In this newsletter:
Benchtest 09.2019, prescribed assets are blatant theft of pensions and more...

NAMFISA levies

  • Funds with year-end of October 2019 need to have submitted their 2nd levy returns and payments by 25 November 2019;
  • Funds with year-end of April 2019 need to have submitted their 1st levy returns and payments by 25 November 2019;
  • Funds with year-end of November 2018 need to submit their final levy returns and payments by 29 November 2019;
  • December 2018 year-ends need to submit their final levy returns and payments by 31 December 2019.
Extension granted for Online Submission of Employees Tax (PAYE) returns via the ITAS portal

Employers were originally required to submit their monthly PAYE 5 returns on ITAS by 20 September. Due to difficulties experienced by many employers to adapt their payroll systems in time, the due date was postponed to 20 February with a clear message that any further extension will not be granted.

Read the relevant PWC alert here...

Social security and labour legislation review

The latest Namibia Employers Federation (NEF) newsletter reports on developments concerning the Social Security Act, the Employees Compensation Act, the National Pension Fund and other matters.

Download the newsletter here...

Administration of Estates Act – where do we stand?

Following an informal meeting between the Principal Officer of the Benchmark Retirement Fund and the Master of the High Court, the following points were noted with regarded to the status of the prospective further amendment of the AoEA:
  • The Master is not ready to accept and administer the monthly annuities. It can however administer and make lump sums payments.
  • The Master would formally communicate when they would be ready to accept payments, for both annuities and lump sums. We should anticipate a formal response before or on 1 November 2019.
  • The Master does not expect the revised Bill to be enacted this year.
On the basis of comments made by a NAMFISA official at the September industry meeting, it seems funds should ignore the amendment of the AoEA that came into force on 1 January 2019 on the basis of the written ‘moratorium’ granted by the Minister of Justice earlier this year. A formal response by the Master to a formal enquiry by the Benchmark Retirement Fund is being awaited.

News from parliament on FIM Bill and other Bills

The Namibia Financial Institutions Supervisory (NAMFISA) Bill passed committee stage in parliament without any amendments and was read a third time on 15 October 2019.

The Financial Services Adjudicator Bill passed committee stage in parliament without any amendments and was read a third time on 15 October 2019.

On the motion of the Deputy Minister of Industrialisation, Trade and SME Development, seconded by Ms. Kandumbu, debate on the second reading of the Financial Institutions and Markets (FIM) Bill was adjourned until Tuesday, 22 October 2019. During the session of the 24th of October discussion was adjourned to 24 October at which time the Minister is to answer to earlier questions from the floor. Due to election campaigning underway, a quorum may not be present on 24 October. However should a quorum be present, it is expected that the Bill will be referred to committee stage in the last week in October.

Registered service providers

Certain pension fund service providers need to be registered by NAMFISA and need to report to NAMFISA regularly

These service providers are:-

  • Registered Investment Managers
  • Registered Stockbrokers
  • Registered Linked Investment Service Providers
  • Registered Unit Trust Management Companies
  • Registered Unlisted Investment Managers
  • Registered Special Purpose Vehicles
  • Registered Long-term brokers
  • Registered Long-term insurers

If you want to find out whether your service providers are registered, or whether you need to establish directly from NAMFISA because the service provider does not appear on the list, use this link...

Check out our new retirement calculator

Our web based retirement and risk shortfall calculator has been enhanced and updated to assist you to determine how much you should contribute additionally, either by way of lump sum or regular salary based contribution, to get to your target income at retirement, death or disablement.

Try it out. Here is the link...

Dear reader

In this newsletter we address the following topics:

In ‘Tilman Friedrich’s industry forum’ we present -

  • How does intestate succession impact pension fund death benefits?
  • Can a fund grant a loan on a property owned by more than one person?
  • Prescribed assets are blatant theft of pensions.
  • A summary of the latest FIM Bill standards.
  • The IMF – can we take it seriously?
  • The full article in last month’s Benchmark Performance Review to 31 August 2019 – ‘How to invest in times of political unrest.’.

In our Benchmark column we present:

  • Changing the retirement funding landscape (part 2).

In our Administration Forum column we alert employers of their obligations concerning correct calculation and payment of contributions.

In ‘News from RFS’, read about

  • "Non-standard service fees" – is this principle in your fund’s interest?.

In ‘News from the marketplace’ read

  • Media reports about challenges pension funds experience investing in Namibia and on the status of the Namibia Revenue Agency.
  • An analysis of the price of fuel.

In ‘News from NAMFISA’ we present –

  • A summary of the minutes of the industry meeting held on 19 September 2019;
  • A link to the minutes and the presentation of the industry meeting of 19 September 2019.

In ‘Legal snippets’ read our guest writer’s exposition on ‘Age of majority – the Child Care and Protection Act vs the Administration of Estates Act’.

The topical articles from various media should not be overlooked – they are carefully selected for the value they add to the management of pension funds and the financial well-being of individuals...

...and make a point of reading what our clients say about us in the ‘Compliments’ section. It should give you a good appreciation of who and what we are!

As always, your comment is welcome, so open a new mail and drop us a note!


Tilman Friedrich

Monthly Review of Portfolio Performance
to 30 September 2019

The Monthly Review of Portfolio Performance to 30 September 2019 provides a full review of portfolio performances and other interesting analyses.

Should you be concerned about recent poor performance of your pension fund?

