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THE NAMIBIA FINANCIAL INSTITUTIONS SUPERVISORY

AUTHORITY (NAMFISA) EXISTS TO SUPERVISE

FINANCIAL INSTITUTIONS AND FINANCIAL SERVICES,

AND TO ADVISE THE MINISTER OF FINANCE ON

MATTERS RELATING TO FINANCIAL INSTITUTIONS AND

FINANCIAL SERVICES IN TERMS OF THE NAMIBIA

FINANCIAL INSTITUTIONS SUPERVISORY AUTHORITY

ACT, 2001 (NO. 3 OF 2001).

ANNUAL REPORTNAMFISA 20191

ANNUAL REPORT ANNUAL REPORTNAMFISA 2019 NAMFISA 20192 3

2018/19 AT A GLANCE .............................................................................................................................. 10

OUR CORE FUNCTIONS ........................................................................................................................ 11 Core Function 1: Supervision ................................ .............................................................................. 11 Core Function 2: Advice ....................................................................................................................... 11 Auxiliary Function: Anti-money Laundering / Combating the Financing of Terrorism /

Combating Proliferation Financing (AML/CFT/CPF) Supervision ......................... 11

OUR MISSION .......................................................................................................................................... 12iv

OUR VISION ............................................................................................................................................. 12

OUR VALUES ........................................................................................................................................... 12

OUR LEADERSHIP CREED ..................................................................................................................... 12

STRATEGIC THEMES .............................................................................................................................. 13

NUMBER OF ENTITIES AND VALUE OF ASSETS ................................................................................. 14

FOREWORD BY THE BOARD CHAIRPERSON ..................................................................................... 16

REVIEW BY THE CHIEF EXECUTIVE OFFICER .................................................................................... 18xxii

1. CORPORATE GOVERNANCE ............................................................................................................ 20

The Board of Directors ...................................................................................................................... 26

Board Member profiles ...................................................................................................................... 26

Board composition .......................................................................................................................... 27

Ethical and value-based leadership ............................................................................................... 28

Performance assessments ........................................................................................................... 29

Delegation of authority ............................................................................................................... 29

Board training and development ............................................................................................. 29

Board meetings ...................................................................................................................... 29

Board Committees ............................................................................................................................. 30

Audit and Risk Committee ....................................................................................................... 30

Human Resources Committee .............................................................................................. 30

Legal and Supervisory Committee ...................................................................................... 31

Board fees .......................................................................................................................................... 32

Application of NamCode ................................................................................................................... 32

2. RISK MANAGEMENT .......................................................................................................................... 34

Philosophy ......................................................................................................................................... 36

Governance of risk management ..................................................................................................... 36

Key focus areas for 2018/19 ............................................................................................................. 36

Risk appetite ...................................................................................................................................... 36

Our key risks ...................................................................................................................................... 36

TABLE OF CONTENTS



3. EXECUTIVE MANAGEMENT .............................................................................................................. 38

Executive Committee ........................................................................................................................ 41

Risk Management Committee ........................................................................................................... 41

Licensing and Litigation Committee .................................................................................................. 41

Data Management and Information Technology Operations Committee .......................................... 42

Investment Committee ..................................................................................................................... 42

Procurement Committee ................................................................................................................... 42

Ad-hoc committees ............................................................................................................................ 42

4. STRATEGY AND PERFORMANCE .................................................................................................... 44Strategy .............................................................................................................................................. 46Financial performance ...................................................................................................................... 47 Financial sustainability ...................................................................................................................... 47 Overall performance .......................................................................................................................... 47 Income .............................................................................................................................................. 48 Expenditure ....................................................................................................................................... 49 Financial position .............................................................................................................................. 49Human resource developments ...................................................................................................... 49 Executive or key employee changes ................................................................................................ 49 Labour turnover ................................................................................................................................ 50 Staff complement .............................................................................................................................. 50 Staff development ............................................................................................................................ 51 Employment equity .......................................................................................................................... 53

5. DIVISIONAL ACTIVITIES .................................................................................................................... 54

Market conduct and operations ....................................................................................................... 76

Market Conduct Division ................................................................................................................... 76

Internal Audit Department ................................................................................................................. 78

Governance, Risk and Compliance Department .............................................................................. 78

Corporate Communications Department .......................................................................................... 79

Information and Communications Technology Division .................................................................... 79

Strategy and Projects Division ......................................................................................................... 80

Finance and Administration Division ................................................................................................ 80

Legal Services Division .................................................................................................................... 80

Human Resources Division ............................................................................................................. 81

Prudential supervision .................................................................................................................... 81

Insurance and Medical Aid Funds Division ...................................................................................... 81

Capital Markets Division .................................................................................................................. 82

Pension Funds and Friendly Societies Division ............................................................................... 83

Research, Policy and Statistics Division .......................................................................................... 83

6. REGULATORY UPDATE ..................................................................................................................... 84

New legislation ................................................................................................................................... 86

Amendment of existing legislation .................................................................................................. 87

7. SUPERVISORY UPDATE .................................................................................................................... 88

Supervisory principles ...................................................................................................................... 90

Ladder of Supervisory Intervention ................................................................................................. 90

Prudential supervision update ......................................................................................................... 92

Short- and long-term insurers ............................................................................................................ 92

Medical aid funds ............................................................................................................................... 94

Pension funds .....................................................................................................................................96

Capital markets .................................................................................................................................. 96

Market conduct and operations update .......................................................................................... 100

Market conduct .................................................................................................................................. 100

Money laundering, terrorist financing and proliferation financing ....................................................... 105

Compliance among microlending and intermediary industries ........................................................... 106

8. INDUSTRY DEVELOPMENTS ............................................................................................................ 108

Global and regional economic developments ................................................................................. 110

Domestic economic developments .................................................................................................. 110

Financial sector developments ........................................................................................................ 111

Long-term insurance .......................................................................................................................... 111

Short-term insurance .......................................................................................................................... 116

Medical aid funds ................................................................................................................................120

Friendly societies ...............................................................................................................................129

Pension funds ....................................................................................................................................130

Microlending ...................................................................................................................................... 134

Capital markets ..................................................................................................................................136

9. STATISTICS .........................................................................................................................................142

10.ANNUAL FINANCIAL STATEMENTS ...................................................................................................158


LIST OF TABLES LIST OF FIGURESTable 1: Number of entities regulated as at 31 December 2018 ............................................................ 14

Table 2: Total assets per industry sector, 2012–2018 (N$ million) ......................................................... 15

Table 3: Board Member profiles ............................................................................................................. 26

Table 4: Strategic themes for the 2018/19 financial year ....................................................................... 28

Table 5: Membership and attendance of Board and Board Committee meetings .................................. 29

Table 6: Board fees, 2018/19 ................................................................................................................. 32

Table 7: Application of NamCode guidance on governance-related aspects ......................................... 32

Table 8: Risk Register, 2018/19 .............................................................................................................. 37

