Pension funds could save ailing economy: SAVCA

24 Oct 2018 17:20pm
WINDHOEK, 24 OCT (NAMPA) - Pension funds in Namibia can help stimulate the economy, while finding attractive and safe returns by investing in private equity funds.
This was the view of Southern African Venture Capital and Private Equity Association (SAVCA) Chief Executive Officer (CEO), Tanya van Lill in her presentation during a discussion titled ‘Investing in scary times’ here on Tuesday.
The event was organised by private equity manager Eos Capital.
A media statement issued by the host on Wednesday quoted Van Lill as saying pension fund assets as a percentage of Gross Domestic Product (GDP) in Namibia are well above the global average.
Pension fund assets in the country are estimated at N.dollars 290 billion, which roughly represents 90 per cent of annual GDP.
This is more than double the assets held in the banking sector, estimated at about N.dollars 120 billion.
The SAVCA CEO said pension funds thus have an opportunity to make a real difference in the economy through what they choose to invest in.
“If they invest even half of their N.dollars 290 billion within Namibia, in activities that stimulate the economy, it could assist in pulling Namibia out of its recession,” she said.
This is presumably the thinking around new pension fund regulations, which require pension funds to bring 45 per cent of their assets back into the country by April 2019, the statement said.
Van Lill said this is however a challenge, as pension funds are now faced with the challenge of investing 45 per cent of their assets in Namibia where there are limited options to choose from.
“Many are already over-exposed to government bonds and there are only a handful of Namibia-only listed stocks on the Namibia Stock Exchange. Thus, pension funds are bringing money back and placing it in banks and money market,” she said.
The CEO said pension funds could invest in unlisted infrastructure funds, as these funds provide attractive returns over the long term, typically around 15 years.
Most of these returns are in the form of inflation-linked income, as well as some capital gain over the long term.
Van Lill further stated that it has been shown that infrastructure investment has a multiplier effect on the economy, with the World Bank estimating that every 10 per cent increase in infrastructure provision increases GDP by approximately one per cent in the long term.
Infrastructure such as hospitals and schools provide additional social benefits for citizens and pensioners alike, who have better access to healthcare and schooling for their children, she added.
Eos Capital is an all-Namibian private equity fund manager led by experienced professionals with the former managing director of Old Mutual Africa, Johannes !Gawaxab as managing partner.