As a pension fund member you will no doubt be disappointed with the investment returns your (probably) biggest investment has earned over the last number of years. This investment is to carry you through retirement and in order to ensure a comfortable retirement. This assumes a typical total contribution by you and your employer of around 17% of salary and on the underlying expectation of long-term returns that your pension fund investment should earn of 5% per year in real terms, i.e. above inflation. Where inflation for the year to 30 September was 3.2%, your investment should thus have earned 8.2% for the year to 30 September. The average return of typical pension fund investments for the same period however, was only around 3.4% (after fees). Over a 5 year period inflation was 4.7% per year. Your investment should have thus earned 9.7% per year while the average return of typical pension fund investments for the same period however, was only around 6.8% per year (after fees). So over both periods, your investment has substantially underperformed the underlying expectation. One will have to extend the period to 8 years to get to the first measurement period where the average return of about 9.8% per year (after fees) actually achieved the expected real return of 9.9% per year (inflation of 4.9% plus 5% real return).

Any member of a fund who has been in the fund for 7 years or less certainly has good reason to be disappointed and to be concerned.

Read part 6 of the Monthly Review of Portfolio Performance to 30 September 2019 to find out what our investment views are. Download it here...

Death benefits and intestate succession

Section 37C prescribes the manner in which death benefits are to be disposed of by the trustees of a fund. In short, dependants are to be considered first, if there are any. Next to be considered are nominees, if there are any.

If the deceased fund member did not leave any dependants but nominated persons to be awarded a portion of the death benefit as specified in writing to the fund, the benefit or such portion of the benefit shall be paid to such nominee: Provided that where the aggregate amount of the debts in the estate of the member exceeds the aggregate amount of the assets in his estate, so much of the benefit as is equal to the difference between such aggregate amount of debts and such aggregate amount of assets shall be paid into the estate.

If there are neither dependants nor nominees, the benefit is to be paid into the estate of the nominee for disposition to the heirs in accordance with the testament of the deceased. If the deceased did not leave a testament the benefit is to be paid into the Guardians Fund to be disposed of in terms of the Intestate Succession Ordinance 1946.

Therefore, except for the circumstances set out in section37C, as presented above, the law of intestate succession bears no relevance to the distribution of a death benefit of a pension fund member. Only once a benefit is paid into the estate or into the Guardians fund, as prescribed by section 37C, the Master of the High Court will oversee that the benefit is paid to the heirs in terms of the deceased member’s testament or is disposed of in terms of the Intestate Succession Ordinance in the event of the member not having left a testament.

Trustees of a fund therefore do not need to concern themselves with the fate of a death benefit once it has been paid into the estate or into the Guardians Fund as prescribed by section 37C of the Pension Funds Act. A different set of rules will apply from there on.

Housing loans where property is owned by more than one person

Property can be owned through different vehicles and in different forms. More than one person can be registered as joint owner of a property. Property can be owned by a company in which the shareholder’s ownership is linked to a specific property via his share. It can be owned via a sectional title scheme or in a ‘build-together cooperative.

In these instances the land is not registered in the name of a single person. Can a pension fund grant a loan to a fund member in respect of a property in which the member is not the only owner?

Ownership of fixed property is recorded in the deeds office for each surveyed piece of land in the proclaimed areas of the country. If it is within the borders of Namibia but not in a proclaimed area it belongs to the government. The irrefutable evidence of ownership of land is thus if your name is reflected on the relevant title deed at the deeds office and the title deed can reflect more than one person as being the co-owner of that piece of land. Of course for properties registered in the name of a legal entity, ownership of any portion of that property registered in the name of a legal entity will have to be established by reference to the legal documents in terms of which the legal entity has made over ownership to that portion to someone.

In terms of section 19(5)(a) of the Pension Funds Act the prerequisites for the granting of a housing loan to a member by the Fund are that a member or his or her spouse must own the property in question and that the dwelling must be occupied by the member or a dependant of the member. Section 19 (5) (a)(i) requires that such a loan must be in respect of a property "...which belongs to the member or his or her spouse...". The word 'belong' is nowhere defined in the Act and one would have to consult a dictionary to determine the meaning of this word and whether or not this would exclude a property registered in the name of a Close Corporation or a Limited Company.

The Oxford Advanced Learner's Dictionary defines belong as "....be the property of..., i.e. mine...". There is no reference to any formal or legal requirements underlying the word 'belong' in this definition. One may consequently argue that it is a question of substance rather than law and that the substance of 'belonging' can also be fulfilled in this context, through the member's and/or the spouse's sole ownership of the property holding Closed Corporation or Limited Company, or through the conclusion of a legally enforceable contract that secures ownership for the person applying for a loan.

In all instances, ownership of a property must entail the freedom to hold, dispose, encumber, transfer or bequest the property at any time. This is implicit when being the registered owner at the deeds office but not necessarily so when owning a property through a legal entity. Where a member intends to borrow from his pension fund for a property occupied or to be occupied by him, his spouse or a dependant, the trustees will have to establish whether the member has the right to hold, dispose, encumber, transfer or bequest the property at any time. At the end of the day, the fund must be able to sell the property should the member fail to meet his obligations under the loan agreement with the fund.

Of course, once satisfied that the property in question is indeed owned by the member, the trustees need to satisfy themselves that the loan will generate an acceptable return, that it represents an acceptable risk profile in terms of the inflation risk and the risk of incurring a capital loss when being obliged to sell the property. Such a loan must be approached by the trustees with the same prudence as they would approach any other investment opportunity. Finally, the trustees must ascertain that all the other prescriptions of section 19(5) will be complied with before making payment.

Prescribed assets are blatant theft of pensions

Who still remembers the times when pension funds were obliged to invest a substantial portion of their assets in SA government bonds? This topic was raised at an ANC congress again earlier this year and the matter recently ended up in the SA parliament. A member of the DA warned that the policy would leave South Africans with smaller pensions when they retire. "It is pension theft," he said. "This government is proposing to steal pensions of hardworking South Africans to pay for their mismanagement. "Stealing from people's future pensions is still theft and should be fought by every South African who has diligently saved for their retirement," he told the National Assembly.

In response, an ANC MP defended the policy proposal. "The ANC is not a reckless government. We are a caring government," she said and went on to explain the ANC's reasoning for considering the policy. With the economy being under strain the governing party is coming up with solutions and wants to support the president's "exploratory direction", she said.