Table 9: Priorities and key initiatives planned for 2019/20 ..................................................................... 47

Table 10: Executive and Management appointments .............................................................................. 49

Table 11: Staff complement ...................................................................................................................... 50

Table 12: Group training interventions ..................................................................................................... 52

Table 13: New legislation drafted ............................................................................................................. 86

Table 14: Existing legislation amended .................................................................................................... 87

Table 15: Ladder of Supervisory Intervention ........................................................................................... 91

Table 16: Long-term insurance industry participants, 2017–2018 ........................................................... 92

Table 17: Long-term insurers, 2014–2018 ............................................................................................... 92

Table 18: Short-term insurance industry participants, 2017–2018 ........................................................... 93

Table 19: Short–term insurers, 2014–2018 .............................................................................................. 93

Table 20: Total number of inspections ...................................................................................................... 93

Table 21 Registered medical aid funds, 2014–2018 ............................................................................... 94

Table 22: Registered entities – Capital Markets 1, 31 December 2018 ................................................... 97

Table 23: Registered entities – Capital Markets 2, 31 December 2018 ................................................... 99

Table 24: Registered entities – Active vs Dormant licences ..................................................................... 99

Table 25: Complaints received per industry, 2014–2018 ......................................................................... 100

Table 26: Top five complaints per industry ............................................................................................... 102

Table 27: Complaints received per Region, 2014–2018 .......................................................................... 104

Table 28: Long-term insurers – Cover in terms of capital adequacy requirements .................................. 113

Table 29: Short-term insurance industry solvency ratio ........................................................................... 117

Table 30: Short-term insurance exemptions – Lloyd’s and non-Lloyd’s cover ......................................... 120

Table 31: Medical aid funds beneficiaries ................................................................................................ 120

Table 32: Medical aid fund industry – Distribution of healthcare benefits paid ....................................... 122

Table 33: Medical aid fund industry – Gross contributions and gross expenditure vs Namibia Consumer Price Index .................................................................................... 125

Table 34: Medical aid fund industry – Ratio of healthcare costs (claims) to administration costs ............ 125

Table 35: Pension fund asset allocations per asset class ........................................................................ 132

Table 36: Pension fund assets – Overarching limits ................................................................................ 133

Table 37: Collective investment scheme assets per geographic allocation ............................................. 133

Figure 1: Board governance structure ........................................................................................................ 27

Figure 2: Executive management organisational structure ........................................................................ 40

Figure 3: Executive Committee and its supporting Committees ................................................................. 41

Figure 4: Strategic initiatives performance, 2018/19 .................................................................................. 46

Figure 5: Overall strategy performance, 2018/19 ....................................................................................... 46

Figure 6: Levies, per industry ..................................................................................................................... 48

Figure 7: Operating expenditure ................................................................................................................ 49

Figure 8: Staff complement ........................................................................................................................ 50

Figure 9: Staff development ....................................................................................................................... 52

Figure 10: Employment Equity ..................................................................................................................... 53

Figure 11: Number of pension funds ........................................................................................................ 96

Figure 12: Complaints received, resolved and in progress per industry, 2018 ............................................. 101

Figure 13: Payments to complainants .......................................................................................................... 103

Figure 14: Use of toll-free number, January–December 2018 ..................................................................... 105

Figure 15: On-site AML/CFT/CPF inspections conducted ........................................................................... 105

Figure 16: Off-site AML/CFT/CPF inspections conducted ........................................................................... 106

Figure 17: Long-term insurance industry total assets .................................................................................. 111

Figure 18: Long-term insurance industry total liabilities ............................................................................... 112

Figure 19: Long-term insurance industry gross written premium ................................................................. 113

Figure 20: Long-term insurance industry investment income ...................................................................... 114

Figure 21: Long-term insurance industry gross claims paid ......................................................................... 114

Figure 22: Long-term insurance industry profit before tax ............................................................................ 115

Figure 23: Short-term insurance industry total assets .................................................................................. 116

Figure 24: Short-term insurance industry total liabilities ............................................................................... 116

Figure 25: Short-term insurance industry gross written premium ................................................................ 117

Figure 26: Short-term insurance industry investment income ...................................................................... 118

Figure 27: Short-term insurance industry claims and expenses .................................................................. 118

Figure 28: Short-term insurance industry profit before tax ........................................................................... 119

Figure 29: Medical aid funds industry dependent and pensioner ratios ....................................................... 121

Figure 30: Medical aid funds industry – Gross healthcare contributions vs Gross healthcare expenditure 121

Figure 31: Medical aid funds industry – Healthcare expenditure growth vs Namibia Consumer Price Index 123

Figure 32a: Medical aid fund claim seasonality, 2018 .................................................................................... 123

Figure 32b: Medical aid fund industry – Annual healthcare expenditure ........................................................ 124

Figure 33: Medical aid fund industry operational surplus and net surplus .................................................... 126

Figure 34: Medical aid fund industry liquidity by cash coverage of claims .................................................... 127


Figure 35: Medical aid fund industry solvency trend .................................................................................... 129

Figure 36: Friendly societies – Total beneficiaries ........................................................................................129

Figure 37: Total pension fund investments including insurance policies ...................................................... 131

Figure 38: Pension fund assets per geographic allocation ...........................................................................132

Figure 39: Pension fund assets – Investment income ..................................................................................133

Figure 40: Value of microlending disbursement and loan book ....................................................................134

Figure 41: Average microlending loan amounts ........................................................................................... 135

Figure 42: Number of new microlending loans disbursed ............................................................................ 135

Figure 43: Number of microlending borrowers ............................................................................................. 136

Figure 44: NSX indices .................................................................................................................................137

Figure 45: FTSE/JSE All Share Index .......................................................................................................... 137

Figure 46: Debt markets – Debt outstanding ................................................................................................138

Figure 47: Investment management assets per geographic allocation ........................................................ 138

Figure 48: Investment management assets per asset class ........................................................................ 139

Figure 49: Investment management assets per source of funds (investor) ................................................. 139

Figure 50: Collective investment scheme assets per geographic allocation ................................................ 140

Figure 51: Collective investment scheme assets per asset class ................................................................ 141

Figure 52: Collective investment scheme assets per source of funds (investor) ......................................... 141

LIST OF LEGISLATION MENTIONED

LIST OF ABBREVIATIONS AND ACRONYMS

Banking Institutions Act, 1998 (No. 2 of 1998)Financial Institutions (Investment of Funds) Act, 1984 (No. 39 of 1984)Financial Intelligence Act, 2012 (No. 13 of 2012)Friendly Societies Act, 1956 (No. 25 of 1956)Long-term Insurance Act, 1998 (No. 5 of 1998)Medical Aid Funds Act, 1995 (No. 23 of 1995)Microlending Act, 2018 (No. 7 of 2018)Namibia Financial Institutions Supervisory Authority Act, 2001 (No. 3 of 2001)Pension Funds Act, 1956 (No. 24 of 1956)Prevention and Combating of Terrorist and Proliferation Activities Act, 2014 (No. 4 of 2014) Public Enterprises Governance Act, 2006 (No. 2 of 2006)Public Procurement Act, 2015 (No. 15 of 2015)Short-term Insurance Act, 1998 (No. 4 of 1998)Stock Exchanges Control Act, 1985 (No. 1 of 1985)Unit Trusts Control Act, 1981 (No. 54 of 1981)Usury Amendment Act, 2018 (No. 6 of 2018)Usury Act, 1968 (No. 73 of 1968)

