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Saturday 20 April 2019
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GIPF’s N$100m investment trapped

…SME closure blocks civil servants’ money

 

As expected, the N$100 million fixed deposit the Government Institutions Pension Fund (GIPF) has with the embattled SME Bank has not been returned to the coffers of the fund when it matured last month.
In fact, only a meagre N$25,000 from the N$100 million invested three years ago is guaranteed to return to the GIPF when the liquidation process is concluded, the institution’s latest audit report reveals.
According the audit report, GIPF placed N$100 million fixed deposit with SME Bank on 23 October 2014 for 36 months (three years) that was supposed to accrue an interest 7.65% on a quarterly basis.
This means, by 23 October 2017, GIPF was to receive N$122,5 million. This represents a clean N$22.95 million in profit, a wise investment for GIPF at the time.
The deposit was callable on 23 October 2017 and had up to date an interest repayment schedule.
However, fortunes did not favour GIPF. The situation went from promising to completely bleak in July 2017 as the Windhoek High Court ordered that the SME Bank should be placed under provisional liquidation.
This was after the Bank of Namibia (BoN) realised that the SME Bank was in trouble when its auditors BDO informed the central bank about the N$200 million which was dubiously invested in South Africa.

 
Liquidators – Ian Mclaren and David Bruni of Investment Trust Company – were appointed to wind up the business at SME Bank.
The provisional liquidation was aimed to ring-fence assets and halt expenditure, recover debts and close down the bank’s operations.
“As it stands, the Fund[GIPF] stands to lose the fixed deposit[N$100 million] it has with the bank. N$25,000 is guaranteed,” states the report by independent audit firm, PricewaterhouseCoopers.
When quizzed about what looks like the N$100million gone down the drain, GIPF’s external stakeholders’ engagement officer Robyn Nakaambo said: “The fixed deposit the GIPF has with the SME Bank matured on 23 October 2017, but as the liquidation process had already begun by that time, the appointed liquidators did not return the amount placed on deposit with them as the process is still on-going.”

 
The Bank of Namibia recently introduced a Determination (BID-26) under the Banking Institutions Act, which is a key factor in determining how much GIPF could get in return.
“In terms of this Determination, the liquidation costs of the liquidator must first be paid, thereafter the remuneration of the employees must be paid, and then depositors must be paid up to an amount of N$25 000. Thereafter the secured creditors must be paid, and then other creditors must be paid. Should there be amounts left after these claims have been paid, the remainder of the claims would then be dealt with in terms of the Insolvency Act. The liquidation process is still on-going and the fund will only know the full extent of the recovery of the amount after the process has been completed,” Nakaambo explained.

 
More so, GIPF is not the only state-owned company that could lose money invested with the SME Bank.
According to reports, the Road Fund Administration (RFA), Agribank, the Social Security Commission (SSC), NamWater and the National Energy Fund (NEF) could all lose money.
The SSC invested N$150 million, GIPF N$100 million, and NEF N$260 million. NamWater initially invested N$140 million, but forced the SME Bank to pay back N$90 million.
The Namibian government owns 65% of SME Bank, while 30% is owned by Zimbabwe’s Metbank and 5% by Worldeagle Investments.
Since the bank opened its doors, the minority shareholders (35%) only contributed N$57,7 million. Meanwhile, the Namibian government as the majority shareholder (65%) pumped a massive N$448,7 million in the bank.

 
Furthermore, the winding up of SME Bank brought with it its own troubles.
The discontinuation of SME Bank’s operations left 208 people jobless while putting over 1000 others in disarray as they directly or indirectly depend on those that lost their jobs.
Past loss
In the past, through the Development Capital Portfolio (DCP) initiative, GIPF invest N$611 million. To this day, N$63 million has vanished in thin air without trace.
Between 1996 and 2006, GIPF invested N$611 million in the DCP projects on 21 companies.  Of the 21 companies, there was no return on investment for N$63 million that GIPF invested in three companies (unlisted investments).

 
Of the 21 companies, Tsongang Investment, Omina Investment and Sepiolite Investments did not return a single cent GIPF.
In the meantime, Black Square Investments, Namibia Chicken Investment and Namibia Plastics and Liquids returned a combined N$4.68 million of the N$63.7 million which GIPF had invested in the six companies.

 
The positives
Despite the losses, GIPF continues to make notable strides. As at September 2017, GIPF’s asset base stood at N$ 106,3 billion.
Additionally, the Fund remains one of the biggest contributor to the socio-economic wellbeing of the Namibian society.
GIPF currently takes care of close to 19 000 orphans and 9000 widows and widowers.

 
During the period under review, the Fund has paid out a total of N$2,9 billion in benefits. Of this amount N$1,3 billion was paid as monthly pensions.
GIPF offers funeral benefits at no cost to its members, their spouses and children along with a lump sum and monthly benefits paid to the deceased loved ones.
Upon death of the main member, the funeral benefit is divided as follows: An active member and spouse receives N$8000; a retired member receives N$8000; a qualifying child get N$3000 while a qualifying child under the age of 1 year receives N$1000.

 
During the financial year ending 31 March 2017, the Fund paid over N$121 million in death benefits and over N$9,1 million in funeral benefits.
Speaking at an event here last week, GIPF’s board chairman, Goms Menettè, pointed out that the process of settling death claims is a major challenge for the Fund.
“One of the challenges experienced especially in the process of settling death claims, is the duration it takes to identify all the beneficiaries of a member who are entitled to receive a benefit. We have found that members while still alive don’t always update their beneficiary nomination forms and include all of their dependents. This leaves the Fund in a difficult position of tracing all qualifying dependents to enable a claim to be paid out,” Menettè bemoaned.

 
Despite this daunting task, GIPF managed to trace 9000 out of 12000 beneficiaries. At present, the list of unidentified beneficiaries stands at 3000 beneficiaries.




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