I’m a fan of World Bank president Robert Zoellick’s idea yesterday that sovereign wealth funds should invest 1% of their assets in Africa.
For one thing, as Zoellick says, this kind of investment makes sense on a purely financial level. Africa is a promising region for investment, and it becomes even more promising if you know that a lot of other people are going to be investing there as well.
But this is also a smart use of sovereign wealth funds specifically, as opposed to financial investors more generally. The NYT’s Steven Weisman reports that if the funds sign on to the idea, that might assuage "the West’s mistrust of sovereign wealth funds" – something which has been brewing for a while.
Up until now, proposals for assuaging that mistrust have concentrated on codes of conduct and best-practice procedures and the like, most of which try to place the funds at arm’s length from their sovereign owners, and ask that the funds have only financial and not any kind of strategic interest in where their money is invested. That’s simply not realistic. Much better to harness the strategic interests of those sovereigns in a positive-sum game, which is something the Zoellick proposal can do.
Every sovereign nation in the world has a geopolitical interest in a stable and strong Africa. If the sovereigns with excess funds can invest that money in Africa, they will help to stabilize an important region while at the same time making healthy returns. That’s a much more realistic vision than one in which sovereigns renounce any strategic interest in where their monies are invested.