The Royal Bafokeng Nation and its important sovereign wealth fund story

rbh

The Royal Bafokeng Nation (RBN) is a 150 000-strong community of South Africans, predominantly Setswana-speaking, led by Kgosi (‘King’) Leruo Molotlegi. They trace their origins to central Africa from where they migrated southwards over hundreds of years to settle in the valley between the Pilanesberg Mountains and Rustenburg in South Africa’s North West Province. They sit on just over 1000km² of land which hosts some of the world’s richest-known reserves of platinum and chrome.

The RBN, through its mini sovereign wealth fund Royal Bafokeng Holdings (RBH), leases and conducts joint mining operations on this land with some of the world’s largest mining companies such as Impala Platinum Limited (Implats), Anglo Platinum and Xstrata. In 2011, the value of RBH’s diversified project portfolio stood at R25.1 billion. In the same year, it received dividends of R600 million. That is equal to about R4000 per person! The nation, its Council and its King place strong emphasis on investment in education (see ‘Royal Bafokeng – Strategic and Inclusive Education’), healthcare, infrastructure and other areas that support widespread development – interestingly not only in North West Province but in other regions of South Africa too. An important point to remember.

According to the African Development Bank, sovereign wealth funds are on the rise across the continent. Chief Economist and Vice President at the Bank, Mthuli Ncube, has written a report which states that Africa currently accounts for 14 sovereign wealth funds with a total amount of US$114 billion in 2009, representing 3% of global sovereign wealth funds. The largest sovereign funds on the continent are the Libyan Investment Authority and Algeria’s Revenue Regulation Fund with total assets of US$65 billion and US$56.7 billion respectively. This, in comparative terms, is considerably lower than the Norwegian Government Pension Fund’s US$656 billion and US$627 billion managed by Abu Dhabi Investment Authority, the world’s largest two.  (AfDB Report)

Despite representing a small and homogeneous population, the RBH fund presents important lessons for other mineral-rich, traditionally-governed communities and whole countries on the continent. In recent months, we have been made more aware of the raw deals many of these communities and countries have struck with large multinational organisations for exploration in the extractive sectors such as mining, oil and gas. Perhaps now is the time to start seriously and confidently pursuing more equal commercial relationships to the benefit of the people. That said, a number of significant challenges remain and Professor Ncube touches on them in his piece. They include the need for sound economic management and the right kind of political will.

On the national level, there is little point in creating such a fund if the money will simply be diverted to the coffers of individuals or ruling party activities. The RBN seem to have three key ingredients working in their favour: good leadership interested in the people, sound economic management and the right sort of political will.

Important lessons for the rest of the continent.

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Professor Mthuli Ncube’s article: ‘The Boom in African Sovereign Wealth Funds’, 11 January 2013, AfDB

Link to the The Sovereign Wealth Fund Institute

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