In Namibia, our Minister of Finance chose to follow a slightly more sophisticated approach by setting 45% of total pension fund assets as the minimum to be invested in Namibia, knowing full well that in the absence of investment opportunities in the Namibian market, pension funds will be forced to invest in government bonds. The arguments offered in support of the prescribed asset requirement are the same as those raised by the ANC parliamentarian.

This requirement substantially reduced the cost of funding for government from paying a premium of around 1.5% over SA equivalent rates to now being on par with SA equivalent rates. At the same time it has practically resulted in a substantial reduction of exposure to total equity. One asset manager had to effectively reduce its equity allocation from 71% down to 59% in order to remain with the prescribed investment parameters.  Since the beginning of 2013, the negative impact on returns of its Namibian balanced portfolio relative to its SA balance portfolio has been a reduction of the return by nearly 10% over just less than 6 years! While these two portfolios initially performed pretty similarly, the gap has been opening up ever more, as Namibian prescribed investments continued to increase.

If you are interested to follow the discussions in the SA parliament to equip yourself for a discussion that should definitely be held in our parliament as well when regulating pension fund investments, read the full article in Fin24 of 10 September 2019, here...

Further on in this newsletter under ‘News from the market place’ we are quoting recent concerning reports in the Namibian that indicate pensioners and pension fund members are indeed made to pay as the result of misguided regulation.

The IMF – can we take it seriously?

As we reported in our previous newsletter, the International Monetary Fund made some seemingly conflicting statements in a report on the Namibian non- banking financial sector. On the one hand the report intimated that the cost of regulation has increased considerably, to be cover by an increase in levies that was described as excessive. On the other hand the report suggested that NAMFISA’s inspectors should be more experienced and that inspections should be carried out more regularly, thus hinting at the regulator having to increase its costs to achieve these objectives.

Since we have been advocating benchmark of the costs of regulation and in the light of these seemingly conflicting comments in the IMF report, the editor wrote to the IMF. We pointed out that our main concern with the proposed new legislation (FIM Bill) is that it represents a first world legal framework to be installed in a third world country. As the report points out the Namibian regulator does not have the capacity to meet the obligations set by the current legal framework. This problem will of course be much exacerbated by the new legal framework which will include a barrage of standards. NAMFISA of course has the advantage of raising levies to cover the costs it needs to incur, essentially at will. The industry that will be required to implement and comply with the new legislation does not have that benefit and operates in a highly competitive environment. It too would have to substantially increase its capacity to meet its obligations under the new legislative framework. This in turn would further increase the cost to the consumer where the IMF already laments that the pensions industry in Namibia is fragmented and consequently costly to the consumer.

It was furthermore pointed out to the IMF that its report does not make any attempt at defining an international benchmark for regulatory and supervisory costs for countries at a similar level of development and of similar size. Superficial studies we have done indicate that our consumer of non-baning financial services services carries a multiple of costs relating to supervision and regulation when compared to developed countries like Australia and the UK.

Unfortunately we did not get any response nor only the courtesy of an acknowlegement of receipt of our letter. Hence our question – can the IMF be taken seriously?

Latest FIM Bill standards summarised

Two new standards were circulated by NAMFISA for comment in August, i.e. GEN.S.10.19 and GEN.S.10.20.

  • GEN.S.10.19 Application for approval of a change of name, use of another name or use of shortened for or derivative of a name
    • Before changing the name, using another name or a shortened form name, an application must be submitted -
      • on the form per schedule to this standard to NAMFISA electronically through ERS and as hard copy;
      • together with
        • proof of payment of application fee as per GEN.S.10.23;
        • resolution and reasons in support of application;
        • all other information and documents prompted for in the schedule to the standard.
    • Certified copies must be provided of the entity’s legal documents that need to be submitted.
  • GEN.S.10.20 Definition of related party transactions and identifying those that are prohibited
    • This standard applied to all directors of financial institutions/ intermediaries
    • A party is related to another party if former –
      • Is an affiliate or associate of the latter;
      • Is in a joint venture with latter;
      • Is a member of the key senior management of latter;
      • Considered to be controlled by latter.
    • A ‘related party transaction’ is a transfer of resources, services or obligations between two related parties.
    • Conflicts of interest arise from related party transactions of ‘significance’.
    • ‘Significance’ may exist if –
      • It requires NAMFISA reporting;
      • It requires reporting to senior management; or
      • It requires reporting to the shareholders.
    • Significant related party transactions are prohibited in which a conflict of interest is not disclosed.
    • Directors of financial institutions/intermediaries must comply with GEN.S.10.8 and GEN.S.10.9  when assessing a conflict of interest in terms of this standard..

How do you invest in times of political and economic unrest?

Since governments across the globe are net debtors, they all have to pay interest and they all have to repay their debt. The best friends of governments are economic growth and inflation. Economic growth raises tax collections while inflation reduces the real value of debt and both thus ease the burden of governments to service their debt.

In the aftermath of the financial crisis, followed by a deep slump in global consumer confidence and global economies, reserve banks across the globe, including Namibia, thought it wise to boost consumer confidence and consumer spending through massive monetary easing and an ultra-low interest rate environment, thereby creating massive liquidity in global financial markets. Unfortunately these measures never achieved the desired results and where we are today global economies, including those of China, the Eurozone and Namibia are in reverse gear. Consumer confidence has not really improved and the consumer has not really started to consume. Much of the global liquidity flowed into China. The result of that was a massive build-up of Chinese foreign reserves, and massive investment in economically unviable projects and infrastructure such as futuristic ghost cities centrally planned by the communist government. One of these, Kangbashi, was built in the remote south-west of the country with little economic justification, initially for a population of half a million and later expanded for one million, but currently inhabited by only around 150,000 people. In the meantime the Chinese ‘gold rush’ of foreign investors is about to come to its end. The high hopes of the Chinese consumer fuelling the global economy also looks like it will not happen anymore while foreign investors are busy pulling their money out of China, thereby rapidly reducing China’s foreign reserves and putting pressure on China’s financial system and currency.

