Domestic asset requirement goal set at 50%
Although not immediate, Investment managers will now have to contend with the decision by the Minister of Finance, Hon. Calle Schlettwein to repatriate more funds back from South Africa under Regulation 28, setting the domestic asset requirement at 50%, to be achieved periodically.
Said Schlettwein, “in regard to the broader agenda for domestic resources mobilization, Regulation 28 will be amended to lift the threshold for local asset requirement from the current 35 percent of total assets to about 50 percent through a phased process. This will be undertaken in line with the initiatives in the Financial Sector Strategy to develop the domestic market alongside actions to grow bankable asset classes to accommodate the inflow of funds.”
Added Schlettwein, “we will therefore continue to engage the market participants on our journey in developing the Namibia financial markets. I am glad to announce that the engagement with the market has commenced to develop how best the domestic resources can be mobilized, improve liquidity in the market and increasingly invest in infrastructure needs.”
He urged, “the private sector and the financial services industry is called upon to leverage opportunities for project financing as a result of the ongoing consultation and partnership process.”
The key spending priorities for the Financial Year 2017/18 and Medium Term Expenditure Framework are to fund development interventions established in the national development policy frameworks within the constraints of available resources.
Among other matters, Schlettwein noted that Government would, “safeguard macroeconomic stability and address sovereign ratings weaknesses by ensuring fiscal prudence, policy coordination and implementing a much deeper but balanced fiscal adjustment path, based on reinforced reduction of non-priority recurrent spending, leverage alternative sources of financing to reduce over-reliance on the national budget through a balanced approach to utilization of domestic asset requirements, Public, Private Partnerships and engaging the private sector in projects with potential revenue and profit generation and finally promote inclusive economic growth and job creation by increasing investment in public infrastructure in the priority sectors of the economy through off-budget financing of priority projects.”
The debate surrounding the domestic asset requirement has been ongoing for a while now. Simonis Storm earlier this year argued however that amendments to increase the 35% domestic asset requirement to 50% for Regulation 28 of the Pension Funds Act and Regulation 15 of the Long Term Insurance Act, with the objective of developing and stimulating the capital market and channelling more savings into the Namibian economy, may do more harm than good.