It seems that the Namibian Competition Commission has resolved to join forces with NAMFISA in promoting more competition in the retirement funds industry. Interestingly though, it chose to bracket out two-thirds of the retirement funds industry comprised of retirement annuity funds and surprise, surprise... the GIPF! In this endeavour, RFS and the only other larger player in the private funds market segment, and RFS and three other larger players in the umbrella fund market segement, were served with a notice of an investigation by the Namibian Competition Commission into alledged uncompetitive practices in the pension fund service provider industry. It appears that the Competition Commission took its clue for such an investigation from an article in the American Journal of Marketing Research which comments on “The Nature of Commercial Practices in the Namibian Pension Fund Administration Market”. The article is the result of a study by MR Zamuee through the Maastricht School of Management. The study claims that “…the Namibian pension fund administration landscape is highly concentrated with 3 administrative firms controlling 80% of the market...”
If the Namibian retirement fund service provider industry were to be investigated, it is incomprehensible that the investigation will not cover retirement annuity funds and the GIPF who cover two-thirds of the market, with the GIPF of course being by far is the largest player in the Namibian retirement funds market. By our estimates retirement annuity funds and the GIPF together control 71% of total assets and 61% of total active membership (excluding pensioners) of the retirement funds industry. RFS in contrast, controls a ‘whopping’ 11% of total assets and 12% of total membership (excluding pensioners) of the retirement funds industry!
Although GIPF may argue that it is administering the government staff in the fund, it is in fact also offering its services to the wider pension funds market and is competing with private pension fund administration companies, particularly in the para-statal pension fund market and it competes with other private funds that offer membership to quasi government employers.
Against this background I would argue that the conclusions reached in this study are factually incorrect since the study excludes the retirement annuity funds, and the GIPFas largest administrator by far. In fact the GIPF’s disproporationately size in the Namibian financial sector should ring alarm bells at our regulators, as it presents a major systemic risk to the Namibian economy in general and the Namibian financial market specifically. There is no competitor in Namibia that has the resources to meaningfully compete against a GIPF that has the added advantage of employing taxpayers’ moneys to fund its activities.
Considering that the Namibian employer based pension fund market only covers some 200,000 employees, of which roughly one-half is the exclusive domain of the GIPF, the remaining 100,000 employees are covered by 5 administration companies. Considering further that an administration company needs to administer at least 20,000 employees to be viable, Namibia would have 5 administration companies that are all on the border line of not being viable if the total remaining market were to be shared equally between the 5 administrators. This is substantiated by the fact that since Namibia’s independence every time more than 3 administration companies were active in the non-GIPF market, one of them closed down its administration operations sooner or later.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.