AML Anti-money laundering

AML/CFT/CPF Anti-money laundering, combating the financing of and combating proliferation financing

AUM Assets under Management

BI Business Intelligence

BPMC Business Processes Management Committee

CAR Capital Adequacy Requirement

CEO Chief Executive Officer

CFT Combating the financing of terrorism

CIS Collective Investment Scheme

CISNA Committee of Insurance, Securities and Non-banking Financial Authorities

CMA Common Monetary Area

CPF Combating Proliferation Financing

ERS Electronic Regulatory System

ETF Exchange-traded fund

EXCO Executive Committee

FIM Bill Financial Institutions and Markets Bill

FSA Bill Financial Services Adjudicator Bill

FATF Financial Action Task Force

GDP Gross Domestic Product

GWP Gross Written Premium

IAIS International Association of Insurance Supervisors

IT Information Technology

IOPS International Organisation of Pension Supervisors

NAMFISA Namibia Financial Institutions Supervisory Authority

NBFI Non-bank financial institution

NSX Namibian Stock Exchange

oCOA One Chart of Accounts

PACOTPAA Prevention and Combating of Terrorist and Proliferation Activities Act, 2014 (No. 4 of 2014)

RBS Risk-based supervision

SADC Southern African Development Community

ANNUAL REPORT ANNUAL REPORTNAMFISA 2019 NAMFISA 201910 112018/19AT A GLANCE

Company name: Namibia Financial Institutions Supervisory Authority (NAMFISA)

Email: [email protected]: 0800 290 5000

Tel.: +264 (0)61 290 5000Fax: +264 (0)61 290 5194

Website: www.namfisa.com.naCompany address: PO Box 21250, Windhoek, Namibia

13th Floor, Sanlam Centre 154 Independence Avenue, Windhoek

OUR CORE FUNCTIONSThe Namibia Financial Institutions Supervisory Authority (NAMFISA) exists to supervise the business of financial institutions and financial services and to advise the Minister of Finance on matters relating to financial institutions and financial services in terms of the Namibia Financial Institutions Supervisory Authority Act, 2001 (No. 3 of 2001; hereinafter NAMFISA Act).

CORE FUNCTION 1: SUPERVISION

AUXILIARY FUNCTION: ANTI-MONEY LAUNDERING / COMBAT-ING THE FINANCING OF TERRORISM / COMBATING PROLIF-ERATION FINANCING (AML/CFT/CPF) SUPERVISION

To supervise the business of financial institutions and financial services.

To advise the Minister of Finance on matters relating to financial institutions and financial services.

To supervise, monitor and enforce compliance with the Financial Intelligence Act, 2012 (No. 13 of 2012) in respect of all accountable and reporting institutions supervised by NAMFISA in terms of the NAMFISA Act.

CORE FUNCTION 2: ADVICE

Value of total assets of the non-bank financial institutions that NAMFISA regulates

Number of entities that NAMFISA regulates

Total consumer complaints resolved out of 1,072 received

N$290.3 billion

NAMFISA regulates 655 Entities and 7,388 Intermediaries

1,001 (93.4 percent)


WE ARE UNITED

• We have a shared vision of being a respected regulator of financial institutions

• We stand together

• We support team decisions

WE ARE COMMITTED

• We take ownership of our mandate

• We have a sense of urgency to execute our strategy

• We take mutual accountability to embed our vision and values

OUR MISSIONTo effectively regulate and supervise financial institutions and to give sound advice to the Minister of Finance.

OUR VISIONTo have a safe, stable and fair financial system contributing to the economic development of Namibia in which consumers are protected.

OUR VALUESWe are committed to teamwork

We passionately serve

We value integrity

We drive performance excellence

We are accountable

We are agile

STRATEGIC THEMES

WE ARE DECISIVE AND FIRM

• We are consistent in our decisions

• We make timeous decisions

• We execute decisions firmly

WE ARE EXEMPLARY

• We set the leadership benchmark

• We are approachable and fair

• We encourage innovation and creativity

WE ARE PASSIONATE AND INSPIRED

• We are driven to achieve our vision

• We defend what we stand for

• We celebrate our achievements

WE CARE

• We care about the well-being of our employees

• We care about the protection of financial services consumers

• We care about the safety and soundness of the financial services sector

TRANSFORMATION

WA transforming and learning orga-nisation adaptive to changes in the relevant legislative, organisational and supervisory environment

STAKEHOLDER ENGAGEMENT

Improved beneficial relationships with our customers and stakeholders, premised on collaboration, trust and productive and active engagement

OPERATIONAL EFFICIENCY

An operationally efficient organisa-tion with a high-performance team supported by efficient and effecti-ve processes, appropriate systems and prudently managed financial re-sources

OUR LEADERSHIP CREED


NUMBER OF ENTITIES AND VALUE OF ASSETS

TABLE 1: NUMBER OF ENTITIES REGULATED AS AT 31 DECEMBER 2018

Regulated financial institution or intermediary, by subsector

Number of entities per subsector,

31 December 2017

Number of entities per subsector,

31 December 2018

Active pension funds 138 138

Active medical aid funds 9 9

Active friendly societies 1 1

Long-term insurance companies (Intermediaries) 16 (4,998) 16 (5,846)

Short-term insurance companies (Intermediaries) 16 (1,455) 15 (1,542)

Special purpose vehicles 17 17

Collective investment schemes 16 20

Investment managers 26 27

Unlisted investment managers 22 21

Microlenders 317 365

Reinsurers for long- and short-term insurance 1 1

Stock exchanges 1 1

Management companies 14 17

Linked investment services providers 3 4

Stockbrokers, including sponsors 4 4

TOTAL (INTERMEDIARIES) 601 (6,453) 655 (7,388)

TABLE 2: TOTAL ASSETS PER INDUSTRY SECTOR, 2012–2018 (N$ MILLION)Total assets

per industry sector2012 2013 2014 2015 2016 2017 2018

Long-term insurance 31,654 36,424 40,224 44,746 47,554 53,934 56,640

Short-term insurance 3,002 3,461 4,749 5,587 5,769 6,233 6,540

Medical aid funds 858 1,002 1,162 1,360 1,445 1,772 1,933

Pension funds* 85,757 105,267 119,569 133,089 137,462 152,885 158,528

Collective investment schemes** 29,250 33,389 33,469 38,935 39,609 47,483 52,252

Investment managers*** 3,303 3,873 5,221 5,725 7,620 19,779 7,795

Friendly societies**** n/a n/a 0.88 1.04 1.21 1.36 1.57

Microlenders 1,753 2,616 3,382 4,257 4,222 5,460 6,610

TOTAL 155,577 186,032 207,777 233,700 243,682 287,548 290,300

* The amount of assets under the management of local investment managers and collective investment schemes excludes any amount managed by foreign investment managers.

