategic investment funds also adopt international standards such as the Santiago Principles to ensure that they are operated in an independent and financially motivated manner. All 11 African members of the International Forum of Sovereign Wealth Funds (IFSWF) have published a governance structure self-assessment on their website to provide insight into the fund’s legal framework, governance structure and investment policy, ensuring that the fund operates in a transparent and responsible manner.
Engaging with the public and involving stakeholders in the decision-making process is essential to building public trust and ensuring funds fulfill their mission. For example, the Ghana Petroleum Fund has mechanisms for public consultation and stakeholder engagement to ensure that the Fund’s activities reflect the needs and priorities of the public. This approach helps build trust and legitimacy for the fund.
Looking to the future
Africa’s sovereign wealth funds are important tools to support their countries’ economic development and ensure financial stability. They are increasingly looking to find innovative ways to partner with different institutions to direct investment to sectors such as infrastructure, healthcare and agriculture. Although these sectors are vital to their economies, they have traditionally been difficult to finance due to lack of scale, poor project preparation, high risk perception, and low returns. In the context of the energy transition, a growing number of global investors are seeking to finance infrastructure projects on the African continent, and for them reliable, government-connected and well-funded partners are attractive prospects. By playing this role, African sovereign wealth funds can foster economic development and diversification across Africa.
