David Nuyoma has been at the helm of the largest pension fund in the country, the GIPF, for the last 10 years, having taken up the position in 2013 when he departed the Development Bank of Namibia. During the last decade, the global pension fund industry has faced numerous challenges, but despite many obstacles, it has increased its asset base by about N$100 billion. Now, as Nuyoma prepares to depart the fund, with his last day scheduled for 4 August 2023, New Era’s Head of Business and Lifestyle Edgar Brandt sat down for a one-on-one interview with Nuyoma to speak about his experiences and what is next in what has been nothing short of an illustrious career.
Q: What are some of the major lessons that David Nuyoma, the person and the CEO, has learned after 10 years at the helm of the GIPF?
A: When I came to GIPF in 2013, I had just left the Development Bank of Namibia, which I was privileged to set up. I did not know much about GIPF at the time. I found an enthusiastic young team of well-educated professionals, who were ready to take the fund to the highest level.
I then appreciated the magnitude of the GIPF and the role it plays in the Namibian economy.
I realised then that it is the largest corporate entity by far in a very significant way in the Namibian economy from a liquidity aspect because every month, hundreds of millions of dollars are paid out to sustain many Namibian families. I also realised the GIPF is a crucial safety net for so many Namibian families that otherwise could be destitute. Then it dawned on me that here we have something special that needs to be taken care of through a lot of diligence.
Q: How, in such a volatile investment environment, did you and your team manage to remain so consistent in growing the fund?
A: Its about strategy. The fund has adopted a philosophy based on what we call liability-driven investment. Essentially, we look at the characteristics of our liabilities in terms of the liquidity profile required over various periods: short, medium and long-term, and our ability to meet those. So, our liability-driven investment, which is really spelled out in our asset and liability model that we adopted, has been tuned in such a way that we are fully cognisant of these liabilities, and we have to move in tandem in terms of juxtaposing the type of assets required to insulate us against global volatility.
That is really what has been key to us and further to that is the issue of diversification. To be diversified at various levels, one must be diversified from the choice of assets and in terms of geographic regions, namely Asia, emerging markets, developed markets, Africa, and the region in a broad sense, including South Africa and Namibia. The reason for this is because in the event there is trouble in one region, then the other regions can compensate and vice versa. That has actually helped us to survive the volatility.
One thing that is also crucial across the asset classes, there has been a consciousness of investing in so-called essential products. In other words, even when there is conflict, you realise that people still need to eat, you still need to communicate, and you still need the lights. You invest in those things that can be of relevance at any point in time.
Q: In terms of returns on investment, GIPF has been able to thrive in an economy where other fund managers have been struggling. Does it boil down to only strategy or are there other factors involved?
A: The key issue is strategy, but another thing that is crucial is governance, the discipline of governance required, and the ability to have consistency in the application of the strategy. There is more to it, absolutely. I have been in conversation and attended various foras with many peers across the globe and across the continent. We compare favourably and they want to know how we have done it. The key issue is really prudence, mixed with integrity.
In this area of business, there are many smart people, but sometimes some of them are too smart for their own good. In other words, they may want to use that smartness to abuse that position of privilege. So, you have to keep an eye on that to ensure everything you do is for the true purpose you want it to be.
Overall, it is a basket of issues deployed in such a way that it is able to respond to evolving circumstances.
What was amazing was during the time of Covid. When the world shut down, we were able to rally ourselves, and we managed to grow the fund by 26% while working from home. This was our biggest growth ever, and this was a result of intense concentration.
This demonstrated the robustness and resilience of the strategy.
Q: What has been the average rate of return on GIPF investments, and how does this compare to other Namibian fund managers?
A: GIPF is in a class of its own in Namibia. We don’t have a fund here with the same characteristics because we are a defined benefit fund. We have been able to benchmark ourselves that at all points our rate of return must be inflation plus. It was inflation plus four and we have increased it to inflation plus five. The reason for this is that we need to realise these returns because in all circumstances, there are times of plenty and there are lean times.
Overall, we have realised a rate of return of approximately 12.6% during the last decade against a benchmark of 12.1%. We have been well above this benchmark.
Q: Tell us more about the GIPF’s pension-backed home loan scheme. Why this kind of approach and how do you expect the scheme to impact the Namibian housing dilemma?
A: The background is that when I joined the fund in 2013, a report was produced that looked at the housing situation in the country. Through this, we realised there is a dire need at various levels.
That led to a three-pronged strategy: to finance infrastructure development for housing across the country; top structure, in other words putting up housing units, as well as housing financing.
What we found is that out of civil servants, who are the majority of our members, only some 30% then had formal dwellings.
The question I asked was why government’s housing subsidy was not being optimally utilised.
So, then we decided to contribute to the equation by contributing to infrastructure development. The strategy really is to increase access to housing for all GIPF members.