** To avoid double-counting, the collective investment scheme assets under management were adjusted by the sum of funds sourced from the following sectors: Pension funds, Long-term insurance, Short-term insurance, and Medical aid funds.

*** Similar adjustments were effected on funds sourced from the following sectors: Pension funds, Long-term insurance, Short-term insurance, Medical aid funds and Unit trusts.

**** Friendly societies: Financial data only available since 2014.

1 Section 36 of the NAMFISA Act states the following: “This Act does not affect the operation of any bank registered in terms of the Banking Institutions Act, 1998 (Act No. 2 of 1998), or the Building Societies Act, 1986 (Act No. 2 of 1986), in respect of any bank or building society business carried on by that bank or building society in accordance with the provisions of those Acts.”

NAMFISA regulates a sector that is significant by any measure in that it comprises several different financial institutions and intermediaries.1 As at 31 December

2018, the number of entities the Authority regulated was as follows (Table 1):

The non-bank financial institutions (NBFIs) sector remained financially stable and continued to grow its assets despite challenging economic conditions. The NBFI asset base increased slightly during the reporting year, namely by 0.9 percent, to end at N$290.3 billion by 31 December 2018 (Table 2).

The increase, which reflects a moderation in growth in comparison with the year ended 31 December 2017, was chiefly evident in pension fund industry assets, whose

gains were attributed to marginal growth in investment income. This marginal increase in industry assets is mainly reflected in financial market volatility attributed to a softening of global economic activity influenced by trade tensions and tariff hikes between the United States and China, a decline in business confidence, a tightening of financial conditions and greater policy uncertainty across many economies. Nonetheless, the industry held sufficient excess reserves to cushion themselves against potentially adverse movements.


ANNUAL REPORT NAMFISA 201916

FOREWORD BY THE BOARD CHAIRPERSON

Another major step forward was the implementation of our new organisational structure during the review period.

GERSOM R KATJIMUNEBOARD CHAIRPERSON

The Board remains firm in its commitment to provide good governance and financial oversight to ensure that the Authority carries out its mandate effectively and efficiently. NAMFISA is now in the second year of implementing its five-year strategy for the 2017/18 - 2021/22 financial periods. In respect of the overall strategy, 42 percent of the strategic performance targets have already been met. Moreover, the Authority was able to achieve 76 percent of its target for the reporting period despite delays in its quest to have the NAMFISA Bill, the Financial Institutions and Markets Bill and the Financial Services Adjudicator Bill tabled during the 2018/19 financial year. The three Bills are expected to be promulgated in the coming financial year. With Parliament having passed the Microlending Act, 2018 (No. 7 of 2018) in the reporting period, I am proud to state that we have already started to see immense transformation and growth within the organisation, as we migrate from compliance-based to risk-based supervision.

Another major step forward was the implementation of our new organisational structure during the review period. The structure is now streamlined into two clusters, namely Prudential supervision and Market conduct and operations, and will bring about the much-needed focus on consumer protection within the non-bank financial institutions’ sector. As part of this drive, NAMFISA, together with other stakeholders, initiated the drafting of a Consumer Credit Bill. Supporting this effort was the establishment during the period under review of a concomitant policy that sets the stage for further consultations in ensuring that consumers in general and borrowers in particular are treated fairly.

Other progress included the development of a framework to highlight the fair treatment of customers according to set key principles. We believe the Treating customers fairly framework will lead to building and maintaining confidence and trust among the consumers of financial services, ultimately contributing to the objectives of the financial sector strategy, namely to (a) increase financial literacy and protection and (b) provide access to financial services and products.

The 2018/19 financial year saw consumer complaints to NAMFISA grow by 8.3 percent to a total of 1,072 in comparison with the previous reporting period. There was also an increased use of a variety of channels to lodge such complaints. This shows that our consumer education drive has begun to yield the success demanded of our strategy. We are proud to report here that over 93 percent of all complaints received in 2018/19 were resolved, showing that we remain committed to achieving our vision to protect consumers.

Commencing with the implementation of RBS was another accomplishment recorded during 2018/19. This bears testimony to our resolve to ensure that, as an institution, we support our regulated entities by identifying key risks to them, and to oversee how they deal with such threats. These efforts contribute to the fulfilment of our vision to have a safe, stable and fair financial system contributing to the economic development of Namibia.

NAMFISA owes its gratitude to all the stakeholders who have undertaken this journey of transformation with us. Therefore, on behalf of the Board, I would like to thank our Minister of Finance Hon. Calle Schlettwein and his team for their support, as well as all the regulated entities for the healthy working relationship we have with them. My sincere appreciation also goes to my fellow Board Members Dr Simeon Amunkete, Ms Hettie Garbers-Kirsten, Ms Leonie Dunn and Mr Jauque Jansen, for their dedication and high standard of service. Finally, we are indebted to NAMFISA’s Chief Executive Officer, Mr Kenneth S Matomola, and to the institution’s Executive team and staff for their unflagging devotion to accomplishing our important mission.

Gersom R Katjimune Board Chairperson



REVIEW BY THE CHIEF EXECUTIVE OFFICER

KENNETH S MATOMOLACHIEF EXECUTIVE OFFICER

Despite the tough domestic economic conditions that prevailed during the period under review, the non-bank financial institutions (NBFIs) sector showed resilience, as reflected in the growth of its assets by 0.9 percent compared with the previous financial year. The stability of these institutions is crucial: not only are they a key source of funding to the entire financial sector, they also ensure that the country’s financial sector remains safe, stable and fair. Therefore, NAMFISA is steadfast in its mandate to regulate and supervise these financial institutions effectively.

The past few years have served as a preparatory phase under the New Dawn Project to transition towards a risk-based supervision (RBS) framework in a bid to ensure that the Authority meets its five-year strategy. Having completed Phase 1 of New Dawn, we now move towards Phase 2, which seeks to achieve (a) the promulgation and implementation of the NAMFISA Bill, the Financial Institutions and Markets (FIM) Bill and the Financial Services Adjudicator (FSA) Bill; (b) complete an effective implementation of RBS; (c) attainment of adequate reserve levels; and (d) the securing of an appropriate degree of protection for consumers.

The 2018/19 financial year delivered significant progress in these initiatives, as evidenced by the finalisation of our regulatory reform, i.e. the NAMFISA, FIM and FSA Bills now await promulgation, while the Microlending Act has taken effect. We also began implementing our One Chart of Account project, which collects industry data in a systematic manner by harmonising reporting across NBFIs. Harmonised reporting not only improves operational efficiency: it also enhances analysis, which in turn supports the regulation and supervision of NBFIs.

