The Namibian government has opened the way for pension funds and insurance companies in the country to invest in private companies, a move which private companies like startups would benefit a lot from. Under this new position, pension funds and insurance companies in Namibia will now be able to invest more money in private companies and diversify their portfolios. The change follows a government announcement that they will increase the percentage of funds put in unlisted investments.

Here Is All You Need To Know

• According to the Namibian Pension Fund Act, a pension fund must invest in unlisted investments a minimum of 1.75% of the market value of its total assets.
• However, unlisted investments may cumulatively not exceed 3.5% of the market value of the total assets of a fund.
• Now, according to Finance minister Calle Schlettwein during the mid-term budget review recently, regulations will be amended to allow pension funds, insurance companies to invest from 5%, 7.5% and ultimately to 10% in phases, as the 45% domestic asset requirement takes effect.
• The regulations also conditioned that all unlisted investments be used to finance the activities within Namibia of the companies which are the subjects of the unlisted investments and may not be transferred out of Namibia in any form or manner.
• According to Schlettwein, the amendments will not wait for new financial institutions market laws but will be implemented under the current laws with certain conditions.

Exposing Funds To Too Much Risks?

• Regarding the risk from unlisted projects, Schlettwein said they are aware of the risk and they are busy putting the finishing touches on the performance criteria that need to be fulfilled before any investment is made.
• He said even though the country has a stock exchange where the pension funds can be invested, Namibia has so many private companies that are not listed on the Namibian Stock exchange.

“So we have to create opportunities for the investors; asset managers and pension funds to partake in these companies. We do believe that these private companies need to grow. That is why we believe there is opportunity in unlisted companies,” Schlettwein explained.

The announcement also came at the time the financial market (money and capital market) is liquid with limited bankable projects to invest in, with most of them being diverted to fixed income assets mostly treasury bills and bonds.

Read also: Namibians Are Only Allowed To Invest $ 410k Per Year Abroad — Bank of Namibia

Assistant portfolio manager at First Capital Milner Siboleka told the Namibian that lifting of the threshold will expose pension fund assets more to the industry offering attractive returns according to available data with diversification benefits.

“The decision will also ensure broader economic development benefits given the size of pension fund assets standing at N$170 billion,” Siboleka stated.

Siboleka said given the regulations and requirements, most pension funds, including the Government Institutions Pension Fund (GIPF) [which accounts for 70% of the pension funds industry] has developed investment policies specifically.

He noted that it has become a global trend, especially among emerging and developing economies, to commit more funds to unlisted investments given their higher multiplier effect on the economy, with South Africa’s pension funds threshold requirement ranging between 10% to 15% depending on the asset class.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world