Mixed reviews on wealth funds aiding Africa
World Bank President Robert Zoellick's plan for government-owned wealth funds to devote 1 percent of their investments to projects in Africa drew mixed reviews from global development and finance leaders.
The wealth funds, controlling more than $2-trillion in assets and growing fast, have not always been warmly welcomed in Western countries who worry that they will base investment decisions on political, rather than financial, goals.
Zoellick suggested earlier this month that the funds should put their money where it was not only desperately needed, but also very much wanted - Africa.
The funds are concentrated in oil producing countries and Asian exporting powerhouses including China. They have gained notoriety in recent months via high-profile investments in several global banks hard hit by the subprime mortgage mess.
In a statement to the World Bank, Germany's minister for economic competition and development, Heidemarie Wieczorek-Zeul, said "every available opportunity" should be used to boost growth in Africa, including Zoellick's 1 percent proposal. She said the World Bank should help governments work with potential investors such as wealth funds.
However, some development leaders raised concerns that Africa lacked the sophisticated financial markets and regulators to monitor inflows.
"In some of the countries the markets are quite fragile and therefore even what is considered a relatively marginal investment by some wealth funds, or hedge funds or any other funds, can throw off the markets," Benedicte Christensen, the International Monetary Fund's Africa director, said in a press briefing on Saturday.
"So therefore we would consider it important that the markets are well developed before hand."
The wealth funds themselves have been quiet on the issue.
Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development, which is drawing up recommendations on how countries receiving investments should work with wealth funds, also had reservations about Zoellick's idea.
At a briefing this weekend, Gurria said wealth funds were not meant to "channel aid," and there should be no target on how much they ought to invest in Africa. Instead, the focus should be on helping Africa present compelling investment opportunities to the wealth funds, he said.