Pension funds urged to invest in infrastructure

Eos Capital’s infrastructure fund sized at between N$1-1.5 billion is expected to be launched early 2019, focusing on unlocking Namibian infrastructure projects in public services, energy, water, education and healthcare.

25 October 2018 | Economics

Ongwediva Medipark gives quality healthcare to people in the North and they don’t have to travel down to Windhoek anymore- Nicole Maske, Partner: Add Value, Eos Capital

NDAMA NAKASHOLE

The fact that there are a lot of macro-economic factors that can’t be controlled locally makes it scary to invest, a Southern Africa private equity expert told Windhoekers on Tuesday.

In her presentation titled: “Investing in scary times” during an Eos Capital event, CEO of the industry body and public advocate for private equity and venture capital asset classes in Southern Africa (SAVCA), Tanya van Lill, said despite that, pension funds in Namibia can still find attractive and safe returns during these times. This can be done by investing in private equity and infrastructure funds while also helping to stimulate the economy.

One option for pension funds would be to invest in unlisted infrastructure funds, she said.

According to Van Lill, these funds provide attractive returns over a long-term, typically around 15 years, mostly in the form of inflation-linked income as well as some capital gain over the long term.

“Infrastructure assets provide returns of about 15% per annum, with these returns decreasing or increasing depending on the inflation rate,” she said.

In a nutshell, Van Lill encouraged pension funds to consider their role in kick-starting the growth in the economy through investing in private equity and infrastructure funds while also earning attractive returns and making a positive impact.

During the same event, local private equity manager Eos Capital’s Add Value Partner Nicole Maske highlighted an example of Private Equity-invested Ongwediva Medipark hospital as one positive impact made by decisions to invest in private equity.

She said it is important for pension funds to know that it’s not just about returns but the social benefits for its members.

“Ongwediva Medipark gives quality healthcare to people in the North and they don’t have to travel down to Windhoek for that anymore,” said Maske.

Fund reality

Pension fund assets as a percentage of GDP in Namibia is well above the global average, with pension fund assets close to 90% of annual GDP at N$290 billion. This is more than double the assets held in the banking sector, estimated at about N$120 billion. Pension funds thus 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$290 billion within Namibia, in activities that stimulate the economy, it could assist in pulling Namibia out of its recession.

This is presumably the thinking around the new Pension Fund regulations which require pension funds to bring 45% of their assets back into the country by April 2019. However, pension funds are now faced with the challenge of investing 45% 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 NSX. Thus, pension funds are bringing money back and placing it in banks and money market. This does not provide the most attractive returns for funds and does not provide the benefit for the economy that was intended.

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