Chart of the Week

With the prospect of significant oil discoveries in Namibia, government must draw lessons from its Norwegian counterpart to ensure the country's natural resources benefit both the current and future generations of Namibia, says Cirrus Capital colleague Jacob Fougner, who works in corporate finance.

Through the Sovereign Wealth Fund Bill, the primary focus should be to ringfence the fund from the influence of the political environment. This, coupled with a clear investment mandate and stringent withdrawal regulations, is necessary to ensure the long-term success of Namibia's Sovereign Wealth Fund.

Today, Norges Bank Investment Management finances more than 20% of Norway's state expenditures.

Late last year, more than 50% of the Norwegian Sovereign Wealth Fund's total market value (15.765 billion Norwegian krone or NOK, equivalent to US$1.552 billion) stems from the return on investments alone, whereas net inflows from the government and NOK depreciation relative to key currencies contributed 29.8% and 15.7% respectively.

This clearly highlights the importance of restricting unnecessary withdrawals, and instead allow the fund to grow continuously. Less than 20 years after inception, the aggregate return of the fund surpassed net government inflows from the oil and gas industry.