Dominance of GIPF of concern to NSX
The Namibian Stock Exhange (NSX) in its latest annual report mentions the risk attributed to the Government Institutions Pension Fund (GIPF) due to its size relative to other players in the domestic market. Another concern cited is the status of the application to licence a second stock exchange, to be called the Namibia Financial Exchange (Nam-Fin X), according to outgoing Chairman of the NSX and Chief Executive Officer of Nedbank, Lionel Matthews.
The Namibia Financial Institutions Supervisory Authority, he said, had received an application in May 2013 and subsequently advertised in line with the Stock Exchanges Control Act of 1958. Matthews said the effect that it is bound to have on the bourse remained uncertain and made mention of the fact that as at 2013, the NSX held reserves in excess of N$42 million.
“Caveat emptor. Is the doctrine that a market place is best regulated by cautions buyers now in principle obsolete?” Matthews asked.
According to Matthews, the total of government debt securities at the end of 2013 is N$18 billion up from N$9 billion at the end of 2010 in addition to N$5.4 billion internationally and N$850 million listed on the JSE. This, he said, may have deflected investments from the exchange as will happen with the introduction of Regulation 29 to the Pension Fund Act.
He said, “The NSX believes that the unlisted investments [Regulation 29] are inherently riskier than listed investments where corporate governance and disclosure are in keeping with best practices and subjected to transparent price discovery. The NSX again acknowledges that its success in building up reserves has largely been due to the Pension Fund Regulation 28 and the 1990’s Namibianisation process, driven by the GIPF, but it appears as if the latter is no longer a prerequisite for an appointment as a GIPF Asset Manager.”
The Over the Counter (OTC) procedures for the NSX stockbrokers to trade unlisted investments was launched in February 2013 when Agra Limited shares started to trade on this market. In total 6.44% of the shares in issued, traded during 2013, at an aggregated total of just over N$8 million. Matthews cited these as crucial factors that would aid the further development of the NSX.
“The local index increased by 21.3% in 2013 on a turnover of N$352 million after a 23.7% increase in 2012, all in an illiquid market while the Overall index increased by 1.32% against the JSE All Share index, which increased by 17.85%,” Matthews said.
“As at 31 December 2013 the total market capitalisation was N$1.4 trillion, hopefully re-confirming the position of the NSX as the second largest exchange by total market capitalisation in Africa, after the JSE,” Matthews concluded.