When David Nuyoma
was appointed the Chief Executive Officer at the Government Institutions Pension Fund (GIPF) in 2013, the Fund was worth about N$58 billion. Today, GIPF’s assets under management GIPF has grown to about N$113 billion as at the end of April 2018 and the Fund is by far the most significant player in terms of Namibia’s Gross Domestic Product (GDP). There is no question that GIPF is a major investor in the domestic economy. In fact, to date, GIPF has committed N$5.48 billion into the local economy through its unlisted investment programme. This confidence in the Namibian economy has greatly impacted the development of the local unlisted market, particularly in the areas of property, private equity, debt and infrastructure. This week, Senior Business Journalist, Edgar Brandt (EB), sat down with Nuyoma (DN) for an exclusive interview.
EB: What are the challenges that GIPF faces and are you happy with the Fund’s investment performance?
DN: At the Fund we have had to recognise the economic difficulties as a country, a region, a continent and globally. The fund has grown bigger and bigger and has significantly improved returns compared to 2016, which was a year characterised by uncertainty. However, generally the fund has experienced reasonable growth above 10 percent, which is more or less in line with the valuation expectation. At GIPF, we implement a liability-driven investment strategy, which is a long-term approach. In a nutshell, I am happy with the fund’s performance but of course, it could do better. Of course, we are keeping our heads above the water. With monthly reports, all our managers and the board can keep a close eye on where the fund is going.
EB: Diversification is paramount when it comes to investment. How do you and your team ensure the Fund is adequately diversified?
DN: In terms of diversification, GIPF invested globally. Currently, we invest 43 percent of our assets in Namibia, 25 percent in South Africa, 26 percent internationally and 6 percent on the African continent. In terms of asset allocation, the fund invested in bonds, cash, equity and property. These classes are further broken down into different risk portfolios. Even with property, we look at every aspect in a different light. One aspect remains clear and that is our returns must beat inflation at all times. Unlisted investments make up a tiny bit of GIPF, in the sense that it is regulated. The maximum unlisted investments the fund can be exposed to is 3.5 percent while the minimum is 1.7 percent. We are however looking to increase this figure.
EB: It has been reported that GIPF is eyeing a stake in MTC. How is this deal progressing and are you looking at increased exposure in the local market?
DN: Regarding the possible investment into MTC, this is an ongoing exercise and we are discussing exactly how to invest in MTC. We expect to make an announcement on this issue in due course. It will be a wise decision to investigate all options. Overall, there are also some other exciting projects that GIPF is investigating.
The type of projects GIPF has been investing in has been more regulated, specifically starting the period between 2010 and 2014. We have had some excellent investments that have yielded solid returns, particularly in manufacturing, procurement financing, hospitals, ICT, technical innovations and even infrastructure. Many people do not know that GIPF has in fact become one of the biggest players in the country when it comes to manufacturing.
EB: How have some of GIPF’s past mistakes shaped what the Fund is today, specifically the Development Capital Portfolio (DCP) saga?
DN: Well, the DCP investigation is still being finalised by law enforcement agencies, to verify if indeed any transgressions took place. However, overall, I have seen that the DCP actually yielded positive results on net because many of the investments produced excellent results to date, such as the investment in FNB Namibia. It is regrettable that there were casualties.
My personal philosophy is that everyday is a learning experience and every incident is a lesson in life. What we have learned from the DCP debacle is that as of 2010, we introduced our unlisted investment strategy and I can say this was a direct result of the lessons from the DCP.
I must say that one of the most valuable lessons we have learned is that we should not do investments ourselves. Let the specialists in those various fields advise us because they understand the dynamics of the industries in which they operate. For this reason, we have introduced Special Purpose Vehicles (SPVs) to appoint fund managers who specialise in a given area. These complex industries require industry-specific approaches.
Another lesson that we learned is to always have the highest level of transparency, including checks and balances. These were expensive lessons but we cannot shy away from learning these lessons as we have to invest but we have to do it correctly and we have to do it with the appropriate corporate governance.
EB: GIPF recently introduced a new five-year Strategic Plan. What is new in the Fund’s strategy?
DN: We started working on a new five-year strategic plan towards the end of last year and it was officially adopted by the Board of Directors in March this year. We started implementing the new Strategic Plan as of April 01, 2018. One of the themes of the new plan is ‘Global Best Practices’. This is the key to GIPF’s future success. Another focus area of the new strategic plan is sustainability and one of the factors to achieve this is that we have to be an employer of choice. We also have to look at corporate governance and risk compliance in order to develop the appropriate risk management structure. Another focal point for our strategy is excellent service. We want to give our members an overwhelming positive experience. We want to shorten turnaround times in all respects and we are aware of the fact that we need to reduce the waiting period and the anxiety for our members. To achieve this, we are working on business process engineering, which we hope to complete by the end of July.
EB: National documents, such as the Harambee Prosperity Plan and the National Development Plans talk about investing in natural wealth. What is GIPF’s stance on this directive?
DN: In terms of investing in natural wealth, we have to do it in a sustainable manner. We are already investing in solar energy and now we are delving into agriculture and horticulture. We want to see the positive socio-economic impact of these investments. I wish we could be faster with these investments but we need to move steadily and in a calculated manner.
EB: We keep hearing allegations of government eyeing or requesting GIPF money to prop up the state coffers. Is there any truth in these allegations?
DN: There is no government bailout and government has not requested a bailout. I must be clear that there are various options in the investment framework, including bonds, property, equity, etc. In terms of our assets and liability model, bonds are instruments for diversification. Our biggest asset, by far, is equity, which means we are correctly positioned. In terms of Namibian bonds, the benchmark is 21 percent and GIPF is currently at 19.8 percent. However, keep in mind that this figure includes bank bonds. This bailout accusation is nothing more than a perception but this perception is not backed up by any facts.
New Era Reporter
2018-06-22 10:14:47 | 2 years ago