Unpacking President Geingob’s investment strategy

Home Editorial Unpacking President Geingob’s investment strategy

The recent announcement by President Hage Geingob, in which he released his financial records, is an example to us all.

By revealing his financial status in such explicit detail, the President has not only set a wonderful example in transparent leadership (Informanté called it ‘revolutionary’), but has also provided us with an opportunity not to be jealous of his millions, but to learn from his investment strategies and, hopefully, to apply them in our own lives.

Looking through the very extensive records, we can see that his strategy is a sensible one. He has invested in assets, not liabilities. In particular, approximately one third of his wealth is invested in the highest growing asset available (shares – through his investment in unit trusts). Another one third is invested in property (farms and houses) and the final third is in money market accounts and notice deposits (always good for emergencies), household expenses (essential) and, interestingly, only N$1 million (out of a total of N$51 million) is invested in vehicles (the worst performing of liabilities).

How different his example is from the average Namibian, who will be spending probably 50 percent or more of their monthly income on a car, who will not purchase a property but will rent, and who will spend the remainder on “bling” (clothing, DStv, cellphones, watches, etc.).

And, unfortunately, most Namibians fail to invest any money at all, certainly not in the high growth and high return world of shares. According to Warren Ingram (Become Your Own Financial Advisor) over a period of 112 years, shares outperformed any other investment with an average 7.5 percent growth (property, by comparison, grew by only 1.9 percent per annum).

A relatively simple strategy for building a “presidential portfolio” is to invest 10 percent of one’s monthly salary in unit trusts (essentially a diverse selection of shares). If one can make this a habit (a simple debit order each month is a relatively easy way to enforce the investment) then that wealth will grow, using the power of compound interest, over the years.

The second pillar of President Geingob’s investment strategy is property. Every amount that one spends on rent is another sum wasted, and given to a landlord who, if clever, will be investing that rental income in his or her own mortgage.

Instead of bemoaning the ever-increasing property prices, one has to start (and the sooner the better) to get on the property ladder – no matter how humble the dwelling. For instance, the bond on a property of N$600 000 (with a deposit), according to www.namibiaproperty.com would be N$4 945 per month. That is less than many people are paying in monthly rent. Obviously, the property would need renovation and repairs, but every dollar one invests in a property increases its value in the long term.

One book (Dolf De Roos, Real Estate Riches) has the title – “How to become rich using your banker’s money”. Rather than seeing the bank as your enemy you can regard it as your financial partner in growing your wealth.

Thus, if you have a bond of N$500 000 on a property, and if, in 10 years’ time, that property has grown in value to one million dollars, you only owe the bank N$400 000 or less. Without doing anything, you have made N$600 000 profit, and have also lived in a nice house of your own over the 10-year period.

In addition, contrary to your rent paying friends, who will find their payments increasing by 10 percent a year, your monthly payment will (more or less) remain constant, meaning that, over time, you will (in real terms) be paying less each month to live in the property.

Finally, President Geingob’s portfolio shows clearly that motor vehicles do not play a major role in his investment strategy. In fact, at N$1 million (out of N$51 million), his investment in cars is less than 5 percent.

This means, if your own wealth is, say, N$1 million, you should be spending less than N$100 000 on your vehicle. Spending a high amount of income each month on a car, which loses an average 30 percent of value in the first year, as well as higher maintenance and insurance costs on an expensive vehicle, is not a wise strategy for future wealth.

So President Geingob’s transparent financial portfolio should be a wakeup call to all Namibians to ensure that their spending patterns change from taking on credit for liabilities and instead investing in their future through the building of assets.

• Robin Tyson is founder and administrator of the Facebook group, Namibian Investor, and lectures in business reporting at the University of Namibia.