WINDHOEK: The retirement fund industry in Namibia has grown in leaps and bounds, Finance Minister Saara Kuugongelwa-Amadhila said on Wednesday.
Speaking at the sixth annual Retirement Funds’ Institute of Namibia (RFIN) conference here, Kuugongelwa-Amadhila made reference to figures from 2002, where which assets under management by retirement funds totalled N.dollars 16.3 billion.
That is equivalent to 46 per cent of the Gross Domestic Product (GDP). The value of assets under management grew to N.dollars 63.9 billion, or a staggering 79 per cent of GDP in 2010.
She said what is even more remarkable is that the value of pension fund assets in 2002 was eight per cent lower than the assets of banking institutions. In 2010, the value was 24 per cent higher than that of banking institutions.
“This clearly illustrates the importance of retirement funds in the Namibian financial sector. The tremendous growth in retirement fund assets in Namibia is ascribed to several factors,” she explained.
Kuugongelwa-Amadhila said in her view, there are no compelling reasons why retirement funds should not invest more in productive capital.
They can play a much more active role in the financing of long-term, productive activities that support sustainable growth such as cleaner energy, infrastructure projects and venture capital.
Such investments can drive competitiveness, and support economic growth by increasing private and public sector productivity, reducing business costs, diversifying means of production and creating jobs.
While investments in listed equities and corporate bonds have already achieved part of this goal, unlisted, long-term investments such as infrastructure can avoid some of the pitfalls of the short-term investment horizon prevalent in financial markets.
About the rational for a shift by retirement funds from prudential investments to productive capital investments, Kuugongelwa-Amadhila said it lies in the fact that in the prudential investment approach, the members and pensioners take centre-stage, while the productive capital investment approach takes a much longer-term view.
The first approach is to ensure that the pensioner can survive, or at least maintain his or her standard of living after retirement.
The latter approach is to ensure that the pensioner and his or her children and grandchildren will survive on and improve their standard of living.
“To change the investment approach of retirement funds will have to be achieved not only through regulations, but also creating the necessary instruments and institutions.
Speaking of regulations, it is my considered opinion, especially after the lessons learnt from the financial crisis, that some degree of prescriptive investment regulation is still necessary in Namibia,” she stressed.