WINDHOEK – Out of the N$661.2 million the Government Institutions Pension Fund (GIPF) disbursed to 21 companies, by way of equity and debt, between 1995 and 2005 through the now defunct Development Capital Portfolio (DCP), the fund managed to collect N$1.1 billion in dividends, interest and capital repayments.
This means that GIPF’s total profits realised from the DCP as at March 31, 2019 stood at just over N$458 million even though 12 of the 21 investments incurred losses of about N$386.5 million.
GIPF’s Chief Executive Officer and principle officer David Nuyoma explained this yesterday during a media briefing to clarify the intricacies of the controversial DCP scheme, which has dominated national discourse for over a decade.
GIPF’s DCP debacle had until August 21, 2019, been sub judice pending the decision by the Prosecutor General, who declined to prosecute 18 out of 20 dockets sent to her office.
Nuyoma yesterday noted that within three portfolio companies, GIPF still holds today, the total unrealised gain as at March 31, 2019 stood at over N$988 million.
“GIPF exited from the 12 companies that failed to perform in a responsible way under the circumstances that prevailed at the time. This was done by exercising the security rights in mortgage bonds, notarial bonds, converting loans into shares, requiring the shareholders to hand over their shares to GIPF without compensation, selling of shares and loans to other buyers. Six companies were liquidated either at the instance of GIPF or other creditors or through voluntary liquidations,” Nuyoma explained.
To date, all but three of the DCP investments have been disposed or written off, except Etosha Fisheries, FirstRand Namibia (through an initial investment in the now liquidated City Savings and Investment Bank), and Bank Windhoek Holdings, now called Capricorn Investment Group.
“Some of the portfolio companies that these funds were invested in experienced difficulties either due to poor management, poor governance and negative changes in the business environment. During 2005, the GIPF decided to put on a moratorium to ensure proper divestiture of these 21 investments. This was followed by several investigations into this portfolio,” Nuyoma stated.
The Development Capital Portfolio commenced in 1995 with the intent of providing development capital to Namibian businesses with growth potential and developmental impact. The programme intended to promote economic growth and to develop domestic industrial capacity.
According to Nuyoma, GIPF learned valuable lessons from the DCP investment programme and has since strengthened on the weak investment governance that prevailed during that time. He noted that the Pension Fund Regulations on investments have also now been enhanced by the Minister of Finance and Namfisa.
“In addition, the Fund has also now incorporated global best practices in the structures used to invest into unlisted investments and have become a member of the Institutional Limited Partners Association (a global association of institutional investors who invest into unlisted investments) as well as signatories to United Nations-supported Principles of Responsible Investments,” Nuyoma continued.
The DCP programme served as GIPF’s pilot programme for investing into Namibia’s real economy. Said Nuyoma: “It has therefore set the scene for our unlisted investment programmes that ensued thereafter, such as the 2010/11 Real Estate, Debt Finance and Private Equity/Venture Capital Programme; the 2015/16 Private Equity programme, as well as the 2019 Infrastructure programme. These programmes benefited from lessons learnt from the DCP by having been ring-fenced and managed by professional investment managers, proper alignment of interests, transparency, accountability and good governance in line with the regulations issued by the Minister of Finance under the Pension Funds Act.”
To date, GIPF has committed N$6.9 billion in unlisted assets in Namibia through various programmes. In addition, the Fund’s assets grew to approximately N$120 billion as of April 1, 2019.
Nuyoma continued that the GIPF has taken note of the pronouncement made by the Prosecutor General on the investigation into DCP. However, he stressed that the PG’s pronouncement does not, in any manner, adversely affect the Fund’s investment and operational philosophy that has, in most instances, proved successful, bearing much fruit over the past 30 years.
“GIPF provides guaranteed benefits to members no matter what happens to the investments, how long an employee lives after retirement, or whether he or she becomes disabled and unable to work,” Nuyoma concluded.