I am also happy to announce that the 2018/19 financial year saw us achieve certain strategic objectives, namely aligning and cascading organisational performance; gazetting amended regulations under the legislation governing insurance, pension and medical aid bodies; developing a joint supervisory framework with the Bank of Namibia; implementing work culture and

productivity indices; introducing financial intermediary qualification/certification programmes; and launching a file implementation plan through the Electronic Content Management Project. Since these achievements alone do not suffice to execute our five-year strategy successfully, we also instituted a Capability Framework to assess the level of skills within the Authority. Its aim is to ensure that our staff are fully capacitated in terms of executing not only the NAMFISA mandate but also RBS.

Despite the challenges associated with our transition to an RBS framework, the Authority persevered in its vision to ensure that all consumers of NBFI services are protected. We therefore ran several consumer education campaigns across various media channels and can proudly report that their impact was positive. In respect of our stakeholders, NAMFISA continued nurturing strong relationships and collaborating with both local and international organisations that share its values so that experience and best practices could be shared.

Yet another milestone was reached during the reporting period with NAMFISA winning the prestigious PMR.africa Diamond Arrow Award for the eighth consecutive year. This provides firm testimony of the determination and commitment of our staff.

Finally, as I pledge my continued support to the future of NAMFISA’s strategic plan, let me thank all our stakeholders, the Minister of Finance and our Board for your continued guidance in steering the NAMFISA ship in the right direction. Furthermore, I thank all regulated entities for the valuable and unyielding support you offer to the Authority. And finally, I thank all ‘Namfisians’ for the gains we made during 2018/19, as illustrated in the pages to follow.

Kenneth S MatomolaChief Executive Officer

The 2018/19 financial year delivered significant progress in these initiatives, as evidenced by the finalisation of our regulatory reform, i.e. the NAMFISA, FIM and FSA Bills now await promulgation, while the Microlending Act has taken effect.


1.CORPORATE

GOVERNANCE

The following section outlines the corporate governance activities for the period under review. In this regard, it details the Board’s fiduciary duties in pursuit of NAMFISA’s mandate and objectives and elaborates on the principles of good corporate governance required by the NAMFISA Act and internationally accepted best practice.



BOARD OF DIRECTORS

Ms Leonie E Dunn

Dr Simeon Amunkete Mr Jauque Jansen

Mr Gersom R Katjimune(Chairperson)

Ms Hettie Garbers-Kirsten

CHIEF EXECUTIVE OFFICER AND DEPUTY CEOS




OFFICE OF THE CEO


THE BOARD OF DIRECTORSBoard Member profiles

TABLE 3: BOARD MEMBER PROFILES

Members of the NAMFISA Board of Directors, 2019

Mr Gersom R Katjimune


Dr Simeon Amunkete

Mr Jauque Jansen Ms Leonie E Dunn

• Board Chairperson

• Member, NAMFISA Board of Appeal

• Member of Human Resource Committee

• Deputy Board Chairperson

• Chairperson, Legal and Supervisory Committee

• Chairperson, Human Resources Committee

• Chairperson, Audit and Risk Committee

• Member, Audit and Risk Committee

• Member, Legal and Supervisory Committee

• Reappointed 2017; first appointment 2013

• Appointed 2017 • Reappointed 2017; first appointment 2013

• Appointed 2017 • Appointed 2017

• MA Development Economics

• BA (Hons) Economics

• LLB

• BLC

• Member, Law Society of Namibia

• Member, Society of Advocates of Namibia

• PhD Industrial/ Organisational Psychology

• MComm Project Management

• MA Industrial Psychology

• BA (Hons) Psychology

• Chartered Accountant

• BCompt (Hons) Accounting

• LLM (Commercial Law)

• LLB

• BALaw

• Member, Law Society of Namibia

Mr Katjimune has extensive knowledge of the insurance industry. He served in several positions within the Mutual & Federal Group, progressing through the ranks to become the Managing Director before his retirement in 2011.

Ms Garbers-Kirsten has extensive experience in various fields of the legal profession. She is currently a practising advocate.

Dr Amunkete is a human resources specialist with specialised training in Industrial Psychology. He is also a registered Industrial Psychologist.Dr Amunkete is currently employed as a Senior Manager in Human Resources at the Namibia Power Corporation (Pty) Ltd.

Mr Jansen has extensive experience in managing finances in a large corporate environment. Mr Jansen currently serves as Head of the Finance Department at the Namdeb Diamond Corporation (Pty) Ltd.

Ms Dunn has extensive experience in financial services regulation and financial risk management; the legal profession; and in policy, legislative development and implementation relating to anti- money laundering, combating the financing of terrorism and combating proliferation financing. She currently serves as the Director of the Financial Intelligence Centre of Namibia.

Mr Gersom R Katjimune


Dr Simeon Amunkete

Mr Jauque Jansen Ms Leonie E Dunn

External directorships and interests• Aqua Utilities

• UUM Investments

• MK Panels (Pty) Ltd (dormant)

• Farming

• Ehoro Capital (Pty) Ltd

• Merensky Court Properties CC

• Member, Namibia Training Authority – Chairperson of the Industry Skills Committee (Business and Finance)

• Road Fund Administration

• Namdeb Hospital Pharmacy (Pty) Ltd

• Orange Babies Namibia (registered welfare organisation)

Board compositionThe Minister of Finance appoints five Board Members in terms of the NAMFISA Act for a three-year term. The currently-serving Board Members’ appointments were effective on 1 April 2017 and end on 31 March 2020. They remain independent from the operations of the Authority and from the industry regulated by it. The balance of skill and experience of the current Board is appropriate for the execution of the Authority’s mandate.

The Board exercises its oversight function through three principal Committees, namely –• Audit and Risk

• Human Resources, and• Legal and Supervisory.

The CEO of NAMFISA attends Board meetings but has no voting rights. Board Members have access to the advice and services of a Board Secretary. The Secretary is responsible for advising the Board on good governance and for guiding the Board in its duties as set out in the NAMFISA Act and other relevant legislation and best practice, including the Corporate Governance Code for Namibia (NamCode).2

Minister of Finance and other stakeholders

Board Committees

Board Board Secretary

Human Resources CommitteeLegal and Supervisory CommitteeAudit and Risk Committee

The Board is established in terms of section 10 of the NAMFISA Act and provides strategic direction of, and control over, the Authority’s affairs. The Board is also the custodian of corporate governance for the Authority’s affairs. It has established Committees and has agreed

with the Chief Executive Officer (CEO) on a delegation of authority, whilst reserving certain duties for itself. The delegation of authority also sets out several material factors for the matters decided by the various governance forums within the Authority (Figure 1).

Figure 1: Board governance structure

2 NamCode provides guidance to all Namibian corporate entities on various governance-related aspects. NamCode confirms the role of the Board as the focal point for corporate governance.


