Over N$10b availed for unlisted investments in 2022: NAMFISA
• By Confidente Reporter
NAMFISA’s (Namibia Financial Institutions Supervisory Authority) 2022 second to fourth quarter report says N$10.19 billion of the country’s savings were availed for unlisted space investment in 2022.
As of December 2022, the report says only N$5.5 billion had been disbursed.
“This has left around N$4.69 billion of the committed capital lying idle,” the report states.
The report provides an analysis of the unlisted investments industry from the second to the fourth quarter of 2022, that is, 1 July to 31 December 2022.
“By the end of June 2022, N$5.1 billion of the country’s savings was committed to unlisted companies and projects but only N$2.6 billion was disbursed or channelled for projects. The total committed capital was N$5.09 billion as of 31 December 2022, while total investments in unlisted companies as of 31 December 2022 amounted to N$2.9 billion as billions in capital lay idle.”
Local economist Josef Sheehama said the latest figures show that investors are conservative when it comes to unlisted companies/investments(?) as the risk is too high looking at the illiquidity, capital loss, dilution, dividends, and loss of capital.
“Investors demand high returns to compensate for their risks. However, an investor with a long-term perspective and high-risk profile can consider unlisted for a significantly higher return. Furthermore, retail investors may participate up to a specific amount if more demand from investors is received. Then private equities invest in unlisted companies’ interests at a higher valuation. As a result, unlisted shares prices will not provide you with cash flow until several days to weeks. Therefore, when you are investing in unlisted projects, know that there are very high chances of getting inconsistent dividends.
“As a result, it becomes difficult for investors to keep track of the growth of the projects they have invested in. There is a high probability to lose money you invested in a project that produces weak financial performance. Additionally, the fair value is difficult to ascertain and due to this, getting any loan or advance becomes even more difficult. The investors are afraid, especially in the time of market volatility despite N$10.19 billion for unlisted investments by NAMFISA,” he said.
Sheehama said the main risk management challenge is to ensure a strong governance structure and accountability, while at the same time adjusting performance evaluation to the illiquidity nature of the investment, which implies a long-term horizon in performance measurement and a higher tolerance for short-term performance shortfalls.
According to NAMFISA’s assessment, the increase in committed capital can be attributed to additional capital committed to special purpose vehicles (SPVs).
“This increase in committed capital indicates that pension funds are continuing to comply with the regulations by allocating additional capital for investment in unlisted companies through SPVs,” the report stated.
For more on this & other stories: Grab a copy of the Newspaper