Ino Harith Capital is one of 17 licensed, Namibian owned and run, unlisted investment managers currently operating in the country.
This fund manager has a focus on infrastructure funding as part of its mandate from the Government Institutions Pension Fund (GIPF).
Below is an extract from an interview with Ino Harith Capital Managing Director, Fillemon Iyambo (FI), in which he shares information about his company and infrastructure capital development needs in Namibia.
Q: Why did Ino Harith Capital pursue an infrastructure mandate?
FI: We chose the infrastructure mandate because we see the need to accelerate infrastructure development in the country which is not just a challenge to Namibia, but a global challenge.
It is estimated that in Africa, we need over US$94 billion per annum to accelerate infrastructure for the next ten years. That is what is needed, but it has been identified that there is a funding gap of more than US$30 billion in Namibia.
In 2014, the Bank of Namibia (BoN) estimated that the infrastructure need in the country for the next six years is around N$223 billion and that was based on the figures of those years.
I believe this funding need might be around N$300 billion, given that government is not in a position to fund the infrastructure the economy demands and requires.
Q: What are the infrastructure investment opportunities that exist in the country?
FI: The infrastructure which we are talking about here is across the board, from transportation, ICT, logistics, health, municipal services, education, etc.
We need to build new schools; we need to build new health facilities to enable people to have access to healthcare.
If you look at ICT, just recently MTC embarked on an infrastructure development program, where they want to cover all of the country and that tells you that we still need a lot of infrastructure in terms of ICT. We need fiber cables across the main cities, as the internet becomes part and parcel of everybody’s daily lives and the infrastructure needs to be enhanced.
If you look at power, Namibia is importing more than 64 percent of its power from neighbouring countries, if I’m correct; it’s costing the country over N$2.8 billion every year.
NamPower cannot stop importing power, because we need power. So already that creates an opportunity for somebody to invest in renewable energy, in upgrading the existing power stations and setting up transmission lines.
If I am correct, since independence no major water infrastructure has been established and the current one is aging. We need to embark on that. It is so disappointing that we tell the world that we don’t have sufficient water in this country, yet we have access to the ocean.
We need to invest in water desalination plants and the pipes needed to get that water to Windhoek or to wherever it is needed. We will never deplete the sea, we just need to look into those opportunities and prioritise.
The on-going port expansion provides an excellent opportunity for Namibia to become a gateway into Africa. However, we need to put up the relevant infrastructure in terms of storage, terminals.
Terminals are being built, but we need to put up all other supporting infrastructure to become a world-class gateway to Africa.
Q: How do unlisted investment managers such as yourself help bridge the funding gap or come up with the required funding solutions?
FI: What we need to take recognition of is in the past or historically, the funding of infrastructure was funded by users’ fees, GRN subsidies or debt. The users fees are still there, but government fees have been changed, the borrowing is a challenge now because as a country we don’t have that borrowing power anymore.
We have to appreciate and commend our government for allowing pension funds to invest in infrastructure and other unlisted investment through regulations 28/29.
In the past, our savings have either been invested in SA or somewhere else and now government has come up with a regulation where it requires pension funds to invest into the economy at least 1.5 percent of their total assets to help accelerate economic growth.
So as a private equity manager, we can help the government through public private partnerships to finance infrastructure. However, we don’t finance all infrastructures, only commercial viable infrastructure.
Q: Why commercially viable infrastructure?
FI: Because the money we are putting in is for pensioners & we need to grow those assets. We can’t finance social infrastructure like a road which is there. How will we recover the money? So what I see here is by nature infrastructure is owned by the state or by state owned enterprises and there is no room for privatization, yet in Namibia we have to form Special Purpose Vehicles’ with these state owned enterprises, then we provide the funding needed, we provide the required funding for that infrastructure as long as we can link the income stream so that we can recover for the pensioners and make some margin on it.
Q: Do you still think government has got a role to play in terms of infrastructure funding?
FI: The infrastructure is owned by the government and it must concentrate more on the social infrastructure and avail opportunities to private investors to invest in commercially viable infrastructure.
However, there is a need for business re-engineering when it comes to government enterprises. Bureaucracy makes it difficult for us. A private investor has no time in the world to wait for everything to unfold. We need to find a formula which will create a win-win situation for both private investors and the government.
If we want to attract international investors, we must put our house in order, so that people will not feel like they’re going to be there and their money will be stuck there.
For example, in our mandate, we have a portion of providing land delivery on municipal services and that is a revolving facility, which means that I must invest it in one project and take it out after the project is finished and do the other project. But now if I have to park this money for five years in one project, I will not achieve my goals. So bureaucracy must be addressed first.
And I think there is a need to educate those who are in positions of power at parastatals and other government offices.
I think bureaucracy is also coming into other laws which are not aligned to one another. We find that the new Public Procurement Act might not be supported by the Local Authority Act. And then you have to alienate a land which you have serviced, you have to meet the requirements for both. You might have to go back and forth.
Another example, for you to become an independent power producer, you must have a licence from ECB and you must have an off take agreement with NamPower, Nored etc.
It will be better, for the benefit of the country if NamPower and ECB sit on one table and say there is this opportunity, so that you don’t have to go back and forth.
Besides that, the local authority has to avail the land where you are going to put your plant.
We have to come up with business re-engineering where we have to sit around the table and provide solutions.
Q: Do you think regulations 28/29 will address funding or capital challenges when it comes to issues of infrastructure?
FI: Yes, I can say that Namibian programs can only be understood by the Namibian people. What I am seeing in the market is that most, if not all the fund Managers which are in the market, are Namibian owned, or at least majority of them are Namibian owned.
They are in a position to direct the funding to the most needed infrastructures because they understand the basics of the economy.
I can tell you that GIPF alone has availed over N$5-7 billion into the local economy already. This shows that Regulation 29 has made an impact.
I believe we are on the right path and believe we have the capacity required to deliver what is needed. We just need to align ourselves and collaborate as a nation being the private sector, government and parastatals.