Djibouti announces the creation of the Sovereign Wealth Fund
(horndiplomat)—The Republic of Djibouti announces the creation of the Djibouti Sovereign Fund (Fonds Souverain de Djibouti – FSD) following the enactment of a law dated 29 March 2020 and the promulgation of the implementing decrees on 24th June 2020.
The creation of this fund is a key measure of the “Vision 2035” policy which guides the government’s actions and the economic strategy of the country in the long term: to position itself as a front-line international commercial, logistics and digital hub. It constitutes a major milestone as it shall serve as an instrument of action that mobilizes resources, with real investment capacities, and as an efficient tool for accelerated economic transformation.
Established in the form of a public limited company under private law whose sole shareholder is and will remain the State of Djibouti, the Fund belongs to all Djiboutians. Its purpose and missions are fully aligned with the country’s development goals. It is aimed at “gathering” national wealth in order to increase Djibouti’s capacity to invest in an optimized and efficient way. And to modernize and maximize the country’s economic potential and attractiveness. The Fund will serve as a tool for today’s growth and employment, while at the same time fostering the creation of large reserves for future generations. It is an inter-generational instrument that brings together the requirements of the short term with those of the long term.
The Fund will also have the role of enhancing Djibouti’s “capacity to act”. It will enable enhanced management of projects while giving priority to the country’s national and strategic interests, to increase its bargaining power with domestic or international partners and to be the strong and committed partner sought by foreign investors.
The Fund’s investments primarily target the Republic of Djibouti and countries with economic connections to it, particularly in the region of the Horn of Africa. The goal is to invest and co-invest in key sectors of the economy such as telecoms, new technologies, energy, infrastructure, logistics, agriculture and fishing. The Fund will focus on projects that support sustainable growth and the implementation of the energy transition.
The Fund is not designed as a “venture capitalist” whose ambition is to generate margins and revenues in the short term. The Fund will act as a long-term investor and is required to reinvest the entire net profits of its activity.
The Fund has chosen a sustainable financing structure that combines a significant initial investment with recurring resources. The law that establishes it provides for contributions spread over time that could reach $1.5 billion within a ten-year period.
Transparency and governance are key components of the legitimacy and the credibility of the Fund. In this field, the Fund is positioned at the level of the best international standards in terms of independence and responsibility of its managing bodies, corporate governance, transparency and performance reporting, in accordance with Djiboutian law and the Santiago Principles.
With the creation of the Djibouti Sovereign Fund, despite the global health crisis related to the coronavirus pandemic, the country is determined, more than ever, to invest in the future and tomorrow’s economy.