The question reserve bankers must be asking themselves is how to get their economies going again particularly in the light of China not bringing the relief hoped for.  Interest rates are already zero or even negative in a number of developed countries so this will not work. When one follows the media, one picks up hints here and there of developments that appear to be aimed at promoting economic growth. Germany is now being criticised harshly for not doing enough to get its population to desist from saving and to start spending. While the German saver is getting no interest on his saving, maybe he will start spending his money may have been the thinking. However, this has still not really happened.  Well the German ‘climate cabinet’ just recently agreed on spending 54 billion Euros over the next few years to achieve ‘climate neutrality’ by something like 2050. So what does this entail? Germany is now on a mission to dismantle its traditional motor vehicle industry, the mainstay of the German economy for many years and the industry where Germany was a world leader and had a strong global competitive advantage. The German government now wants to seriously promote electric mobility. This will not be an industry where Germany will have any competitive advantage and in fact there are many newcomers to this industry such as Tesla that are probably way ahead of German car makers. This development, however, will mean that car makers will replace their production assets in the conversion of the industry at a huge cost.

The hysteria about global climate change might be another of such less overt attempts to reignite the global economy. If this is a conscious strategy and this strategy really gets traction globally, it will most likely lead to another industrial revolution in the course of which much of the existing economic infrastructure will be rendered redundant and will be replaced with new infrastructure which of course will come at a huge expense, but at least there is hope for this boosting the economy. Global media appears to be driving a concerted global effort towards another industrial revolution that will require huge amounts of investment in new infrastructure. Perhaps this will eventually be called the 5th industrial revolution which will be supported by the 4th industrial revolution heralded by artificial intelligence.

In the past, wars have done quite a good job in rejuvenating peoples and economies and igniting economic growth. With a ‘self-inflicted’ in-house industrial revolution driven by politicians, one may be able to achieve similar results while avoiding much human pain and suffering but of course the flip-side of that coin is that there will be not rejuvenation of peoples. Having said this, it does not appear as if the US is relenting at all on its thrust to remain the only global hegemon. As long as this strategy is still firmly in place, and as long as there are countries refusing to bow down and accept the US as the only global hegemon, such as Russia, China, Iran, Turkey and a number of smaller ‘players’ the US is likely to apply conventional methods to impose itself . We are seeing this all over the globe. The huge fuzz about ‘rocket man’ Kim Jong-un had absolutely nothing to do with his rockets or his nuclear capabilities. It was blown out of all proportions to pressure South Korea to accept the deployment of the US THAAD system that is really aimed at containing China. And the US was successful. One of the first official acts newly elected South Korean president Moon’s was to stop the deployment of the system, only to relent a month later despite public protests. We see NATO moving into former Eastern Bloc countries despite undertakings not to do so when the iron curtain fell. We see how aggressively the US pursues its strategies in Venezuela and the Strait of Hormuz, with Turkey, in the Middle East, Afghanistan, Libya in the South China Sea etcetera.

Is this what is behind the current economic war on China (and on Russia, Turkey, Iran etcetera)? China used the last 20 years of peaceful economic co-existence to not only build its economy but also to build its military capabilities, as did Russia. While no opponent to US hegemony has the means to challenge this hegemony on his own, things will certainly look different if China, Russia, Turkey and Iran form an alliance to take up the challenge and this is what seems to be happening right now. Of course the US is not watching this idly. Brexit could very well be part of this strategy that will emancipate the UK, as once all mighty global hegemon, from its European Union shackles. Purely for this reason, it appears inevitable that Brexit will happen. It is not about economic niceties but about military imperatives. Since Russia and China are highly unlikely to submit to US domination, a war seems inevitable as China is already posing a serious military threat the US must contain sooner rather than later, else China will become the next global hegemon. Typically the US would not want to fight a war on its own territory but would rather set up others frontier states to lead the fight against its adversaries on their territory until the warring parties have virtually bled to death, for the US to then ‘take the honours’.


There are two global developments happening now to address two key challenges the world faces. Firstly it’s the absence of global growth and secondly it is the challenge posed to the US global hegemony. These will impact investment and must be taken into account when investing. The challenge of the absence of global growth appears to be addressed by a move from fossil fueled mobility to electric mobility and from carbon emission intensive to carbon neutral industries and technology, together with the advent of artificial intelligence.  Secondly China’s threat to US hegemony is likely to be addressed by the US forcefully re-imposing itself as the undisputed global hegemony – hence “we will make America great again”.

From an investment perspective, old fossil fuel dependent industries standing in the way of the ‘5th industrial revolution’ should be dropped in favour of ‘climate friendly’ industries. Countries whose economies depend on fossil fuels will face a tough time. Climate friendly electricity generation will become popular and even nuclear power may experience its renaissance. From a political perspective, Brexit is likely to happen and the UK will no doubt capitalise on the opportunities this will offer as opposed to a European Union that will experience an economic decline. Since the European Union does not have the military means to protect its economic interests, it is doomed to towing the US line and it becoming the field of fire in a military confrontation between Russia and the US. China and its economy are also on the back foot and will find the going tough and this will negatively impact investments in Chinese firms. In terms of geographical distribution of investments, frontier countries of US adversaries present a fair risk. In contrast, politically stable developing countries, with well managed economies that are out of the line of fire should offer more secure investment prospects.

Although the timing of more serious global political turbulence as sketched above is difficult to foresee, conceivably this can be towards the end of president Trump’s tenure as this may be the last opportunity for the currently dominating school of thought on US strategy to have its will.

