THE Namibian economy boasts national savings of over N$326,8 billion, yet policymakers travel the world looking for investors.
This amount involves twice the country’s output, which the Namibia Financial Institutions Supervisory Authority (Namfisa) ascribes to investment.
Data from Namfisa shows the total investment of pension funds and long-term insurers as at 30 September last year stood at N$231,4 billion.
However, only N$11,1 billion of this amount was invested in unlisted companies for these two industries by 30 September 2020 – N$2,1 billion in pension funds, and N$9 billion in insurers.
The rest of Namibia’s savings pools is mainly allocated to listed companies, government bonds, as well as treasury bills.
Namfisa spokesperson Victoria Muranda says, as the regulator, in setting investment cap decisions, expectation of returns from an asset class is the main consideration.
She says, while the unlisted investment sector is important to developing the Namibian economy, it is fairly new on the market and lacks past performance figures, with investors need to base their expectations on.
“It is a sector less understood with little experience on the part of both the managers and likely investors in the sector,” she says.
Muranda says there is, however, ongoing facilitation to ensure market development of the sector by working very closely with industry players to promote investment in the unlisted space.
According to regulations, every pension fund, registered insurer or reinsurer has to invest 1,75% of the market value of its investments in unlisted investments.
Unlisted investments may cumulatively not exceed 3,5% of the market value of such pension fund, registered insurer or reinsurer.
Unlisted investments involve investments in companies not listed on the Namibian Stock Exchange (NSX).
These companies comprise start-ups and emerging small companies with plans to scale up through investment in equipment, expanded space, more employees or value addition.
Due to a lack of capital options, specifically seed funding and risk-tolerant capital, these companies are limited to borrowing from commercial banks.
SMEs are considered high risk by traditional financial institutions.
At a Government Institutions Pension Fund media event last year, Tiaan Bazuin, the chief executive officer of the NSX, said Namibian companies remain in the SME category for so long, they barely graduate – despite the NSX having created a development board.
Veteran economist and chief executive officer of First Capital Namibia, Martin Mwinga, last year told The Namibian the country has enough savings, especially when including institutions such as pension funds and insurance companies.
However, “at the moment most of these savings are not channelled in sectors such as housing and agriculture, because of the absence of structured products that could be used to channel these savings into sectors of the economy,” he said.
Mwinga said unlisted investments, if well managed, could provide a solution to the challenges of collateral faced by many entrepreneurs.
Additionally it could help successful start-up companies expand with a combination of debt and equity finance.
“So yes, I agree the current threshold should be increased to 5%, but should only be allocated to fund managers who are capable and have a good track record,” he said.
He said though risky, depending on the economic cycle, private equity and venture-capital funding have helped many economies grow and advance, and therefore pension funds with long-term liabilities are well suited to channel their savings to this asset class.
Email: erastus@namibian.com.na
