In order to finance its ambitious development strategy by 2035, the Republic of Djibouti has created a Sovereign Fund. Long-term investor, it could total $ 1.5 billion in endowments in ten years
The creation of this fund supports the “Vision 2035” which guides government action and guides the country’s long-term economic strategy. Indeed, Djibouti aims to position itself as a commercial, logistics, port and digital hub in East Africa.
From this “vision” already underway, it is now a question of launching a new phase. For this, the country must equip itself with an instrument for mobilizing resources, endowed with investment capacities, supposed to become a tool for accelerated economic transformation. This is the mission of the Fund. Its creation is permitted by the law of March 29, 2020 and by the implementing decrees promulgated on June 24, 2020.
Established in the form of a public limited company under private law, the sole shareholder of which is and will remain the State of Djibouti, the Fund “is fully in line with the country’s development imperative,” said a press release.
Its purpose is to “bring together” national wealth to increase Djibouti’s ability to invest quickly, to modernize, to maximize its economic potential and its attractiveness. This tool works for today’s growth and jobs, while prioritizing the creation of large reserves for future generations. It is an instrument that is supposed to bring short term and long term requirements closer.
The Fund also aims to enhance Djibouti’s capacity for action. It will allow better control of projects while privileging the national and strategic interests of the country, increasing its margin of negotiation with local or international partners and being the “solid and committed” partner that external investors are looking for.
Reinvested results
The Fund’s investments primarily target the Republic of Djibouti and the countries with an economic link with it, in particular the Horn of Africa region. It is about investing and co-investing in key sectors of the economy such as telecoms, new technologies, energy, infrastructure, logistics, agriculture and fishing. The purpose of the Fund will be to prioritize projects supporting sustainable growth and the implementation of the energy transition.
On the other hand, this Fund is not designed as a “venture capitalist” whose ambition is to generate short-term margins and income. But to be a long-term investor required to reinvest all of the net profit from his activity.
The Fund has chosen a long-term financing structure that brings together a significant initial investment with recurring resources. The law establishing it provides for endowments spread over time that may reach $1.5 billion in ten years.
Transparency and governance are key elements of the legitimacy and credibility of the Fund. “In this area, the Fund is placed at the level of the best international standards in terms of independence and accountability of its management bodies, corporate governance, transparency and performance reporting.”
It is in accordance with the Santiago Principles, reassure the authorities of Djibouti. Which declare themselves “more than ever” determined to invest in their future, despite the global health crisis.
