Union rejects GIPF’s pension-backed housing scheme
Takes aim at appointment of two administrators
Tucna has warned that the housing scheme is flawed and plans to urge the prime minister to reject it.
The Government Institutions Pension Fund (GIPF) has confirmed that N$900 million is being earmarked for civil servants to borrow from their pension savings to finance the construction or purchase of homes.
This was confirmed in a statement by GIPF CEO Martin Inkumbi this week.
It follows concerns raised earlier this month by the Trade Union Congress of Namibia (Tucna) over the fund’s latest plan to make pension savings available to members in the form of housing loans.
Tucna president Mahongora Kavihua warned that the pension-backed housing scheme should not further contribute to widespread inequality plaguing Namibian society.
He argued that pension funds, which are drawn from workers’ earnings, should be used to promote a more equitable Namibia.
“But in this case, GIPF’s approach aims for an outcome that contradicts the ideal of fair wealth distribution,” Kavihua said.
He criticised the fund's decision to appoint only two companies to administer the funds that will be made available to members for homes.
By allowing only First Capital Namibia and Kuleni Financial Services to manage the funds, Kavihua noted, the plan will “entrench the troubling trend of excessive wealth centralisation in the hands of a few, thereby boosting their profits at the expense of workers.”
Kavihua said the union intends to approach Prime Minister Elijah Ngurare with more sustainable proposals and to persuade him to reject the scheme.
Final steps
According to Inkumbi, the fund is merely awaiting Ngurare’s signature on a memorandum of understanding (MoU) before proceeding with the scheme.
The MoU will, among other things, provide for the direct deduction of housing loan repayments, with GIPF making up to one-third of members’ pension benefits available for this purpose.
Inkumbi disagreed with claims that granting an exclusive mandate to First Capital and Kuleni is intended to enrich the two companies.
He explained that repayments on the loans will be credited back to members’ GIPF accounts, allowing them to enjoy their full pension benefits upon retirement.
Moreover, he said, the interest rate on the loans is more favourable than that of commercial banks, calculated at the Bank of Namibia’s repo rate plus 2.5%. With the repo rate currently at 6.75%, this brings the total interest rate to 9.25%. In contrast, commercial banks offer loan rates of between 10.5% and 11.25% for mortgage products.
He added that the administrative fee of N$30 per month is also reasonable.
Kuleni is wholly owned by the fund, while First Capital already has a working relationship with them through its management of mortgage loans for GIPF members.
Members protected
The new scheme will not involve traditional mortgages, Inkumbi explained. As such, failure to repay the loan will only affect the one-third portion of pension benefits made available, rather than resulting in the repossession of properties.
He added that the deduction agreement with government, as the employer, will help prevent defaults.
Other costs include a once-off valuation fee for the purchase of an existing home or a building inspection fee for the construction of a new one. Repayments are calculated over a maximum period of 20 years.
“The scheme is more focused on traditional brick-and-mortar construction,” Inkumbi said when asked about the eligibility of alternative low-cost housing.
The loan is intended for a primary residence, although members may be eligible for two primary homes, according to GIPF investment services manager Cacious Siboleka.
Homes in towns or unproclaimed areas may be approved, he added. However, proof of land ownership or the legal right to occupy the land will be a requirement.
View a summary of both positions here: q.my.na/7XJD
– [email protected]
This was confirmed in a statement by GIPF CEO Martin Inkumbi this week.
It follows concerns raised earlier this month by the Trade Union Congress of Namibia (Tucna) over the fund’s latest plan to make pension savings available to members in the form of housing loans.
Tucna president Mahongora Kavihua warned that the pension-backed housing scheme should not further contribute to widespread inequality plaguing Namibian society.
He argued that pension funds, which are drawn from workers’ earnings, should be used to promote a more equitable Namibia.
“But in this case, GIPF’s approach aims for an outcome that contradicts the ideal of fair wealth distribution,” Kavihua said.
He criticised the fund's decision to appoint only two companies to administer the funds that will be made available to members for homes.
By allowing only First Capital Namibia and Kuleni Financial Services to manage the funds, Kavihua noted, the plan will “entrench the troubling trend of excessive wealth centralisation in the hands of a few, thereby boosting their profits at the expense of workers.”
Kavihua said the union intends to approach Prime Minister Elijah Ngurare with more sustainable proposals and to persuade him to reject the scheme.
Final steps
According to Inkumbi, the fund is merely awaiting Ngurare’s signature on a memorandum of understanding (MoU) before proceeding with the scheme.
The MoU will, among other things, provide for the direct deduction of housing loan repayments, with GIPF making up to one-third of members’ pension benefits available for this purpose.
Inkumbi disagreed with claims that granting an exclusive mandate to First Capital and Kuleni is intended to enrich the two companies.
He explained that repayments on the loans will be credited back to members’ GIPF accounts, allowing them to enjoy their full pension benefits upon retirement.
Moreover, he said, the interest rate on the loans is more favourable than that of commercial banks, calculated at the Bank of Namibia’s repo rate plus 2.5%. With the repo rate currently at 6.75%, this brings the total interest rate to 9.25%. In contrast, commercial banks offer loan rates of between 10.5% and 11.25% for mortgage products.
He added that the administrative fee of N$30 per month is also reasonable.
Kuleni is wholly owned by the fund, while First Capital already has a working relationship with them through its management of mortgage loans for GIPF members.
Members protected
The new scheme will not involve traditional mortgages, Inkumbi explained. As such, failure to repay the loan will only affect the one-third portion of pension benefits made available, rather than resulting in the repossession of properties.
He added that the deduction agreement with government, as the employer, will help prevent defaults.
Other costs include a once-off valuation fee for the purchase of an existing home or a building inspection fee for the construction of a new one. Repayments are calculated over a maximum period of 20 years.
“The scheme is more focused on traditional brick-and-mortar construction,” Inkumbi said when asked about the eligibility of alternative low-cost housing.
The loan is intended for a primary residence, although members may be eligible for two primary homes, according to GIPF investment services manager Cacious Siboleka.
Homes in towns or unproclaimed areas may be approved, he added. However, proof of land ownership or the legal right to occupy the land will be a requirement.
View a summary of both positions here: q.my.na/7XJD
– [email protected]
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