Government, through the Ministry of Finance, has announced plans to launch an Infrastructure Fund next month in partnership with the private sector.
The fund will be housed by the Development Bank of Namibia.
Finance Minister, Calle Schlettwein, told journalists in the capital on Wednesday that the fund will be ring-fenced for funding current and future priority economic infrastructure.
“The fund will be operational by the end of October this year and it will draw capitalisation from the domestic financial and capital markets, with amortisation provided for under the budget overtime as a measure to embed sustainability and fiscal transparency,” Schlettwein said.
He said the proposed fund will complement the infrastructure financing provided through the African Development Bank and Private Public Partnerships infrastructure financing arrangements.
“These measures will be a good shot in the arm for the construction sector, which is now bottoming out of the severe effects of the steep consolidation phase,” he said.
But one asset manager, who spoke to the Windhoek Observer on condition of anonymity, questioned how the fund would be different from the infrastructure projects to be funded through Treasury.
“This appears to be an overlap between Government and DBN funding,” the asset manager said.
He quizzed if Treasury will also inject seed capital into the fund and if capital markets are expected to invest in this fund.
Furthermore, he wanted to know if the Pension Funds Act will be amended as at the moment pension funds have a limit on how much they can invest. “Capital markets will only invest if there is a commercially viable and bankable pipeline of infrastructure projects. I wonder if this will be possible in Namibia at the moment.”
The asset manager said the fund should have been outsourced to private managers as DBN seem to lack the capacity to handle it.
“I wonder if DBN has the capacity to handle the fund. Private capital will only invest in the fund if there are commercially viable projects and an acceptable risk-adjusted return is possible,” he said.
Schlettwein said Namibia has to increase the funding of its development agenda using local resources as no country can rely on other countries’ resources for its own development. “As such, and given the investment opportunities that have emerged on the domestic investor space, the policy to raise the domestic asset requirement threshold is now due for implementation with the gazetting of amendments to domestic resources requirement in the first week of October,” he said.
The amendments will lift the domestic asset requirements from the current 35 percent to 40 percent by January 2018, 42,5 percent by April 2018 and 45 percent by October 2018.
“Such policy change will release substantial savings into the economy for listed and unlisted opportunities.”
DBN CEO Martin Inkumbi explained in an interview that in the short term, the Government is planning to raise N$3 billion for the ongoing public infrastructure projects.
“The money needed for long term projects, cannot be quantified as we don’t know what those projects will be.”
He said there will be two kinds of projects to be covered by the fund. The first fund is a self-funding project like toll roads, where a private investor will be allowed to recoup their money back from fees.
He also gave the Gautrain in South Africa as an example of a project, which is self-funding. Inkumbi said other projects, which are not self-funding will have Government guarantees that public funds will be used to repay the investors.