By the end of next year an estimated N$3 billion of pension and life monies will have flown into unlisted companies following the promulgation of the first changes to the Domestic Asset Requirements. For the past five years, the Ministry of Finance has mooted the idea of forcing local pension funds and life insurance companies to invest 5% of their assets in so-called greenfield projects, or start-up companies. This intention of the ministry became reality last week, but in a slightly modified format.

Pension funds and life insurance companies will now have to find suitable investments for 5% of their assets in the case of pension funds, and 5% of aggregate liabilities in the case of life insurance companies. Fortunately, the concern with greenfield projects has not found its way into the new legislation; instead any unlisted local company now qualifies as a valid investment destination.
For both pension and life industries, the 5% has been split over two years. This year, 2% of assets and aggregate liabilities, respectively, have to go into unlisted companies with a further 3.5% scheduled for next year. By 1 January 2010, pension funds and life insurers must have made the 5% benchmark. The investment in unlisted companies is capped at 10% of total assets or aggregate liabilities.
In her previous 2007 budget speech, Minister of Finance Hon. Saara Kuugongelwa warned the financial services industry to expect these changes to the Domestic Asset Requirements.