By Wezi Tjaronda WINDHOEK AS a way of stemming capital flight from Namibia, the country is looking into instituting a levy on capital leaving the country. This is in addition to other measures that the Ministry of Finance has put up to help reduce the amount of money that leaves the country. The recommendations deal with unit trusts which if implemented will require the investors to invest 35 percent of their total investments in Namibia, while investments by pension funds which are dual listed on the Namibia Stock Exchange will be reduced from 35 percent to 10 percent. Before, unit trusts were not required to invest 35 percent of their total investments locally, while dual listed pension funds could invest as much as 35 percent. The issue of capital flight was one of several that were discussed during an annual meeting of Namibia with the World Bank and the International Monetary Fund in September this year. The Cabinet, during its sitting on December 6, approved the recommendations that the Namibian delegation made at the end of the meetings. Other recommendations deal with Namibia’s membership of the small states group; insurance cover for natural disasters in Namibia for farmers; policy support instrument for the IMF; capacity building, availability of statistical information and Namibia’s classification as a Middle Income Country. A memorandum from the National Planning Commission to the Cabinet said the Namibian delegation also considered the issue of capital outflow from Namibia and proposed that a levy be instituted on capital leaving the country. The proceeds from the levy would go to a dedicated fund and not to the state coffers. It however noted that to institute such a levy, the necessary legislation would need to be passed and the proposals would need to be discussed between the ministry, NPC and the Bank of Namibia. It also said the Ministry of Finance should ensure that recommendations on the control of capital outflow which among others include the unit trusts and pension funds are implemented by the Namibia Financial Institutions Supervisory Authority. (NAMFISA). The recommendations are however yet to be implemented. Recently, finance Minister Saara Kuugongelwa-Amadhila said due to concerns that domestic savings leave Namibia amidst immense investment gaps, regulation 28 and 15 will be tightened to ensure that investments that are dual listed are reduced. She told stakeholders in the financial industry those amendments to tighten the two regulations by reducing the investment in dual listed shares that qualify as domestic shares to 10 percent over a period of five years were underway. This is aimed at addressing the investment gaps that exist in Namibia, failure which, Kuugongelwa-Amadhila warned, the social divide might worsen and have serious implications for all. In ratings that Fitch assigned to Namibia recently, it noted that the country had high gross savings of 36 percent of GDP at the end of 2004, which were a result of highly developed pensions and insurance institutions. The pension and insurance institutions, said Fitch, have encouraged domestic savings and brought assets under management close to 100 percent of GDP, which was a rating strength. However, it said that this has resulted in persistent and growing capital outflows to neighbouring South Africa, which reflected limited domestic investment opportunities for the institutional investors. Namibia’s reserves, according to Fitch have been just under US$200 million (approximately N$1.2 billion) since 1993, despite sustained current account surpluses. “Given the size of assets under management, the capital outflows are likely to be a source of ongoing pressure on the balance of payments and reserves, and a relative weakness for the rating,” the Fitch statement said. It further said improvements in credit-worthiness would hinge on structural reforms to strengthen domestic investment opportunities and deepen the domestic capital markets. “These will strengthen the economy and thus help reduce capital outflow and build reserves,” it added.