Pension fund governance - a toolbox for trustees

The following documents can be further adapted with the assistance of RFS.

  • Download the privacy policy here...
  • Download a draft rule dealing with the appointment of the board of trustees here...
  • Download the code of ethics policy here...
  • Download the generic communication policy here...
  • Download the generic risk management policy here...
  • Download the generic conflict-of-interest policy here...
  • Download the generic trustee performance appraisal form here…
  • Download the generic investment policy here...
  • Download the generic trustee code of conduct here...
  • Download the unclaimed benefits policy here...
  • Download the list of fund service providers duly registered by NAMFISA here... 
  • Download the Principal Officer performance appraisal form here...
  • Download the revised service provider self-assessment here...
Tilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. Tilman is co-founder, shareholder and Chairman of the RFS Board, and retired chairperson, and now trustee, of the Benchmark Retirement Fund.

A compliment with a difference

“Dear Directors,
I wish to thank you once again for this token of appreciation. As always, I don’t take anything for granted and am indeed grateful that I am working for such a great Company and with such awesome people. I have never regretted a moment since joining RFS more than 12 years ago. I am extremely thankful and proud to be part of this team!

Kind regards...”

Read more comments from our clients, here...

Changing the retirement funding landscape (part 2)

In the previous article we focused on the key considerations for financial resilience, which was the theme of this year’s Sanlam Benchmark Symposium in South Africa as presented by Barend le Grange – Head of Individual Member Support: Sanlam Employee Benefits South Africa, at the Benchmark Retirement Fund Annual Member Meeting held on 5th September 2019 at NIPAM. In this article we are going to have a look at the fascinating findings and stats of the Sanlam Benchmark Survey that were presented by Le Grange at the same meeting.

Le Grange advised that one of the biggest megatrends in the pension fund industry is the rapid consolidation of stand-alone (private funds) into umbrella funds, stating that “ in South Africa only about 1,500 funds can broadly be categorised as stand-alone compared to about 13,000 in 2005.”. He further noted that about 350 stand-alone funds are in the process of transferring to an umbrella fund. Le Grange advised that the rapid consolidation is driven by the underlying key considerations of financial resilience, which we touched on in the previous article. These are default strategies, good governance, member engagement, information security, professional and independent trustees and scale.

Le Grange advised that increase in funeral cover, the introduction to severe illness benefits and increase in insurance rates were the top advice themes noted by employee benefit (EB) consultants in the Group Risk space. Le Grange advised that 19% EB consultants indicated that their clients experience a trend towards more claims being declined and 52% EB consultants noted that their clients have experienced large insurance rate increases over the past three years.

Le Grange advised that the EB consultants also noted that the number 1 thing that they would change in retirement fund industry is that clients stop fixating on costs and pay more attention to value. Le Grange shared the below, in figures 1 to 3, to illustrate the impact of cost.

Figure 1 – Average Contributions and Cost

Figure 1 is the estimated average contributions and cost of both stand-alone and umbrella funds, which result in an average net contribution of 13%.

Figure 2 – Replacement Ratio

Figure 2 shows the estimated salary replacement ratio over various terms (years) of investment. The salary replacement ratio expresses the pension that will be received on retirement as a percentage of the pensionable salary in the last month before retirement.

Figure 3 – Replacement Ratio with no administration and consulting fees

Le Grange noted that the impact of waiving all the administration and consulting fees over a 40-year term is just a 5% uplift and only 1% uplift over a 10-year term. Le Grange advised that clients should move away from focusing on the difference between the cost of administration and/or consulting between service provider A and B and rather focus more on which service provider produces more value, quoting Warren Buffet – “Price is what you pay, value is what you get.”

Paul-Gordon /Guidao-Oab joined RFS as Manager: Audit and Compliance in May 2016 and then moved into the position of Benchmark Product Manager. In 2019 he assumed the duties of Principal Officer of the Funds. Paul holds a B Compt degree from Unisa and has completed his articles with SGA.

"Non-standard service fees" – is this principle in your fund’s interest?

Clients often appear to be irritated about our charging and fee philosophy, more particularly with the principle that while we are usually paid a retainer fee, certain services attract a so-called “non-standard service fee”. In one instance this practice has even been discredited as being unprofessional! Typically, clients take the position that all fund management services must be covered by the ‘retainer’ fee.

The Code of Ethics and Professional Responsibility of the Financial Planning Institute defines a pensions practitioner’s practice for determining fees for professional services. It requires of a professional member of the Institute to “..explain in writing, the precise range of professional services that the fee is intended to cover, the basis on which the fee is computed…” and that “…the main criteria are fairness and equitability for the client and the member…”.

This means that a professional service provider should not charge for work it has not executed. By implication, the principle requires a service provider to charge for services carried out.

The services we carry out in return for a ‘retainer fee’ agreed upon with our clients, are clearly defined in our service level agreement as required by the Code, and in addition, our service level agreement clearly demarcates our mandate from that of other service providers and also clearly defines services we will provide on an ad-hoc basis as and when required, for which we would then raise an additional “non-standard service fee” as agreed upon with our client in advance. If a service provider were to include all conceivable services that a fund might require in the course of time, clearly provision would have to be made for the unknown requirement for ad-hoc services. This would entail charging for services not rendered on an on-going basis and applying the over recovery to recover the cost of ad0hoc services should they be required at any time in future. In our view this is inconsistent with the Code of Ethics and Professional Responsibility.

An analogy ‘closer to home’ for most, is building a house. The only two possible arrangements with the contractor consistent with our professional obligations are, firstly that where you add to the original plans you pay extra and where you deduct you get a price reduction. Alternatively, you agree with the contractor that whatever you desire to be changed must be changed without a change in costs and that the contractor then informs you only upon completion, what the actual cost is. We apply the former approach which we believe is the right approach.

