Namibians are some of the Africans that will retire comfortably, provided they donot tempt with their retirement savings, as the country is rated high in retirement savings.
Namibia has the highest pension assets to GDP ratio in Africa, according to the latest report by RisCura Bright Africa.
Bright Africa is RisCura’s research resource which provides insight into enablers and managers of investment on the African continent for investors.
According to the report, the average pension assets to GDP for most African countries remains below 60% of The Organisation for Economic Co-operation and Development members.
While Namibia consistently achieved the highest at around 116%, this means local retirement savings are higher than the country’s collective economic output.
South Africa scored 68%, Mauritius 29%, Kenya 13% and Nigeria 7%.
In the latest Second Quarterly Report of the Namibia Financial Institutions Supervisory Authority, the total retirement fund investments, including insurance policies, stood at N$199.8 billion during the review period.
This investment value is higher than the overall Namibian economic activities at the current price (at nominal level) for 2021 at N$ 180.8 billion and even the pre-pandemic nominal level of N$ 181.2 billion
Retirement fund investment in the direct control of the retirement funds was valued at N$176.6 billion during the quarter that ended on 30 June 2022.
Some of the economic participants that are well catered for in their retirements (provided they donot withdraw) are the civil servants that are members of the Government Institutions Pension Fund (GIPF).
GIPF’s asset value currently stands at around N$135.4 billion, as the largest defined benefits pension fund in the country and the single biggest investor in the economy.
GIPF represents more than 62% of the GDP in Namibia.
The assets of the fund have been utilised to assist with fiscal policy by assisting the government to meet their borrowing needs through investments in bonds and treasury bills
According to 2020 annual report, its long-term balanced growth can be attributed to good investment returns due to a diversified investment strategy and a robust asset allocation process.
“Local asset requirements compel Namibian pension funds to hold 45% of contractual savings locally; there are very few opportunities to invest in the Namibian Stock Exchange.”
The researchers argue that this regulation has enabled Namibian pension funds to seek viable long-term opportunities, amid limited opportunities while avoiding and limiting potentially harmful investments in the process.
“African long-term asset composition mimics the global picture, where a few countries claim the most significant proportion of long-term savings,” they say.
The fund’s board of trustees recommended that GIPF monitor the employer contribution reserve to assess sustainability for financing the pension subsidy to meet the required contribution rates.
On a global scale, RisCura has observed that in most of The Organisation for Economic Co-operation and Development and many non-OECD countries, bonds and equities remain the two predominant asset classes for pension funds.
For the selected pension funds within their report, they said asset allocations for South Africa, Botswana, and Namibia continue to reflect greater allocations to equities, more so than OECD countries.
OECD is a 38-member intergovernmental organisation and a global policy forum that promotes policies to improve the economic and social well-being of people.
“For the rest of the African countries, the picture continues to be skewed towards fixed income. Higher yield local currency government bonds remain comparatively more attractive than public equities for Nigeria, Zambia and East African asset allocators. Regulation continues to be the most important determinant of asset allocation decisions in African countries,” RisCura reports.
Meanwhile, the researchers have also argued that investing in alternative investments such as venture capital and private equity allows African pension funds to invest in an asset class that can provide uncorrelated returns to traditional asset classes.
“Further, African pension funds will invest in a broader universe of companies than those currently available on their local stock exchanges. The information, communication and technology sector presents opportunities for the continent to leapfrog and accelerate and drive economic activity on the continent,” the researchers say.