Stiffer measures needed to stem capital outflow

FINANCE Minister Saara Kuugongelwa-Amadhila has once again expressed concern about the investment of public funds and the outflow of capital in investments from Namibia.

Despite Namibia having one of the most sophisticated financial systems in Africa, Kuugongelwa-Amadhila said some aspects needed urgent attention. These are: upgrading the regulatory framework, enhancing domestic investment opportunities, strengthening the co-operation between Namfisa and the financial sector and improving access to and the affordability of financial services.She was addressing the financial sector in Windhoek yesterday, at the invitation of Namibia’s Financial Supervisory Authority (Namfisa).Acting Namfisa CEO Lily Brandt said she was aware that the capacity of her institution had to be strengthened and that a lot more needed to be done to regulate the financial sector.Namfisa is the watchdog of non-banking institutions in Namibia, including pension funds, insurance companies, medical aid funds and asset-management companies.Kuugongelwa-Amadhila said recent developments in the industry have shown how improper conduct can affect public confidence in the whole industry.”The industry will profit from an efficient regulator because it will be able to identify rotten apples and deal with them accordingly, thereby strengthening public confidence in the industry,” said Kuugongelwa-Amadhila.But she noted that although procedures governing the registration, monitoring and supervision of the industry need to be reviewed, changing supervisory practices alone would not prevent improper conduct.Individual institutions, she said, had to apply governance principles in managing their organisations as well as the funds they manage.The Finance Minister also highlighted the importance of promoting domestic investment, saying that Government did not approve of the large amounts of domestic savings being invested abroad.”Our concern is that this happens amidst immense gaps in investment at home.This may worsen the economic and social divide of our country, which could have serious implications for all of us,” said Kuugongelwa-Amadhila.To date, she said, regulations to retain at least 35 per cent of the assets of pension funds and long-term insurers in Namibia have been rather ineffective, because of dual-listed shares which qualify as local investments.She warned that amendments to regulations were underway to reduce investment in dual-listed shares to 10 per cent over a five-year period.Furthermore, institutional investors will be required to invest a minimum of five per cent in approved unlisted investment vehicles.A further regulation on unit trust investments is also underway, which would subject them to domestic asset requirements.The income earned from unit trusts will also no longer be tax-free.Namfisa will be responsible for implementing these directives.Presenting figures on the growth and performance of the industry, Namfisa indicated that the assets under management of investment managers totalled N$41 billion by the end of March; unit trusts N$7,8 billion; the bond market N$5,5 billion; long-term insurance companies N$13,3 billion; short-term insurance N$1 billion, medical aid funds N$283 million; pension funds N$23,5 billion while micro-lenders had disbursed N$294 million in loans.All these figures have increased steadily over the last three years.Kuugongelwa-Amadhila once again pressed the private sector to involve themselves in co-financing partnerships with the Development Bank.She also touched on the need to make financial services more affordable to the disadvantaged, saying while Government was not against the sector recovering its costs for rendering services and making a profit, bank charges were excessive and stifled the growth of the economy.This week Parliament decided that its committee on Economic Affairs and Natural Resources would conduct a full investigation into the matter.But Kuugongelwa-Amadhila said she would rather have the sector itself come up with ways to improve the situation and urged them to finalise the financial services charter as soon as possible.She said Namibian customers were vulnerable to unfairness from the industry and, like other countries, Namibia could benefit from a financial ombudsman to deal with public complaints.These are: upgrading the regulatory framework, enhancing domestic investment opportunities, strengthening the co-operation between Namfisa and the financial sector and improving access to and the affordability of financial services.She was addressing the financial sector in Windhoek yesterday, at the invitation of Namibia’s Financial Supervisory Authority (Namfisa).Acting Namfisa CEO Lily Brandt said she was aware that the capacity of her institution had to be strengthened and that a lot more needed to be done to regulate the financial sector.Namfisa is the watchdog of non-banking institutions in Namibia, including pension funds, insurance companies, medical aid funds and asset-management companies.Kuugongelwa-Amadhila said recent developments in the industry have shown how improper conduct can affect public confidence in the whole industry.”The industry will profit from an efficient regulator because it will be able to identify rotten apples and deal with them accordingly, thereby strengthening public confidence in the industry,” said Kuugongelwa-Amadhila.But she noted that although procedures governing the registration, monitoring and supervision of the industry need to be reviewed, changing supervisory practices alone would not prevent improper conduct.Individual institutions, she said, had to apply governance principles in managing their organisations as well as the funds they manage.The Finance Minister also highlighted the importance of promoting domestic investment, saying that Government did not approve of the large amounts of domestic savings being invested abroad.”Our concern is that this happens amidst immense gaps in investment at home.This may worsen the economic and social divide of our country, which could have serious implications for all of us,” said Kuugongelwa-Amadhila.To date, she said, regulations to retain at least 35 per cent of the assets of pension funds and long-term insurers in Namibia have been rather ineffective, because of dual-listed shares which qualify as local investments.She warned that amendments to regulations were underway to reduce investment in dual-listed shares to 10 per cent over a five-year period.Furthermore, institutional investors will be required to invest a minimum of five per cent in approved unlisted investment vehicles.A further regulation on unit trust investments is also underway, which would subject them to domestic asset requirements.The income earned from unit trusts will also no longer be tax-free.Namfisa will be responsible for implementing these directives.Presenting figures on the growth and performance of the industry, Namfisa indicated that the assets under management of investment managers totalled N$41 billion by the end of March; unit trusts N$7,8 billion; the bond market N$5,5 billion; long-term insurance companies N$13,3 billion; short-term insurance N$1 billion, medical aid funds N$283 million; pension funds N$23,5 billion while micro-lenders had disbursed N$294 million in loans.All these figures have increased steadily over the last three years.Kuugongelwa-Amadhila once again pressed the private sector to involve themselves in co-financing partnerships with the Development Bank.She also touched on the need to make financial services more affordable to the disadvantaged, saying while Government was not against the sector recovering its costs for rendering services and making a profit, bank charges were excessive and stifled the growth of the economy.This week Parliament decided that its committee on Economic Affairs and Natural Resources would conduct a full investigation into the matter.But Kuugongelwa-Amadhila said she would rather have the sector itself come up with ways to improve the situation and urged them to finalise the financial services charter as soon as possible.She said Namibian cus
tomers were vulnerable to unfairness from the industry and, like other countries, Namibia could benefit from a financial ombudsman to deal with public complaints.