We invite our clients to share their views on this topic with us or to let us know should they prefer any mechanism different from that we currently apply.

Kai Friedrich, Director: Fund Administration, is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. He holds the Post Graduate Diploma and the Advanced Post Graduate Diploma in financial planning from the University of the Free State..

RFS recognises long service

Erica Hipondoka celebrated her 5th anniversary at RFS recently. We express our sincere appreciation to Erica  for the 5 years of her life she has dedicated to RFS and its clients and look forward to her continuing to contribute towards the success of our team!

RFS welcomes new staff

Elray Goreseb joined our private funds accounting team on 15 May 2019. We welcome Elray heartily and look forward to him applying his skills and experience for the benefit of our team and our clients!

Managed by Namibians, trusted by Namibians - RFS celebrates its 20th anniversary in pictures

The staff behind the success of the company!

F.l.t.r. M Fabianus, managing director of RFS, Ms A Moncur, editor of the first issue of Benchtest Review, T Friedrich, chairperson of the board of RFS and H Müseler, chairperson of the Benchmark Retirement Fund.
a picturesque arrival.
A table of sweets.
A group of dancers.  Old friends listening to a speech.

Axel Thyssen of Cymot (right), our first and oldest client.

Martino Olivier of UNIREF, our first SOE client.

RFLAUN, our largest client.

Agra, our second private fund.

RFS made a donation to Make-a-Noise, a community safety organisation.

Charlotte Drayer received a 20 year certificate. Charlotte joined the company with no salary.

Founder Tilman Friedrich receives his 20 year certificate.

Read the press release here...

Here are some messages from stakeholders:

“Good day Tilman, Marthinuz and Gunter
Thank you very much for the invitation to your 20th birthday celebration. I was indeed memorable and very enjoyable. RFS is truly a Namibian success story and you, rightfully, have a lot to be proud of. Here is to another great 20 years!” ̴
~ I Erlank, CEO Capricorn Asset Management

“Dear Marthinuz, words of thanks sound so ordinary but I can assure you and your excellent team that there was nothing ordinary to the celebrations last night. Thank you for the invitation to be part of the joyful occasion to celebrate with RFS the 20 Year Birthday Celebrations. It was such a great evening and portrayed the effort that RFS puts into everything they do. I was really honoured to be part of it. A very big Thank You for the Certificate of Appreciation – it will proudly be displayed in the UNIREF office. It is my wish that you and your team and the company as a whole will reach even higher milestones. With respect and appreciation.”
~ A de Greef, Fund Administrator Universities Retirement Fund

“Guten morgen Tilman & Kai,
Vielen Dank für gestern Abend! Habt Ihr gut gemacht ?”
~ A Theissen, CEO Cymot

“Fabulous evening, amongst great company!  Thank you! ?”
~ A Schimming-Chase, Trustee, Benchmark Retirement Fund

The price of fuel – do you know what you pay for?

The latest fuel levy was set in Government Gazette 7003 of 25 September 2019 and reflects an interesting composition of the price of fuel as per below table. The total for Namibia is based on an estimated annual consumption of 1.6 billion litres of fuel in Namibia.

Interestingly included in the ‘taxes and levies’ is a ‘strategic oil storage levy’ at N$ 0.6 per litre. That is approximately N$ 1 billion per year. Given the total capital cost of the strategic oil storage facility at Walvis Bay harbour of around N$ 5.5 billion, as reported in local media, the annual levy presents a return on investment of 17% p.a. if the capital cost was amortised over 20 years.

Current  status N$/litre % Nov 2018 % Total for Namibia N$m
WTI Spot Price 5.33 38 45 8,530
Taxes, levies per Gazette 3.82 27 25 6,112
Trading margin per Gazette 1.99 14 14 3,040
Storage and delivery in Namibia per Gazette 0.17 1 1 272
Theoretical selling price 11.31 80 85 18,098
Refining @ US$ 20/bbl est. 1.90 14 14 3,040
Onshore delivery SA est. 0.03 0 1 48
Railing to Namibia 0.68 5 5 1,088
Unaccounted for difference 0.14 1 1 244
Selling price Windhoek May 2019 (diesel 50 ppm) 14.06 100 100 22,498

Concerning news for pension funds and their members

So the chickens are coming home to roost? Forcing pension funds’ and pensioners’ life savings into Namibia through regulation to promote development has not really happened and this is making them lose money in the process.

“Capital market in diversification dilemma. Namibia’s financial market is not developed enough to take up excess funds in the economy, with most pension funds recently settling for government debt. Worryingly, this has resulted in returns on government debt diminishing, with some investors currently praying that inflation stays low in order for them to earn meaningful returns on their investments. The Bank of Namibia recently said changes in the domestic asset requirement is gradually reducing treasury bills and bond yields as the market becomes flooded with too much money chasing few investments.” ~ The Namibian

“Lack of bankable projects keeping money idle. There are a lot of funds in Namibia but there are few bankable projects to take up such money, Bank of Namibia governor Iipumbu Shiimi said yesterday. Speaking at the monetary policy announcement in the capital, he observed that the capital market is flooded with funds, and not even the government debt issuance will make a dent on it. “In the last two months, there has been a lot of interest in treasury bills from financial institutions and investment outlets. In itself, it is not bad, as they had enough money and were just looking for where to invest and making more money for themselves,” he said. ~ The Namibian

“Revenue agency struggles to take off. The finance ministry is struggling to launch the Namibia Revenue Agency this month as promised, and has now pushed the implementation date to March 2020. Finance minister Calle Schlettwein revealed the new date yesterday after the ministry missed the 1 October launch date. “The launch will now be in March next year,” the minister said, adding that the date is not far, as the process involves the migration of personnel. At the appointment of the board of directors last year, the minister said the tax authority would be operational by March 2019, but that take-off date was pushed to October due to “many operational hurdles that remained unresolved”. ~ The Namibian

Minutes of industry meeting of 19 September 2019

NAMFISA held another quarterly pension funds industry meeting on 19 September 2019. Some 26 funds were represented, which is only about 30% of the 82 active registered funds. Of these 7 are RFS administered funds, just less than one-third of those represented. It seems, our comment in previous newsletters on the low representation of funds administered by our competitors has borne some fruit at last!

