The West African state of Gabon has announced its plans for setting up a new sovereign fund. Indeed, Gabon is resource rich – it’s the fourth largest exporter of petroleum in Sub-Saharan Africa – and it will look to its new SWF to help sidestep the resource curse.
The new fund will be called the Fonds Souverain de la République Gabonaise, but non-French speakers will call it FSRG. The new SWF will be financed from a 10 percent levy on all petroleum receipts (or thereabouts), and it is expected that the new fund will be worth roughly $1 billion in a few years.
What will the new SWF do? Well it will apparently be focused on big projects that encourage development, which suggests to me that most of the money in the new fund will be put to work locally.
The idea, then, of setting up a SWF is really to add a layer of professionalism and accountability to projects that might otherwise be funded through the budget. If the fund is set up correctly (i.e., appropriate governance) it can also offer a sort political commitment mechanism to ensure that the oil revenues are put to good use.
Personally, I think it’s a brilliant idea. So it’ll be interesting to see the new FSRG in action!
