GIPF investment in Bank Windhoek – an interesting private initiative
The successful acquisition by the Government Institutions Pension Fund (GIPF) of 25 percent in Capricorn Investment Group (CIG) at a cost of N$2 billion is commendable. But from my perspective it needs further scrutiny vis-à-vis other compelling national investment opportunities in the country. Capricorn Investment Group is the majority shareholder in Bank Windhoek that has an asset value of more than N$32 billion based on the company’s recent financial statements. GIPF, with a pension fund asset value of more than N$98 billion, is 100 percent owned by the Namibian government whose specific mandate is to collect, manage and distribute (pay out) pension funds on behalf of all government employees, among others. The successful regulatory approval of this deal has ensured going forward that GIPF in conjunction with Nam-mic Financial Services as strategic shareholders have the controlling interest of more than 51 percent of Bank Windhoek. This by all means is a significant development in the Namibian banking sector. However and before I proceed, I would like to acknowledge that GIPF does make provision of close to N$4 billion for investment in unlisted local business entities which sadly is underutilized due to the poor marketing of this facility. It is however important at this juncture and for the purpose of this article to note the significant comparison of the N$4 billion to the N$2 billion that has been invested in a single business entity relative to a pool for others to share. As clearly demonstrated above, GIPF as the largest pension fund administrator in Namibia has the financial muscle to potentially change the domestic investment landscape of the country but instead invests more than 90 percent of its financial resources in South Africa and elsewhere rather than significantly in the domestic market which is reeling with a lot of investment opportunities. This is a clear sign that on behalf of the Namibian Government as its main shareholder, it rather invests funds that are collected from Namibians into foreign markets rather than in Namibia, which can be seen as having a total lack of investment confidence in Namibia as compared to investment opportunities in other nations. These kinds of backward decisions are to a large extent contributing to the dismal state of the nation now experiencing high unemployment levels, poverty and destitution due to the extreme lack of sustained large-scale money supply and circulation in the Namibian economy. This sad picture confirms that Namibia is a net exporter of domestic generated capital to develop other nations instead of its own. Government as the sole shareholder of many business entities including GIPF has a duty to ensure that capital flow is significantly invested domestically in such a way that these business entities become less reliant on state coffers for bailouts. This kind of smart business model would to a large extent lead to the modernization of management principles and processes in state-owned enterprises as capital injection into them will be based on strict business requirements as will be required by the GIPF board of trustees. In the absence of such a business model among and for state-owned enterprises, GIPF would rather continue to invest billions into already well-established business entities such as Bank Windhoek and elsewhere to the detrimental state of state-owned business entities such as TransNamib, RCC and the SME Bank, among others. With that said, the recent closure of the SME Bank and the intended closure of RCC and TransNamib hereby going forward raises a number of strategic investment questions which as government being the main shareholder of all these institutions including GIPF cannot go unchallenged. Bank Windhoek is without a doubt a very successful domestic bank with a very healthy bank balance as compared to the troubled SME Bank. That’s a fact. However, the choice of the main shareholder to allow the demise of the SME Bank at the expense of an investment decision into an already well-established bank does not at this stage make any business sense at all especially taking into account the historic importance of the bank. This terrible decision defeats the purpose in the first place of establishing the SME Bank. Yes, businesses including GIPF have lost millions of dollars over the years but that does not justify neglecting a strategic asset such as the SME Bank relative to the Namibian economy. The SME Bank simply needed a capital injection of just N$400 million to stay afloat but was ignored by its main shareholder and GIPF who instead went ahead to acquire 25% stake at N$2 billion in an already established bank. Government could have through the same GIPF easily acquired an additional 25% or more in the SME Bank for less than N$1 billion with strict business conditions but instead decided otherwise. The Roads Contractor Company (RCC), a strategic national company, is on the verge of being closed down due to a lack of cash flow of just N$300 million from its sole shareholder. Ironically, RCC assets are currently ringfenced by Bank Windhoek, which is now under the partial control of GIPF. To all intents and purpose, GIPF could have also capitalized RCC for N$1 billion over a duration of two years with strict business conditions supported by an explicit directive from GRN that 50 percent of all road capital projects be awarded to RCC and the rest for the open market. The shunning of government assets by GIPF in favour of others will in the medium to long term be more beneficial to a privileged few than the intended masses. In the absence of the above, the status quo will continue whereby GRN continues to bail out its companies and GIPF continues to invest with confidence more than 90 percent in South Africa and elsewhere, whilst the public sector intentionally falls apart due to a lack of political and economic leadership. • Pendapala Hangala is a Namibian socio-economist.
New Era Reporter
2017-07-21 12:12:43 | 3 years ago