Here is a summary of the key discussion topics for the convenience of our readers:
  • The CoA topic to be removed from the agenda as the project has ‘reached maturity’, but decided against it because industry is still looking forward to an upload functionality to be established by NAMFISA;
  • Section 37C does not oblige trustees to withhold payment of benefits for 12 months but can pay benefits as soon as they have duly established who the beneficiaries are;
  • NAMFISA has expressed its concerns with the Administration of Estates Act in a letter to the Ministry of Justice and the Ministry of Finance but responses were still awaited;
  • NAMFISA is of the view that the letter circulated by the Minister of Justice earlier this year affords all pension funds a moratorium for not complying with the AoEA;
  • In response to industry concerns about the unlisted investment obligation on funds and the poor performance of a number of unlisted investments, NAMFISA expressed its cautiously optimistic view on the outlook for unlisted investments and suggested that funds should rather apply for exemption if they experience legitimate challenges than investing for the sake of compliance;
  • RFIN informed that it has requested a legal opinion of circular 04/2019, that deals with death benefits;
  • On the issue of provident funds offering benefits not provided for in the Income Tax Act, NAMFISA elaborated on its role being to ascertain that funds contravene any laws of the country and invited persons who have a specific issue relating to their fund to take this up with NAMFISA on a ‘bilateral basis’.
In case you missed the NAMFISA mail circulating the presentation and the minutes of the industry meeting held on 19 September 2019, follow this link to the presentation... or for the minutes, follow this link...

Age of majority – the Child Care and Protection Act vs the Administration of Estates Act
A guest contribution by Andreen Moncur BA (Law )

Ordinarily, in the case of two contradictory statutes, the most recently promulgated Act would amend the earlier Act, unless otherwise provided in the most recent Act or there is an entrenched clause in the earlier Act or in another Act. While the Administration of Estates Act 66 of 1965 (the Estates Act) appears to conflict with the Child Care and Protection Act 3 of 2015 (the Child Care Act), a closer examination of both statutes will show that this is not the case. The Estates Act as amended on 31 December 2018 does not amend the age of majority in Namibia; it merely deems a minor to be a person younger than age 21 for purposes of the Estates Act. While the Child Care Act, effective from 30 January 2019, amended s72 of the Estates Act, it did not amend s1(2) of the Estates Act. Section 1(2) is the section deeming a minor to be a person under age 21 for purposes of the Estates Act. While it is true that the Child Care Act repealed the Age of Majority Act 57 of 1972 and reduced the age of majority from 21 to 18 years, there are certain exceptions:
  1. Section 10(4) provides that in the absence of a contrary intention being indicated in a law (whether the law was enacted before or after 30 January 2019), then the age of majority is 18 years. However, since the Estates Act clearly intends the age of majority to be age 21, the age of majority for purposes of the Estates Act is 21 years and not 18 years. The same applies in the absence of a contrary intention being indicated in a will, document or other instrument made on or after 30 January 2019;   
  2. Section 10(5) expressly provides that nothing in s10 affects the construction of a document or other instrument executed or made before 30 January 2019 or  a will of a testator who died before such date;
  3. Section 10(6) expressly states that nothing in s10 affects a reference in a law or document or instrument to an age expressed in years. Since the Estates Act describes minority as an age expressed in years, the reference in the Estates Act to a minor being someone under 21 years of age is unaffected.

Can a death claim become unclaimed?
Death benefits cannot become unclaimed as the trustees must ascertain who the beneficiaries are or were at the time of death and must allocate the benefit as envisaged in section 37C. A person who cannot be traced within 12 months of date of death, cannot be awarded an allocation as the trustees will not be able to establish existence or dependency of the person. Once the trustees have awarded a benefit to nominees and dependants, a beneficiary can pass away or disappear.

Where a beneficiary has passed away after a benefit was awarded to him/ her, the benefit must be paid into his/ her estate or to the guardians fund if no testament has been registered with the Master of the High Court. Where the beneficiary has disappeared and cannot be traced for the purpose of effecting payment, the relevant benefit will become an unclaimed benefit to eventually be paid to the Master after having remained unclaimed  for 5 years.

The impact of regulation 28 on returns

In the article above ‘Prescribed assets are blatant theft of pensions’ in Tilman Friedrich’s industry forum, we refer to a comparison by a local asset manager between the performance of a balanced portfolio in Namibia with that in SA showing up an ever growing gap between these two portfolios at the cost of Namibian pension fund members.

In this article the author shows that in South Africa a regulation 28 constrained portfolio had performed on par with SA equity funds over the period 1 July 2011 to 30 April 2019. However taking into account the fact that regulation 28 also constrains the offshore exposure, the median unconstrained portfolio with 50% offshore exposure would have substantially outperformed with a return of 16.6%, compared to a return of only 9.4% of the median regulation constrained portfolio.

Read the full article by Patrick Cairns in Moneyweb of 15 May 2019 here...

How much risk are you taking when picking an active manager?

“According to the latest figures from the Association for Savings and Investment South Africa (Asisa), the five largest South African general equity unit trusts hold 29.2% of all the assets in this category. The largest 15 account for 52.2%. In other words, just 5% of the funds hold more than half of the assets.

How safe are the big names?

Of course big funds are big for a reason. They tend to have attracted investments over time on the back of strong long-term track records. This is why many investors and financial advisors see them as ‘safe’ options. Their reputations have been earned. However, it is worth considering that of the five largest funds in the South African general equity category with 10-year track records to the end of March this year, only one has outperformed the longest-running FTSE/JSE All Share Index tracker...”

