Edgar Brandt Windhoek-Namibia’s drive to increasingly mobilise domestic resources to finance its national development agenda, specifically by raising the domestic asset requirement threshold from 35 percent to 40 percent, has been hailed as a good development by most fund managers who agree that government will benefit significantly from the lower cost of funding. While this development would no doubt provide much-needed liquidity for the local money markets and give locals a chance to prove their skills and training, there are concerns that limited investment opportunities in the domestic economy may result in too much money chasing a small pool of investments, which could lead to an asset price bubble. Minister of Finance, Calle Schlettwein, said last week he expects the new domestic asset requirement amendments to be gazetted this week, given investment opportunities that have emerged on the domestic investor space. These amendments, which will apply to financial institutions like banks, insurance companies and pension funds, will lift the domestic asset requirements from the current 35 percent to 40 percent by January 2018, 42.5 percent by April 2018 and 45 percent by October 2018. These policy changes are expected to release substantial savings into the domestic economy for listed and unlisted opportunities. This, said Schlettwein, is in recognition of the fact that no country can rely on other countries’ resources for its own development. “We have to increasingly mobilise domestic resources to finance our national development agenda. When the international community adopted the Addis Action Agenda as a means of financing the Sustainable Development Goals, strong emphasis was laid on domestic resource mobilisation, as a sustainable means of financing national development objectives. This is in recognition of the fact that no country can rely on other countries resources for its own development,” said Schlettwein recently. Research also shows that domestic investment has a strong influence on Foreign Direct Investment (FDI) inflows in the host-economy. This implies that domestic investment is a strong catalyst for FDI, which also has the added benefit of increasing local equity participation. “The concept of mobilising domestic savings is noble and serves to address the capital deficit inherent in the domestic economy provided it is managed according to established best practices. Furthermore, given that the bulk of savings are in the form of pension funds, it is necessary to find investments with a suitable risk/reward profile and avoid geographic concentration,” commented an analyst from Broadside Capital Investment. Despite these concerns, the analyst – who preferred anonymity – said if well executed, the development will arguably accelerate development of the local capital markets and fuel Namibia’s Growth At Home Strategy. He also stated that the traditional structure of the domestic financial services industry must evolve to accommodate the wider range of independent investment support services, such as deal origination and advisory, thereby improving the efficiency of local investment processes. “The private sector should work together with the government to identify listed and unlisted investment opportunities and the Ministry of Finance normally avails itself to such result-oriented engagements,” he added. The Director of Research at Simonis Storm Securities, Purvance Heuer, agreed that the challenge is to find suitable domestic assets to satisfy the regulation. “A number of institutions are claiming that they are already close to the 40 percent threshold. We believe that they will sell more foreign instruments and bring the cash home to comply…The challenge is that there aren’t enough assets in the domestic market to satisfy the regulation. In fact, there wasn’t enough while the threshold was 35 percent. We hope that more instruments will come to the market from this,” said Heuer.
2017-10-03 10:10:23 11 months ago