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Namibia: Billions Flow Into Unlisted Companies
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Namibia Economist (Windhoek)
16 May 2008
Posted to the web 16 May 2008
Chamwe Kaira
Windhoek
The economy is expected to benefit from an investment of some N$1.4 billion into local unlisted companies by the end of the year.
The government, early this year, gazetted changes to Regulation 28 and Regulation 15 of the Pension Funds Act and the Long Term Insurance Act, respectively, and will now require pension funds and long-term insurers to invest a minimum of 5% of their total assets in unlisted stock.
"Provided that the regulations are implemented in a responsible manner, and the regulatory function is properly fulfilled, there is no reason why an investment in unlisted entities should necessarily have a negative impact on overall portfolio returns in the long-term," Johannes !Gawaxab, Managing Director: Old Mutual African Operations, said this week.
The 5% is to be phased in starting with a minimum of 2% from 1 January to 31 December, which would be followed by a minimum of 3.5% from 1 January to 31 December 2009. As from January 2010, pension funds and long-term insurers are expected to be in the position to invest the whole 5%.
!Gawaxab said such policy interventions will contribute to job creation and poverty alleviation, at the same time stemming capital outflows, cushioning against current economic hardships and mitigating against the impact of monetary accommodation (a decision to keep interest rates unchanged).
Although !Gawaxab said there is nothing unconstitutional about such a policy, he said the current amendments to the legislation require some clarification.
He said the current definition of qualifying "unlisted investments" appears narrow, given the available universe of investable assets, the fact that only N$1.1 billion in government bonds will be issued this year, the proposed phasing down of dual listed shares as well as the lack of progress on partial divestiture from non-essential parastatals.
He said consideration should be given to include not only equity stakes in companies not listed on any stock exchange, acquisition of minority stakes in existing unlisted entities and involvement in unbundling and delisting transactions, but also investments that take the form of equity and debt capital in infrastructure and other projects, including low-cost housing, civil works development of water resources and distribution, electrification, telecommunications, mass media, agriculture, tourism, SMEs and transport.
"This broader definition has the potential to address concerns raised by those citing the lack of bankable projects in the country, who argue that the 5% unlisted investment requirement is tantamount to throwing good money after bad. With this broader definition, the N$1.4 billion should surely find a home," he said.
!Gawaxab said, in the absence of an appropriate alternative to dual listed shares, caution should be exercised in reducing the allowable exposure thereto.
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"The proposed reduction also goes against the noble intention of regional integration and it is thus proposed that this amendment either be done away with in its entirety or, if considered more appropriate, phased in over a longer period," he said.
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| Copyright © 2008 Namibia Economist. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
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