WINDHOEK – The Government Institutions Pension Fund (GIPF) has an Unlisted Investment Policy in place that entrepreneurs seem not to be aware of. GIPF set aside N$2.3 billion for its Unlisted Investment Portfolio by the end of June 2013, to invest in unlisted entities. Thus far the fund has however only invested slightly over N$679 million in various business projects across the country.
The Unlisted Investment Policy was implemented in 2008 to contribute to the development of the Namibian capital market and facilitate local economic growth. The policy was developed after a thorough and detailed study of global best practices regarding unlisted investment as alternative asset class for investment by pension funds. GIPF, through the policy, is also adhering to the government regulations of pension funds, specifically Regulation 28 of the Pension Funds Act, that require funds to invest a specific amount of the money in unlisted institutions in the country. However the absence of awareness of the portfolio among entrepreneurs “impedes our objective to cast our net widely and ensure broad-based participation from the Namibian business fraternity. In this regard, we will be implementing a strategy to market and brand the Unlisted Investment Policy,” said GIPF chief executive officer David Nuyoma. New Era talked to the General Manager for Marketing and Corporate Communication at GIPF, Elvis Nashilongo, on how local entrepreneurs can benefit from the Unlisted Investment Policy.
New Era (NE): How can entrepreneurs/SMEs benefit from the GIPF Unlisted Investment Policy?
Elvis Nashilongo (EN): Access to finance has been cited as one of the main challenges facing businesses and aspiring entrepreneurs in Namibia. Through this policy, GIPF has established Special Purpose Vehicles (SPV) in the form of Bewind Trusts through which the GIPF channels funds for investment purposes. These trusts are managed by competent trustees who have contracted fund managers to administer the invested funds. Entrepreneurs and SMEs can benefit from this arrangement through presenting their business proposals to the fund managers who in turn would assess the viability of proposals submitted.
NE: What are the steps to take when approaching the Fund for the funding?
EN: As stated above, entrepreneurs are required to submit business proposals to the Fund manager after which a process of mutual engagement commences to iron out possible risk elements, establish viability of the project and prepare submissions to the SPV which will take the decision whether to fund or not. If the business idea is found to be fundable, the SPV will forward the funding request to GIPF. It is important to note that GIPF does not give the total capital required in a single payment. The funds are disbursed on a drawdown basis in line with the phases of the particular business proposal. Basically these are the steps followed and the idea is to ensure that the assets of the Fund are secured at all time.
NE: What are the selection criteria, i.e. does the Fund give preference to specific industries/sectors, business located in specific regions, or an application that is above a certain amount of money as the threshold?
EN: The first consideration is financial viability and secondly the current areas of private equity, property development, renewable energy, such as solar, tender or procurement financing and catalytic investments through micro financing, education and mentoring. Determination of threshold amount into a project depends on the size of the funds made available to the specific fund manager and the mandate given. GIPF through the Unlisted Investment Policy has committed a total of 15 percent towards the unlisted portfolio. Private equity takes up 10 percent while 5 percent is allocated to properties.
NE: Is there a limit on the amount of funds that can be applied for?
EN: In a world of scarce resources there will always be limits and in this case the fund managers have access to specific capital amounts for investments. The limit of exposure to a specific project is determined by the fund manager’s appetite for risk, availability of committed funds as well as the nature of the investment proposed. For property investments, we have tried to keep the single obligor limit to 30 percent whilst that for private equity type investments is slightly lower at 20 percent per project.
NE: Under what principles are the funds disbursed (are they a grant or a loan), and how are the interest rates and payback terms?
EN: The investments are made through Special Purpose Vehicles (SPVs) to invest on behalf of the GIPF. The funds to be invested are in the form of equity or unlisted shares. The rate of return as well as the payback period is calculated on the basis of market norms and within the term limits of the respective SPV. While providing the necessary funding to development, the trustees of the SPV remain unequivocally clear to their fiduciary duties of protecting the SPV’s assets.
NE: What about those without collateral, could they too benefit from the Unlisted Investment Policy?
EN: The issue of collateral has always been misconstrued. The business promoters are required to be innovative in crafting business plans with minimum risks. It will not be prudent for GIPF to provide unsecured funding, however innovation could minimise the magnitude of collateral required. The viability of the project is an overriding factor that is considered to determine the level of contribution that each business promoter needs to provide. All the SPVs are encouraged to ensure that these promoters have some form of “skin in the game”. Business funding is a complex undertaking and in this view participating entrepreneurs are engaged so as to create win-win solutions.
NE: Any other comment is welcome
EN: Unlisted Investment Funds are as follows:
– Namibia Procurement Fund
– Desert Stone Namibia
– Kongalend Renewable Energy Fund Trust
– VPB Growth Fund
-Frontier Property Trust
– Konigstein Capital Investment Property Fund
– Preferred Investment Property Fund Trust
– First Capital Real Estate Finance Fund
– Tunga Real Estate Fund
– Expanded Infrastructure Fund
– SIM Real Estate Fund
Entrepreneurs seeking to participate in the GIPF Unlisted Investment Portfolio can obtain information from the GIPF Marketing and Corporate Communication Department.
Story by Staff Reporter