The Sovereign Wealth Fund aims to "accumulate savings for future generations" with oil and gas revenues, but will not be used to guarantee loans taken out by the state.

In its governance structure, the Fund is intended to make full use of the country's existing institutions, guided by the principles of good governance, transparency, accountability, independence and inclusion, in line with best international practices," defines the draft law creating the Sovereign Fund, to which Lusa had access today, approved by the Council of Ministers and which will be discussed at the 42nd ordinary parliamentary session, which will take place in Maputo from August 3 to 7.

In the preamble to the proposal, the government recalls that as part of the exploration activities carried out in Areas 1 and 4, offshore of the Rovuma block, "huge deposits of oil and non-associated natural gas" were discovered, estimated at around 180 trillion cubic feet.

Within this framework, the operators and partners in Areas 1 and 4 have submitted three natural gas liquefaction projects to the government, which have already been approved, namely the Coral South Liquefied Natural Gas FLNG, offshore, the Golfinho/Atum Liquefied Natural Gas, and the Rovuma LNG.

Of these projects, Coral Sul FLNG stands out, which began producing natural gas in the last quarter of 2022 and which "in addition to generating significant opportunities for the development of national companies", its exploitation "will generate direct profits for the state of more than 30 million US dollars for the year 2022", with "an annual average" of 740 million dollars expected "during the life of the project", until 2047.

At the same time, research work is underway in five oil and gas exploration and production concession areas, located in Angoche, in the Zambezi Delta, "with even greater benefits expected in the event of a commercial discovery".

"In this context, with a view to maximizing the gains arising from the exploitation and development of these non-renewable natural resources, defending against the high volatility that characterizes their international prices and with the primary objective of benefiting present and future generations," the government states that the creation of the WSF is of "paramount importance".

The bill creating the fund states that its objectives are to "contribute to leveraging the country's economic and social development", as well as to "stabilize the state budget, counteracting the volatility of oil revenues" and to "accumulate savings for future generations, through the collection of revenues from oil and natural gas exploration and those resulting from the respective investments".

The Fund's revenues come from the production of liquefied natural gas from areas 1 and 4, offshore in the Rovuma basin and future oil and natural gas development and production projects, as well as "return on investment from the revenues" of the fund.

These revenues result from the Petroleum Production Tax and the Corporate Income Tax, including the taxation of capital gains, as well as "production bonuses" in terms to be regulated, and production sharing from profit oil.

"Whenever a public calamity occurs in a given year that leads to the declaration of a State of Siege, State of Emergency and/or War (...) financial resources may be transferred from the Sovereign Fund to support the State Budget," in this case by a higher percentage than expected (between 50 and 60% of revenue), at the Government's proposal.

"The FSM should invest in assets that are not in the oil and gas sector," the proposal in parliament also states, assuming that these investments should be made "on the basis of the policy" approved by the government.

There is also a "ban" on the use of the Fund's resources for "granting guarantees in the contracting of loans by the state or other entities", as well as for "paying debts and servicing debts without going through the state budget", for financing "political and party activities" and for "contracting debts".

The Assembly of the Republic, the Government, the Bank of Mozambique, the Supervisory Committee and the Investment Advisory Board will be "responsible for the governance and management" of the Sovereign Fund.

However, the Bank of Mozambique will be the "operational manager" of the fund and the governor of the central bank the "ultimate responsible entity", but management "must be carried out through a dedicated unit" within that institution. (noam)