The Board provides leadership to the Authority that is premised on the ethical foundation set out in the Code of Ethics and embedded in the following values rolled out across the organisation during the period under review: Teamwork, Integrity, Passion for service, Performance Excellence, Accountability and Agility.

The Board continued to implement its Ethics Programme throughout the Authority in the financial year under

review. The Programme consists of training, declarations of interest and a whistle-blower hotline. The Executive leadership team is also required to adhere to the Code of Conduct and Leadership Creed. The ethics theme for the reporting year was Bribery and various interventions were undertaken to sensitise employees to the notion.

TABLE 4: STRATEGIC THEMES FOR THE 2018/19 FINANCIAL YEARTransformation Stakeholder engagement Operational efficiency

A transforming and learning organisation adaptive to changes in the relevant

legislative, organisational and supervisory environment

Improved beneficial relationships with our

customers and stakeholders, premised on collaboration,

trust and productive and active engagement

An operationally efficient organisation with a high-

performance team supported by efficient and effective processes, appropriate systems and prudently

managed financial resources

Performance assessmentsAn established appraisal process is employed on an annual basis to assess the Authority’s as well as the Board’s performance and effectiveness. NAMFISA’s Head of Governance, Risk and Compliance conducts the appraisals, which are followed by a peer review mechanism and an evaluation of whether the key performance areas set in the Governance Agreement have been duly met.

Delegation of authorityThe Board has an approved delegation of authority framework but reserves the following powers for itself:

• Authority to approve the NAMFISA budget and strategy

• Employment of the CEO and termination of his/her contract

• Remuneration of the CEO and Deputy CEOs

• Institution of disciplinary procedures against the CEO

• Amendment of NAMFISA’s organisational structure, including the creation of new positions and their grading

• Approval of the Annual Report and Annual Financial Statements, and

• Approval of key policies, including remuneration and investment.

Certain matters are delegated to Board Committees. The scope of the mandate of each such Committee is set out in its terms of reference. The Chairperson of the Board, Mr Gersom R Katjimune, is not only responsible for setting the ethical tone for the Board as well as for the Authority, but also for providing overall leadership, overseeing the development of the Board Plan and presiding over Board meetings.

The CEO is responsible for directing and leading the Authority’s operations. The incumbent’s duties include ensuring operational efficiency, strategic planning, execution of agreed strategic initiatives and implementation of Board-approved policies and resolutions.

Board training and developmentBoard Members are presented with opportunities to gain new skills and/or enhance their existing skills with continuous education, training and development on matters relevant to the Authority. An assessment of training needs was made and training on identified skills gaps was identified, but no training took place during the reporting period.

Board meetingsBoard meetings are held at least quarterly, while special meetings are convened as the need arises. There were four ordinary and three special Board meetings held during the reporting period. Special Board meetings were convened for the approval of the mandate for salary negotiations (20 April 2018), a review of the Post-retirement Medical Aid Benefit (15 August 2018) and approval of the Microlending Standards (20 February 2019). The NAMFISA Act requires the CEO to attend Board meetings. The Deputy CEO for Prudential Supervision, the Deputy CEO for Market Conduct and Operations and other Executive Committee Members attend Board meetings on invitation.

Table 5 outlines the membership and attendance of Board and Board Committee meetings.

The Board also ensures that the Authority achieves its strategic objectives. Highlights for NAMFISA during 2018/19 in this regard were the following:

• Phase 1 of the New Dawn Project ended during the reporting period. The project focused primarily on developing tools for successful RBS. Some of the key instruments in this regard were the quantitative module of the risk model, implementation of the One Chart of Accounts project, and drafting of Phase 3 standards and regulations deemed to be critical for the implementation of the FIM Bill.

• Systemically important financial institutions were identified. This was supported by analytical work conducted on the interconnectedness of the financial system and various channels through which global, regional and domestic shocks can be transmitted to NBFIs.

• Several research and policy papers were produced that focussed on strengthening the execution of the Authority’s mandate.

• Expanded supervision activities in respect of anti-money laundering, combating the financing of terrorism, and combating proliferation financing (AML/CFT/CPF) were introduced successfully across the regulated sector.

• All relevant policies, processes and procedures were implemented.

• The revised organisational structure was successfully implemented.

• A new levy and funding model was successfully implemented.

• Business Continuity and Disaster Recovery Policies were approved and the concomitant programmes implemented.

• The Risk Appetite Statement and an updated Risk Register were approved, and

• The resolutions on the Post-retirement Medical Aid Benefit were implemented.

Ethical and value-based leadership

TABLE 5: MEMBERSHIP AND ATTENDANCE OF BOARD AND BOARD COMMITTEE MEETINGS

Member NAMFISA Board(7 meetings)

Audit and Risk Committee

(4 meetings)

Human Resources Committee

(4 meetings)

Legal and Supervisory Committee

(4 meetings)

Mr G R Katjimune 7/7 (Chairperson) n/a 4/4 (Member) n/a

Dr S Amunkete 7/7 n/a 4/4 (Chairperson) n/a

Ms H Garbers-Kirsten 6/7 n/a n/a 4/4 (Chairperson)

Ms L E Dunn 6/7 4/4 (Member) n/a 4/4 (Member)

Mr J Jansen 7/7 4/4 (Chairperson) n/a n/a


BOARD COMMITTEESAudit and Risk CommitteeCommittee CharterThe Committee implemented the Board-approved revised version of its Charter during the reporting period.

Membership and attendance of Board Committee meetingsThe Committee consisted of Mr J Jansen (Chairperson) and Ms L E Dunn (Member) for the 2018/19 financial year. Members of management, external auditors and internal auditors attend Committee meetings by invitation. The terms of office of these Committee Members coincide with their terms of office on the Board.

As required, the Committee held four quarterly meetings during the financial year to deliberate on the matters delegated to them. Table 5 details attendance of the Committee’s meetings.

Duties discharged during 2018/19• Reviewed the Authority’s budget for the 2019/20

financial year• Considered the 2018/19 Annual Financial Statements

and made recommendations for them to be approved by the Board

• Approved the Annual Internal Audit Plan and Audit Charter

• Approved updates to the Audit Charter• Reviewed Internal Audit Reports as presented by the

Head of Internal Audit• Received risk management reports for consideration,

including a review of key risks and responses• Received progress reports on the implementation

of information technology (IT) Projects and the debt collection process for long-outstanding levies

• Recommended the draft Annual Report to the Board for approval

• Approved the external audit scope of work, fee and report

• Provided strategic oversight in respect of key projects• Reviewed and recommended various policies to the

Board for approval• Approved the Authority’s 2019/20 Risk Management

Plan• Approved the Authority’s 2019/20 Compliance

Management Plan

Key focus areas for 2019/20• Continue developing a combined assurance model to

manage key risks appropriately• Continue overseeing the Authority’s integrated

reporting as well as its internal audit and risk management function

• Review the adequacy and effectiveness of the internal control environment and oversight of the risk, internal audit and financial management functions

• Review the Risk Management Policy• Review and monitor the IT control environment• Review and monitor the progress of projects and

strategic initiatives

Human Resources CommitteeCommittee CharterThe Committee assists the Board in ensuring that the Authority’s remuneration and employment principles and practices are aligned to its long-term objectives. This ensures that the Authority can attract and retain the skills required to carry out its mandate effectively. The Committee therefore considers and recommends human resources and remuneration-related policies to the Board. The Committee also makes recommendations to the Board in respect of the remuneration of the CEO and Deputy CEOs.

