Norway’s Oil Fund: Lessons for African Sovereign Wealth Funds

Africa can boast of having over 20 Sovereign Wealth Funds (SWFs). A few of them have been merely established by decree but are not yet perceiving capital inflows and making investments. Nonetheless, although a few African SWFs are recognized to have contributed to some economic development in their respective countries, there is still a long way to go for them to catch up with other SWFs in some developed and emerging economies. Most SWFs in Africa struggle with transparency, embezzlement of funds, weak corporate governance, and lack of skilled investment managers. These deficiencies have resulted in the poor performance of African SWFs and a perceived absence of their positive impact on the continent’s economy.

Nevertheless, African SWFs must be fully engaged in the development dynamic of the continent due to their financial wherewithal, their ties with political leadership, and their ability to attract substantial co-investment opportunities from international partners. During the past 20 years, African governments have gained significantly from natural resources and sectors such as telecommunications and financial services. It is, therefore, timely for the African leadership to fine-tune their SWFs to ensure an optimal contribution to the economic development of the continent and the welfare of its people.

Fortunately, there are many successful SWFs in the world that African countries can analyze and learn from to carry their investment mandates successfully. The Norwegian SWF, in particular, is an ideal organization from which African leaders can draw lessons. With assets under management surpassing a trillion dollars, it is the largest SWF globally, and like most African SWFs, it has strong ties to the oil and gas sector. Established in 1990, Norway’s Oil Fund (the Fund) has been creating value for the citizens of Norway and has contributed to the country being one of the most economically developed and equitable societies in the world. In this article, ACT Afrique analyzes a few lessons that African leaders can learn by studying the Fund to improve upon the present weaknesses of SWFs on the African continent.