New regulations implemented in Namibia requiring institutional investors to invest a minimum percentage of their assets into unlisted assets will provide a significant boost to private equity in the country, according to experts.
Erika van der Merwe, chief executive officer (CEO) of the Southern African Venture Capital and Private Equity Association (SAVCA) told a SAVCA event in Windhoek last week the private equity market in Namibia is still relatively untapped, something that may now change due to the new regulations.
“The new regulations will now provide Namibian long-term insurance companies and pension funds with the incentive to take advantage of this still-underutilised alternative asset class,” she said.
Daudi Mtonga, director at private equity firm VPB, agreed with van der Merwe’s view, saying the new regulations prescribe that long-term insurance companies and pension funds must now invest a minimum of 1.75 per cent of their market values domestically into unlisted investments, with a maximum investment of 3.5 per cent.
He said these new regulations provide a framework for the regulatory authority to regulate the unlisted investment asset class.
“This gives investors comfort that the capital allocated will be under the Regulator’s supervision. Furthermore, the regulation formally defines the nature of the asset class and creates appropriate benchmarks for fund management responsibilities in the market place.”
The regulations form part of the Namibian government’s efforts to curb the outflow of capital and provide access to capital for domestic investment opportunities, which currently struggle to get access to funding.
Van der Merwe said the new regulatory regime will provide an opportunity to increase economic activity in the Namibian economy, by channelling institutional capital into the unlisted private company market.
“Given the now-increased availability of funding for local private enterprises, this asset class will act as a catalyst for the growth of the economy. As is the case in many African jurisdictions, supportive policies are necessary to encourage asset owners, including pension funds, to consider the valuable role that private equity can play in supporting economic development and growth, while providing the returns and diversification required in a diversified, long-term institutional portfolio,” she said.