Remuneration philosophyNAMFISA’s remuneration philosophy provides for a mix of variable and guaranteed pay packages. The Board sets the Authority’s performance scorecard and targets, which are in turn cascaded to all staff. The remuneration model is linked to the Performance Management System, while bonus payments are provided for above-average performers on a sliding-scale basis.

The remuneration of the Board is set out in regulations issued by the Ministry of Public Enterprises. Board fees are determined by the Minister of Finance on an annual basis, following a Board performance review. Board fees comprise a retainer fee as well as a sitting fee; the latter is only paid to members who attend a meeting. The Authority covers expenses incurred by the Board in relation to the execution of Board duties. The reporting period saw no adjustment in Board Members’ remuneration.

Membership and attendance of Board Committee meetingsThe Committee consisted of Dr S Amunkete (Chairperson) and Mr G R Katjimune (Member) for the 2018/19 financial year. Members of senior management attend Committee meetings on invitation. The terms of office of these Committee Members coincide with their terms of office on the Board.


Duties discharged during 2018/19• Reviewed proposals for salary increases and

performance and made due recommendations to the Board

• Conducted performance review reports of the Authority and the CEO

• Reviewed the Post-retirement Medical Aid Benefit for NAMFISA staff and implemented Board decision approval

• Reviewed various Human Resources policies and recommended them to the Board for approval

Key focus areas for 2019/20• Implement talent management and succession

planning

• Review the effectiveness of the new organisational structure

• Conduct performance management appraisals

• Approve Human Resources policies that require implementation

• Continue developing a combined assurance model to manage key risks appropriately

• Continue advising the Board in respect of the Human Resources function

• Continue implementing the Capability Framework

Legal and Supervisory CommitteeCommittee CharterThe Committee receives reports on the enforcement, supervision and regulation of the non- bank financial institutions (NBFIs) sector. In accordance with section 3(b) of the NAMFISA Act, the Committee also advises the Minister of Finance on matters related to financial institutions and financial services, whether of its own accord or at the Minister’s request.

Membership and attendance of Board Committee meetingsThe Committee consisted of Ms H Garbers-Kirsten (Chairperson) and Ms L E Dunn (Member) for the 2018/19 financial year. Members of senior management attend Committee meetings by invitation. The terms of office of these Committee Members coincide with their terms of office on the Board.


Duties discharged during 2018/19• Provided oversight in the finalisation of the

implementation plan relating to the NAMFISA Bill, the Microlending Act, the FIM Bill and the FSA Bill

• Discussed the progress in legal proceedings in which the Authority is engaged

• Reviewed draft Bills and draft subordinate legislation for the various laws falling within the Authority’s mandate

• Exercised strategic oversight in respect of the supervision and regulation of the industry within the parameters of the relevant legislative instruments

Key focus areas for 2019/20• Provide strategic oversight over the Bills

Implementation Project

• Review draft legislation and subordinate legislative instruments


Board feesTable 6 sets out the fees paid to Board Members during the 2018/19 financial year.

TABLE 6: BOARD FEES, 2018/19Name Retainer fee

(N$)Sitting fee

(N$)Total Board

remuneration (N$)

Daily subsistence allowance

(N$)

Total per member

(N$)

Mr Gersom R Katjimune 76,649.00 103,618.00 180,267.00 210,736.00 391,003.00

Ms Hettie Garbers-Kirsten 62,613.00 72,469.00 135,082.00 0.00 135,082.00

Mr Jauque Jansen 62,613.00 79,298.00 141,911.00 25,192.00 167,103.00

Ms Leonie E Dunn 62,613.00 89,325.00 151,938.00 0.00 151,938.00

Dr Simeon Amunkete 62,613.00 73,315.00 135,928.00 0.00 135,928.00

TOTAL 327,101.00 418,025.00 745,126.00 235,928.00 981,054.00

TABLE 7: APPLICATION OF NAMCODE GUIDANCE ON GOVERNANCE-RELATED ASPECTSGovernance principle How the Authority applied NamCode

1 Ethical leadership and corporate citizenship

The Board provides effective leadership based on ethical considerations. NAMFISA adopted a corporate social responsibility programme with both an inward and outward focus. The Authority has an approved Ethics programme effectively managed by the Authority’s Ethics Officer.

2 Board and Board Members The Board provides effective leadership to the Authority. To this end, it requires appropriate reporting and provides direction on key matters such as IT, ethics, risk management, internal controls, integrated disclosures, effective governance structures and reporting, and stakeholder engagement.

3 Audit committees NAMFISA has an effective Audit and Risk Committee chaired by an independent Board Member. The Committee oversees the audits, risk management, and reviews the skills and experience of the finance team.

4 Governance of risk The Board has delegated the governance of risk to the Audit and Risk Committee. The Committee sets levels of risk tolerance and delegates the responsibility to design, implement and monitor risk management options to NAMFISA Management. The Board and NAMFISA stakeholders received periodic and ad hoc reports from the Committee on risks as per the escalation procedure. Although the Committee has only two members, key Executive management members are also invited to attend Committee meetings.

The Board upholds good corporate governance principles as required by the NAMFISA Act, the Public Enterprises Governance Act, 2006 (No. 2 of 2006), and

best governance practices as enshrined in NamCode. (Table 7)

Application of NamCode

Governance principle How the Authority applied NamCode

5 Governance of IT The Board has an approved IT Governance and Security Framework in place and has deployed IT infrastructure aligned to its mandate. IT risk management remains a key focus area for the Board and NAMFISA Management.

6 Compliance with laws, codes, rules and standards

The Authority’s Regulatory Risk Management Framework sets the governance parameters for compliance risk and the risk appetite. The Board receives information and reports from Management on the compliance risks to which the Authority is exposed.

7 Internal audit The Internal Audit Charter approved by the Audit and Risk Committee prescribes that NAMFISA adopt a risk-based approach to internal audit. Since the Head of Internal Audit is invited to the Authority’s Executive Management meetings, s/he is strategically placed to ensure that the Authority achieves its internal audit objectives.

8 Governing stakeholder relationships

The Board has delegated the proactive management of stakeholders to Management through the Stakeholder Engagement Plan. The management of reputational risk is a key strategic risk managed by the CEO with Management’s assistance. The Authority ensures that its engagement with stakeholders is transparent, timely, appropriate in detail and equitable. A dispute resolution mechanism is prescribed in the NAMFISA Act for the regulated industry and additional mechanisms are in place for other stakeholders.

