GIPF Sees Tremendous Growth

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By Mbatjiua Ngavirue WINDHOEK The assets of the country’s largest pension fund, the Government Institutions Pension Fund (GIPF), have shown significant growth during the past financial year, reaching N$26.4 billion. This represents an increase of N$7.37 billion in monetary value, or 37.6% in percentage terms. This is a substantial increase over the previous year when Chairman of the GIPF Board Hartmut Ruppel reported an increase in assets from N$15 billion to N$19 billion – a 25% increase at the time. In view of the growth of the fund, Ruppel said, the trustees believed the fund would be able to meet its liabilities to current pensioners and some 75 000 contributing members for the foreseeable future. Ruppel disclosed these figures when addressing an annual function attended by stakeholders of the company recently. Actuaries are currently in the process of finalising the statutory valuation of the fund, which he promised would be made public in line with the transparency principles the trustees are committed to. He also spoke about GIPF’s scandal-plagued Capital Development Portfolio (CDP), which the company has now placed under a moratorium. The CDP was aimed at stimulating local economic development in the country but ended up losing anything between N$636 and N$750 million in highly questionable fly-by-night business ventures. Most of the money appears to have been embezzled, with little or no effort made to actually establish many of the promised business ventures. Ruppel said the GIPF has been able to make considerable progress in implementing the decision to responsibly exit the investments that “found their way into this troublesome portfolio”. “No new investments have been made, consistent with the 2002 moratorium not to further expose the assets of the Fund to unlisted entities or business ventures,” he disclosed. The financial industry regulatory body Namfisa and the Registrar of Pension Funds commissioned an investigation into the GIPF, including the DCP. The GIPF is currently awaiting the final report from Namfisa. While waiting, the company has launched its own “very thorough and complete review” of the assets in the DCP. He said the review is aimed at providing the GIPF with an understanding of the reasons why the investments performed as they did, describing their performance as disappointing in most cases. On the basis of the new understanding it acquires, GIPF in consultation with stakeholders will design more “viable” alternatives to place assets to stimulate the development and growth of Namibia’s own infrastructure, economy and destiny. He promised the result of the review would also inform the GIPF on appropriate remedial measures to take against the failed businesses where this is appropriate or warranted. The DCP, he charged, is demonstrably a good example of the type of investment not to place a large amount of savings in. Particularly when these savings are expected to yield returns so that pension funds can meet their obligations to members who become entirely dependent on payment of their pensions. “Our experience informs us that even investments in entities listed on our stock exchange return significantly lower yields than the dually listed entities on our stock exchange,” he noted. Ruppel announced that the GIPF Board of Trustees had decided to increase the Fund’s international exposure to the permissible limit of 20% of assets, as part of an effort to properly diversify its risk. Money placed internationally will be placed in equities only, with investments in bonds being placed locally in support of the country’s own economy. Speaking at the same event, GIPF CEO Primus Hango informed stakeholders the number of contributing members of the GIPF decreased by 1.64% during the past year from 71 448 to 70 274 members. He said the decrease in the number of members is due to rationalisation, natural attrition and members going on pension in the public sector. The number of pensioners increased by 2 038 from 26 421 to 28 459, which he described as a worrying trend that could strain future liquidity levels. Members and employers contributed N$990 million to the fund, an average of N$13 973 per member each year. “The fund is liquid and is able to pay benefits from contributions. The gap between the two is however narrowing, which is a concern for future free cash flow within the fund,” he stated.