Namibia: Government Looks At Ways to Stem Capital Outflows

Nyasha Francis Nyaungwa

24 June 2011

Amendments to the Pension Funds Act of 1956 and to the Long-term insurance Act of 1998 are at an advanced stage as government looks at ways to stem capital outflows to other countries, the Deputy Minister of Finance, Calle Schlettwein has said. Namibia is a net exporter of capital as, historically, the country has accumulated excess savings over investment. Capital outflow from the country from institutional investors alone is estimated at N$37.7 billion in 2009 and N$27.4 billion in 2010.

This problem has been made worse by Namibia’s membership of the Common Monetary Area (CMA). In terms of the CMA rules, capital flows freely within the monetary area in search of higher return on investment.

Over the years government has come up with regulatory instruments to curb the increase in capital outflows at the expense of local economic development, but despite this, capital outflows continue to increase.

“Government has put in place domestic asset requirements, which oblige portfolio investors (Pension Funds and Insurers) to invest 35% of their assets locally. Further, Regulation 28 and Regulation 15 relating to the Pension Funds Act (Act No. 24 of 1956) and Long-term Insurance Act (Act No. 5 of 1998) as amended make specific requirements for investment in unlisted assets.

“In particular, the amendments oblige institutional investors to invest a minimum of 5% of their domestic asset requirements in unlisted investments. Further, the amended rules limit the proportion of dual-listed assets that qualify as domestic assets, and subject Unit Trusts to domestic asset requirements.

“In this regard, the regulations constitute a domestic policy instrument for mobilizing domestic savings for investment in the local economy and curbing excessive capital outflow at the expense of local economic development,” Schlettwein said.

But despite the regulations, the deputy minister conceded that the country was facing difficulties in the implementation of these requirements since the amended rules took effect in February 2008. As a result, Schlettwein said, the underlying Acts governing the regulations have been amended to give effect to the smooth implementation of Regulation 28 and 15.

“The Amendment Bills are at an advanced stage for implementation during the course of 2011,” he said.

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