In the past weeks I could not help but notice how unlisted investment managers have become the must-see group of people in the industry, as pension funds hurry to find themselves the right managers. Understandably, pension funds had to move fast in order to meet the deadline that was looming to ensure compliance with regulation.
From 1 July, it became obligatory for pension funds to invest in unlisted investments. In the coming years, this asset class is expected to play a key part in propelling the growth of the Namibian economy, creating jobs and moving us closer in the realisation of Vision 2030. It is perhaps also important to point out that one reason this asset class became mandatory is to curb excessive outflow of capital from the country, and to rather use the savings to promote local economic development.
With this process now under way, we can expect exciting times ahead as the market begins to entrust small portions of their savings to unlisted managers to invest prudently.
As we begin to see pension funds participate in the mainstream economy through their managers, it is therefore important that as owners of capital they understand how their savings will be deployed through the use of these vehicles. It is important to recognise that a clearly delineated investment policy statement is important for a pension fund, as it should spell out the investment objectives of the Fund. This can be anything from adopting the principles of responsible investing (PRI) and integrating any factors that may affect the sustainable and long-term performance of the fund’s assets. In order to ensure that a pension fund grows, trustees must adopt approaches and conducts that are sustainable, thereby preserving the long-term value for the beneficiaries of the fund. That said, only in a thriving economy is it possible to guarantee a promising future for pension fund members, their dependants and the country. It therefore goes without saying, that investment in the real economy is crucial for the sustainable generation of returns.
The Regulation stipulates that unlisted investments can take the form of (private) equity or debt capital. Now that we know that, in the coming two to three years, there is over N$4 billion that can be invested through this asset class, it is rather crucial that we examine the opportunities that are available for investing. As this asset class remains new to many, and the market still has a long way to develop, my view is that every pension fund or owner of capital should have an equal chance to the opportunities that the country presents in order to affect the desired outcome of unlisted investments, which is economic growth, whilst yielding sustainable returns.
There are concerns in some quarters that this investment is going to see money being lost, due to the relative immaturity and inefficiencies in the market. There are further concerns that unlisted investments managers or private equity managers, as they are known globally, have seen businesses fail. In my view these risks can largely be mitigated by a transparent and a stable regulatory framework and appropriate government facilitation. The way I see it, is that government has a key leadership role to play, especially through the creation of investable infrastructure assets, or what I refer to as impactful investments. Indeed it may make sense to have an investment platform that allows for pension funds to participate in government-led infrastructure projects, especially. Whilst it is an unorthodox approach to use in the facilitation of these investments, I think this would ensure that every owner of capital, unconstrained by size, will see themselves participating in these exciting national projects. However, these types of opportunities should be an investment choice that is totally discretionary for pension funds and their unlisted managers, to be weighed alongside all other investment options available in the market. My point is that owners of capital should be targeting impactful investments and SME businesses that show potential for growth, and that are appropriately structured to provide good returns for pension fund members.
In the President’s address on the 100 days in office, we learnt that we could cultivate thirty thousand hectares of land in the Kavango regions and create ample employment. This is no doubt part of government’s way of unlocking opportunities for businesses to move in and produce food at a large scale, and what better way than making the Kavango regions a basket of food producers for this country through agri business. This is just one example of government leading the way to create investment opportunities in Namibia.
I say it again that if the owners of capital want to see themselves participating in impactful investments, and are feeling constrained by their asset sizes, then any participation in big investment opportunities and infrastructural projects currently being initiated by government should be obvious targets, and provide opportunities for investing for all at relatively low risk.
– Loth Angula
Director, RisCura Namibia
For media enquiries please contact Courtney Atkinson via email or on +27 (0)21 673 6999