27 November 2012

Namibia: GIPF Introduces Private Equity Policy

IN a bid to stem the outflow of capital from Namibia, the Government Institutions Pension Fund (GIPF) is in the process of devising a private equity policy to bolster promising investment projects and make domestic savings fruitful for national economic and social development.

Deputy Permanent Secretary of the Ministry of Finance, I-Ben Nashandi said the potential of pension funds to unleash such economic development should not be underestimated.

Namibia is considered as one of the top ten saving countries worldwide, with gross saving rates of about 40% of the gross domestic product (GDP), outperforming other Southern African states and members of the Common Monetary Area (CMA), to which Namibia is a member.

But Nashandi noted that these high saving rates do not translate into domestic economic growth because a large portion of domestic savings are invested abroad.

Government has thus already established domestic asset requirements for domestic pension funds with the amendment of Regulations 15, 28, and 29 that compel pension funds to invest at least 15% of their total assets in the local economy.

The GIPF recently announced that it has allocated about N$8,2 billion in unlisted companies as a result of this deliberate push from Government.

Nashandi yesterday cautioned though that the GIPF as a custodian of pension investments for a large portion of the Namibian population with a market value of N$54,8 billion, should be jealously aimed at protecting investments entrusted to it.

"Besides, the GIPF remain one the one responsible to the members. With that accountability notion, GIPF should embrace principles aimed at [the] preservation of capital invested, ensuring sound growth in investments, and optimising returns for such investments," Nashandi said.

He said private equity managers should similarly be mandated to regularly report on the status of their activities and status of GIPF investments, which will be a way to monitor progress towards implementing the investment principles, improve the investment returns, and create sustainable institutions.

GIPF general manager for finance and investments, Conville Britz, last month said the fund's new investment policy is expected to contribute to the development of Namibia's capital market with regard to unlisted investments.

He said the GIPF trustees have developed the policy through detailed studies on global practices regarding unlisted investments, and used lessons learned from the controversial GIPF Development Capital Portfolio (DCP) saga in which about N$600 million in loans have not been paid back to the GIPF.

Private equity fund-raising globally has fallen by more than 50% during 2008 and 2009. Worldwide private equity backed mergers and acquisitions dropped from US$1 trillion in 2007 to a low of US$100 billion in 2008.

Similarly, falling stock prices made it difficult to launch initial public offerings (IPOs) while refinancing facilities have been blocked by the banking crisis.

The moral of the story here, said Nashandi, is not to go for investments with high returns in a short time, but instead about the sustainability of investments and trying to make a development impact with collected savings.

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