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GIPF lost N$5b in meltdown
THE Government Institutions Pension Fund (GIPF) asset base suffered a N$5,4 billion loss in market value as a result of the global financial crisis.
This was reported by Board Chairman Hartmut Ruppel at a stakeholders’ function on Thursday night, where he said that the Fund’s assets had decreased from N$35,5 billion to N$30,1 billion by the end of the its financial year at March 31 this year, reflecting a 15 per cent loss in value.
The Fund’s asset value has since recovered to N$35,3 billion by the end of September, but the loss in the 2008/9 financial year, in sharp contrast to the Fund’s marked year on year growth previously, provides an indication of the real impact of the crisis on the economy.
But Ruppel described the loss as mild.
“l should hasten to caution the more alarmist amongst you gathered here, that this decline of some 15 per cent represents a comparatively moderate figure,” he said.
“The credit crunch, which forced the very significant downturn in economies around the globe, had a devastating impact and was reflected in the huge losses in most stock markets around the world, with only smaller illiquid markets, such as Namibia’s own local index not being immediately affected.”
Placing this in context, he said that on various stock markets, emerging markets had suffered losses between 28,5 and 72,2 per cent, and developed markets indicated losses of between 28,5 and 45,1 per cent. Locally, the Namibian Stock Exchange’s Overall Index declined by 46,9 per cent over the reporting year.
In this context, Ruppel said the Fund had “only marginally underperformed given the global picture”, adding that over the three- and five-year periods, “we have outperformed our benchmark comfortably”.
Also speaking at the event, Prime Minister Nahas Angula however stated that the N$5 billion loss in market value could not be taken lightly.
“A 15 per cent loss might be insignificant in percentage terms, but in real terms, it is something,” he said, adding that when coupled to losses in other sectors of the Namibian economy, the decline was a serious one.
Angula said that in this regard, while the country might be doing well now, the next financial year would be a difficult one for Government.
“For next year, we might be forced to run into a serious deficit, and this means borrowing. In this context, the N$5 billion is not an insignificant loss.”
In terms of future growth and the lessons learnt from the crisis, GIPF’s General Manager for finance and Investment, Neville Field, emphasised the importance of diversification in terms of investments made by the Fund.
He said GIPF’s strategic asset allocation – 30 per cent internationally, 30 per cent in South Africa, and 40 per cent in Namibia – was particularly important given the narrowing gap between the number of contributors to and beneficiaries of the fund, with overall contributions for the 2008/9 financial year standing at N$1,167 billion, and total benefits paid standing at N$1,092 billion. He said that as early as 2014, benefits paid could exceed contributions received.
On this note, Angula added that the AIDS pandemic – which he posited was part of the reason for the narrowing gap – is presenting new challenges for the pension fund industry, and expressed the hope that GIPF would address this issue.
“High mortality rates associated with AIDS is increasing death benefits paid as well as a sharp fall in life expectancy that is estimated at 49 years in Namibia currently. With a large proportion of economically active Namibians said to be suffering from AIDS, the disease will not only threaten pension funds, but also economic development in general,” he said.
He encouraged the Fund to “devise strategies to protect the investments through social responsible investing in institutions that deal with prevention of HIV infection, treatment and care for those who are infected.”
nangula@namibian.com.na
