Months after discovering large amounts of light oil and associated gas off the coast of Namibia, the southern African country has joined Africa’s league of oil-producing nations to launch a sovereign wealth fund.

At the launch of the state-owned investment fund, President Hage Geingob said an initial deposit of 262 million Namibian dollars ($16.3m) would be injected into the funds. At the same time, 2.5% of its portfolio would be invested locally to bridge the country’s infrastructure financing gap.

Despite Namibia’s wealth in mineral resources, including diamonds and uranium, it still struggles to close financial gaps in its economy. Poverty and unemployment rates are still considerably high, worsened by the impacts of the covid-19 pandemic.

Namibia has the second-highest inequality and unemployment rate in the world, with 50% of young people unemployed. According to last year’s United Nations global report on food crises, 800,000 Namibians are constantly worried about where their next meal will come from, and 400,000 of these people are in dire need of humanitarian aid.

According to an economic assessment report by the World Bank in 2022, Namibia’s slow-paced economic growth makes it increasingly difficult for the country to combat its triple challenge of high poverty, inequality, and unemployment. More than 12,000 workers were retrenched in 2020, as businesses continued to struggle to sustain jobs due to Namibia’s slumping economy, worsened by the coronavirus pandemic.

Currently, the country has roughly 773,463 people receiving social grants funded by a budget of N$5,4 billion meant for social safety net programmes.

Namibia would utilize the funds by collecting some of the royalties from all mineral resources sold as well as some tax revenues raised by the government from its investment holdings.

“We are looking forward to the prospects and opportunities that will emanate from the recent discoveries of oil and the green hydrogen energy, which have the potential to further boost the fund’s capital,” Geingob said.

In February, TotalEnergies said its Venus-X1 prospect, located in block 2913B in the Orange Basin, had found a good quality reservoir, which one source told Reuters was more than one billion barrels of oil equivalent.

TotalEnergies would lead operations with a 40% working interest, alongside QatarEnergy (30%), Impact Oil and Gas (20%) and state-owned NAMCOR (10%).