Read the full article by Patrick Cairns in Moneyweb of 6 May 2019 here...

What does it take to be a long-term investor?

Almost every good piece of financial advice urges investors to focus on the long term. It encourages them to not be swayed by day-to-day market movements, or even what happens from year to year...

Many investors cannot help being swayed by what they see happening to their account balances, whether they are reading investment statements every quarter, or looking at their portfolios every day...

This is what leads to chasing performance and switching investments, which is almost inevitably counterproductive...

It also overcomplicates what it takes to be a successful investor. Essentially, it’s a simple exercise: select good, diversified investments at the start, and stick with them...

To do this takes discipline, but it becomes a lot easier when investors appreciate what it truly means to take a long term view.

1. Take a long term view of markets

The South African stock market has been a miserable place for investors to be over the past five years. Without dividends, growth has been almost zero.

Even with dividends reinvested, the rolling five-year return to the end of 2018 was lower than cash...However, this doesn’t happen often. As the graph below shows, it last occurred 20 years ago, and then 20 years before that.

Source: Investec Asset Management

2. Take a long term view of performance

Over the last 12 months, the performance of multi-asset high equity funds has been poor. The majority have delivered returns between 3% and 6%...

However, this ignores that the five years before that produced exceptional returns in the bull market that followed the 2008 global financial crisis. The average return from funds in the multi-asset high equity category over 10 years is therefore a much healthier 10.7%.

3. Take a long term view of your investments

Investors tend to fixate on a single figure: the monetary value of their portfolios. However, this doesn’t take into account where that figure comes from...

Read the full article by Patrick Cairns in Moneyweb of 25 March 2019 here....

SA investors fail to stay invested through economic volatility

“... South African investors may be too quick to chop and change their portfolios during times of heightened economic uncertainty and market volatility. And as growing geo-political tensions show that volatility isn’t going anywhere quickly, knee-jerk reactions are likely to be detrimental for investors’ portfolios and ultimately lead to disappointing investment returns.

This is according to Doug Abbott, Schroders South Africa Country Head, who refers to the Schroders Global Investor Study 2019, which after surveying over 25,000 investors1 across 32 countries, revealed that the majority made immediate changes to the risk profile of their investments during the volatile final three months of 2018...

These rushed portfolio switches undoubtedly contributed to the short-term investment approach that many South African investors appear to be taking, says Abbott. “The study shows that the average South African investment horizon is 2.8 years, but 39% of local investors stay invested for less than a year, which is similar globally (2.6 years and 41%, respectively)...

Based on the belief that geopolitical risk isn’t going away any time soon, Abbott urges investors to take a longer view – even during periods of heightened uncertainty. “With the rise of China, as well as the rise of populism, it is our view that geopolitical risk is set to continue plaguing markets on a global level. Locally, political risk continues to be a major factor, which ties into regulatory uncertainty and ongoing exchange rate instability.”

Abbott says that while ignoring these risks and remaining invested for longer may mean greater volatility over the short term, this strategy is likely to leave investors better off in the long run...”

Read the full article by in Cover of 9 October 2019, here...

Is it time to ditch SA equity?

“...does South African equity still have any place in discretionary savings portfolios?

The answer is that although in our view global equity currently represents a more attractive “buy” prospect than local, this does not mean that you should sell out of SA equity.

It’s true that global markets have significantly outperformed the Johannesburg Stock Exchange (JSE) over the last ten years. However, this was largely the result of a surge in strength from the United States. In fact, a closer examination of the MSCI All Country World Index (ACWI) excluding the US reveals that global market returns were largely in line with the JSE’s returns in dollar terms.

Moreover, the narrative that poor economic performance in SA has caused the JSE to underperform substantially is patently false. Measured in dollar terms, the JSE’s performance over the past decade is virtually indistinguishable from emerging markets and Europe, even though many of those regions fared far better economically...

History reveals that the JSE’s recent period of underperformance relative to the US is not a new or once-in-a-lifetime occurrence. In fact, it is the norm rather than the exception, as the SA market regularly goes through cycles of outperforming and then underperforming the US...

In the nearly 60 years between 1960 to 2019, SA markets delivered real returns of 8% with a standard deviation rate (which is used to measure volatility) of 20%. Also measured in rand terms, US markets over the same period delivered real returns of 7% with a standard deviation rate of 17%. But investors who opted for a 50/50 combination of both would have seen the best results, achieving real returns of 8% with a standard deviation of just 15%...This then suggests that, from a strategic portfolio construction perspective, the contra cyclical properties of SA and US markets can be used to ameliorate risk and enhance investment returns.”

Read the full article by Harold Strydom of Citadel in Cover of 9 October 2019, here...

An Afrikaans and Xhosa speaking American to become ambassador to SA?

Luxury handbag designer Lana Marks has been appointed US ambassador to South Africa, the US embassy said on Friday. Marks was born in South Africa and speaks Afrikaans and Xhosa, the White House has said. The US Senate confirmed her nomination, which President Donald Trump put forward last year. Washington has had no ambassador in South Africa since Patrick Gaspard left in December 2016, with its mission being overseen by a chargé d’affaires. The website for Marks’ firm offers handbags for up to $20,000 and says they have become favourites for celebrities including Oprah Winfrey, Kate Winslett and Madonna.

As reported by Liston Meintjes

Did you ever wonder why?

WHY: Why do people clink their glasses before drinking a toast?
BECAUSE: In earlier times it used to be common for someone to try to kill an enemy by offering him a poisoned drink. To prove to a guest that a drink was safe, it became customary for a guest to pour a small amount of his drink into the glass of the host. Both men would drink it simultaneously. When a guest trusted his host, he would only touch or clink the host's glass with his own.


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