Once bitten, twice shy

GIPF tries to avoid another fiasco

13 September 2019 | Economics

The Government Institutions Pension Fund says it cannot guarantee the success of its unlisted investment scheme but has taken precautions to ensure that it does not go the way of the ill-fated Development Capital Portfolio (DCP) that saw the country's biggest pension fund lose an estimated N$600 million. Its CEO, David Nuyoma, is confident that unlike the DCP, the GIPF's unlisted investment scheme will succeed. This follows a recent admission by prosecutor-general Martha Imalwa that the GIPF had lost the DCP money because of lost documents and a lack of evidence.Pension funds are required to invest a minimum of 1.75% and a maximum of 3.5% of their total assets under management in the recently introduced class of assets that are not listed on the Namibia Stock Exchange.









“Success cannot be guaranteed, but plans can be developed to manage the risk of the project being a failure,” said Nuyoma.

“The model GIPF is using this time aligns the interests of the unlisted investment manager to those of the investors.”

Unlike the DCP funds, unlisted investment managers would also have some exposure to the funds that they invest in, ensuring that if there were to be losses, it would be felt on both sides of the spectrum, Nuyoma explained.



“GIPF requires its unlisted investment managers to also co-invest in any investment they make. Their co-investment is 1%. They do not incur any liability when investments are made on behalf of the fund, provided they have not acted in a fraudulent manner, have been dishonest in their dealings with the fund, stolen from the fund or breached the contract the fund has with them,” Nuyoma said.



Unlisted investment managers would only receive their big payoff when the investments turned a profit, he said.



“While they are remunerated for the service they render to the fund, their big payoff is captured only when they exit these investments they made at a profit, that is, after they paid back all the capital invested, plus the hurdle rate as well as the fund expenses,” said Nuyoma.



A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor.



“We believe this incentivises them to want to manage the investments in such a manner that they can earn the 'carried interest',” he said.



Zero returns



Three companies failed to repay anything on their DCP loans.



Among these is Tsogang Investments (Pty) Ltd, set up as a special purpose vehicle to acquire a 12% shareholding in the !Uri !Khubis Abattoir at Witvlei. It received N$5 million from the DCP loan scheme.



Omina Investments (Pty) Ltd, which received N$12 million, also failed to pay a cent.



Coen Wium, formerly described as the late Aaron Mushimba's right-hand man, was involved in both the Witvlei abattoir and Omina.



The third company is Sepiolite Production (Pty) Ltd, which received N$10 million. Former president Sam Nujoma's son-in-law, David Iimbili, was involved with this company.







Only some paid



The two companies that “inflicted the heaviest losses” on the DCP scheme was the Namibia Grape Company (NGC) and the Karas Abattoir and Tannery, formerly known as Ostrich Production Namibia.



The NGC borrowed N$164.6 million and repaid only N$56 million.



The Karas abattoir borrowed N$179 million and only N$18.5 million was recouped.



Ongopolo Mining and Processing has repaid N$50.4 million of its N$70 million loan. The GIPF has since acquired shares in Weatherly International, which took over the company.



Namibia Pig Farm (Pty) Ltd received N$26.4 million and repaid N$9.8 million.



Omaheke Tannery & Leather Processing only repaid N$2 million of its N$23 million loan.







Six performing and exited loans



The Namibia Housing Enterprise (NHE) borrowed N$15.8 million and repaid all the money.



Aaron Mushimba's Windhoek Country Club & Resort repaid N$142.9 million of its N$120 million loan. Its sister company, the Swakopmund Station Hotel, repaid N$40 million of its N$40 million loan.



Multiline Investments (Pty) Ltd, which received N$20 million, has repaid N$23.3 million, which includes interest, and Tutunge Investments (Pty) Ltd, which received N$4.6 million, has repaid N$5.6 million.



Preferred Management Services, which received a N$7 million revolving credit facility, has repaid this in full.

OGONE TLHAGE