Welcome, Senegal, To The SWF Club

Senegal has a new sovereign wealth fund. Who knew? Not me. I only learned of the new SWF yesterday when someone asked me, “How’s Senegal’s new SWF coming along?” To which I replied: [shoulder shrug]. As it turns out, however, Senegalese MPs voted to create a new “Strategic Investment Fund” (FONSIS) back in December, and the government of Senegal now lists the new SWF as one of its“Grands Projets”. So, this is clearly legit. And that means I need to do some homework!

Upon further scrutiny, the FONSISlooks and feel more like a ‘sovereign development fund’than a traditional sovereign wealth fund, as the motivation for launching this vehicle is to unlock foreign direct investment to revitalize the Senegalese economy. Anyway,here’s a rough translation of the governmental websitedescribing the new fund:

“In a context of scarcity of direct investment to our country, weak local private industry and the need for structuring investments and to effectively manage investments and other assets of the State, the President of the Republic has decided to establish a Strategic Sovereign Investment Fund (the "FONSIS"), like some emerging countries that have had strong economic booms, such as Singapore, Malaysia, and South Korea...

...The FONSIS invests primarily in the form of equity alongside private domestic and foreign investors (it will focus especially on co-investment with other sovereign wealth funds and strategic partners that are experts in their industries).”

Andhere is how the state describesthe objectives of the new fund:

• To manage state assets effectively;
• To help grow state assets and set aside some financial reserves for future generations;
• To distribute regular dividends to the State by ensuring that its portfolio companies make profits and pay dividends; and
• To be the preferred partner for private investors by providing the capital required for strategic and structural projects.

In short, the government of Senegal will be putting around $1 billion of assets and cash into the new SDF with the hopes of catalyzing the domestic economy through foreign co-investment. Thisis an increasingly common strategy for governmentsof capital starved countries, which Senegal counts itself among; the state really has no oil or mining revenue to speak of, so the assets in this fund will be pulled from other areas of the state balance sheet.

And how will it be governed?Here are some ideas from the Government:

“It is crucial to have a highly qualified management and Board of Directors to be able to quickly organize, execute projects and attract local partners and maintain international credibility to raise additional equity financing and debt.

Management must also be extremely motivated and remunerated according to the highest standards in the field (taking into account Senegal’s realities) with a variable remuneration based on performance. The CEO, the directors and management must have a profile, proven experience and be ethical.”

That sounds good to me. Still, it will be very interesting to see how this fund develops in the years to come...