THE Namibian Government is injecting huge stimulus into the Namibian economy in order to accelerate the growth of local enterprises. The recent promulgation of the amended Regulation 28 and 29 of the Pension Funds Act has the potential to unlock capital and channel its flow towards entrepreneurial businesses.Amended Regulation 28, which limits the extent to which retirement funds can invest in specific asset categories, stipulates that of the 35% compulsory investment in Namibian assets, the exposure in dual listed shares is required to reduce to 10% over the next 4 years. Amended Regulation 29 requires Pension and Provident Funds to invest a minimum of 1,75% of total assets under management in unlisted investments by 2017. This could lead to a massive boost for entrepreneurship in Namibia, as the availability of capital for private enterprises will surge and the Namibian Stock Exchange could see a gradual increase in listing activity of local companies.Nothing ventured, nothing gained
The first attempt by the Government Institutions Pension Fund (GIPF) to venture into the uncharted territory of unlisted investments via the so-called Development Capital Portfolio (DCP) had a disappointing outcome. But chairperson of the board of trustees of the GIPF, Advocate Ellaine Samson, noted that factors that contributed to the failures of the DCP included trustees not having adequate unlisted investment skills and them not running the DCP on a full time basis. This made investment decisions impossible to monitor as per the design of the portfolio.
Because unlisted investments occur in a risk capital environment, lessons can be learnt from the DCP experience. “Investing in early stage ventures is hard work”, says Eben van Heerden – CEO of leading South African venture capital (VC) firm: Knife Capital. “One has to combine access to skills, networks and funding to engineer growth – and ultimately put your reputation on the line to back passionate entrepreneurs”.
Herbert Maier, CEO of IJG Private Equity believes that there is sufficient entrepreneurial talent and good potential deal flow for investment in Namibia, but you have to delve into your networks to find them: “In Namibia, good unlisted investment opportunities don’t come in perfectly packaged business plans; they emerge via engagement within your own extended networks. If one then adds ‘mentorship capital’ to the venture, it dramatically improves its chances of success”.
The challenges that have caused the relative competitiveness of Namibia to diminish over the years as measured by the World Economic Forum (WEF) include the low quality of entrepreneurial skills and inadequate access to finance. The current Namibian funding structure is not conducive to early stage businesses. International research has shown that the only sustainable way that an economy can grow and to have a positive relationship to employment growth is through the birth of new businesses that are nurtured through the initial stages to become sustainable businesses. The UCT Graduate School of Business in partnership with Knife Capital and the Bank of Namibia is bringing its Executive Education Programme on VC investment to Windhoek on 4 to 5 November 2013.