9 Integrated reporting and disclosure

The Board engages external consultants to ensure the integrity of NAMFISA’s Annual Report. With respect to the Authority’s sustainability and its impact on the external environment, these are disclosed in the Annual Report.


2.RISK

MANAGEMENT

Risk management is the process of identifying, assessing and controlling threats to an organisation’s capital and earnings. These threats, or risks, could stem from a variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters.


PHILOSOPHYNAMFISA’s Risk Management Policy and Framework embedded and enhanced the risk management processes at both strategic and operational level. During the year under review, the Authority’s risk management function coordinated risk management initiatives that included business continuity management; health and safety compliance; and information security and ethics management.

The Authority’s risk management function and structures allow it to coordinate risk management activities and provide advice on, among other things, NAMFISA’s internal audit systems, insurance, IT security, compliance processes and quality management. The Risk Management Policy and Framework are aimed at enhancing value for all NAMFISA stakeholders and consider the recommendations of the International Organization for Standardization’s ISO 31000 as well as the NamCode Principles under Chapter 4.

GOVERNANCE OF RISK MANAGEMENTThe NAMFISA Board is responsible for the governance of risk. The Audit and Risk Committee, in its capacity as a Board Committee, is tasked with assisting the Board in carrying out its risk management responsibilities. The responsibility for implementing risk management processes is devolved to the Line Management in each NAMFISA Division, Department or Operation/Business Unit. Furthermore, NAMFISA’s internal audit function provides independent assurance on the risk management process.

KEY FOCUS AREAS FOR 2018/19The Governance, Risk and Compliance Department assisted with the effective implementation of the Authority’s new Risk Appetite statement and Risk Register. Both are aligned to NAMFISA’s five-year strategy spanning the 2017/18–2021/22 financial years.

The creation of a risk management function in NAMFISA reflects that we see business resilience as an opportunity to ensure that our business strength is maintained and

enhanced proactively. This drawing together of the teams that coordinate enterprise risk management, business continuity, compliance/regulatory risk management, ethics risk management and the governance function has enhanced collaboration across the institution in respect of identifying, reviewing and challenging risks arising from our business activities. This has strengthened our ability to manage risk proactively and fully embed a risk management culture throughout the Authority.

In support of these mechanisms, NAMFISA also has an ongoing and effective risk assessment process that identifies risks and opportunities and assesses the effectiveness of our risk management actions. Quarterly reports in this regard are provided to the Board’s Audit and Risk Committee as well as to stakeholders, as and when relevant.

RISK APPETITEThe Authority has adopted a risk appetite that aims to strike a balance between the risks taken by the organisation in pursuance of its mandate, and the opportunities and rewards associated with taking such risks. In this respect, the following broad risk appetite statements were adopted:

• Prudence: Systematically important financial institutions cannot fail.

• Market conduct: All consumers must be treated fairly.

• Supervision: All financial institutions must fully comply with Acts and Regulations.

• Policy advice: Sound advice must inform national policy.

• Resources: NAMFISA must be adequately resourced to execute its mandate.

• Governance: NAMFISA must implement best practice governance principles and practices as well as regulatory compliance.

OUR KEY RISKSThe Authority’s Risk Register is aligned to its core mandate and objectives. Table 8 below lists various crucial risks that have been identified and outlines their accompanying mitigating measures. The registered risks all have high inherent-risk rating values and, thus, present a high risk with respect to the execution of NAMFISA’s mandate and sustainability.

TABLE 8: RISK REGISTER, 2018/19

No. Risk Risk response

1 Inconsistent application of the Performance Management System

Consistency with existing appraisal and review processes is being monitored during the organisation- wide implementation of the Performance Management System.

2 Lack of proper planning, particularly in respect of capacity-building and prioritisation

Approved Divisional training plans are being implemented in line with the Capability Framework, together with a review of the effectiveness of the strategy and business plan formulations.

3 Delay in taking supervisory action The Authority will review its business processes annually and recommend changes to the Business Processes Management Committee for implementation.

4 Fraud and other corrupt practices Training staff in how to identify fraudulent practices was identified as a control factor.

5 Inability to deliver effectively on Divisions’ mandates The requested improved budget was submitted to Finance in September 2018 for consideration to ensure adequate financial resources are provided to deliver Divisions mandates.

6 Inadequate and/or ineffective regulatory and supervisory legislation

Legislation is continually reviewed and revised where necessary.

7 Inadequate data collection systems Robust information and communications technology were identified as a controlling factor.

8 Ineffective business systems The results of automated business processes as per the New Dawn Project as well as those from the project devising business processes, policy and procedure manuals were identified. These results are being analysed in respect of appropriate action to be taken.

9 Compromised integrity of human resources information

As control mechanisms, the human resources system is periodically reviewed, and all human resources records are now filed according to the Enterprise Content Management Standards.

10 Misalignment between processes and operations A supervisory review of all prudential supervision activities was identified as a controlling factor, along with the alignment of business processes to service-level agreement timelines.

11 Unreliable data hampering the effective performance of the supervisory function, e.g. inadequate system integration

Enhanced business analysis and the incorporation of business rules on data capturing were identified as control factors.


3.EXECUTIVE

MANAGEMENT

The CEO drives the implementation of the Authority’s five-year strategy and steers the direction of policy. In this regard, the CEO presides over NAMFISA’s organisational, regulatory and supervisory operations. This leadership is provided to accomplish the regulatory and supervisory objectives conferred on the Authority by the statutes it administers. As outlined later in this chapter, the CEO is supported in his/her duties by an Executive Committee and various auxiliary Committees within NAMFISA’s management structure.

NAMFISA’s organisational structure comprises a Prudential supervision and a Market conduct and operations cluster to enhance the execution of its mandate. A Deputy CEO heads each of these two clusters.



Executive Committee

Risk Management Committee

(Incl. Ethics)

Licensing and

Litigation Committee

Data Management and IT

Operations Committee

Investment Committee

Procurement Committee

Figure 2: Executive management organisational structure

Executive CommitteeThe CEO chairs the Executive Committee, while both Deputy CEOs and all General Managers of the various Divisions in NAMFISA’s organisational structure serve as members. The Head of Internal Audit; the Head of Governance, Risk and Compliance; and the Manager of Corporate Communications attend Executive Committee meetings by invitation.

The Executive Committee’s three functions are Supervision, Strategy and Operations. Thus, they monitor organisational activities, implement the Authority’s strategy and manage risks. Assisting the Executive in these functions are various other Committees, each with its own respective area of technical specialisation, as set out below (Figure 3).

Risk Management CommitteeThe CEO chairs this Committee, while other members are the two Deputy CEOs; all General Managers; the Head of Internal Audit; the Head of Governance, Risk and Compliance; and the Manager of Corporate Communications. The Committee assists the CEO in identifying and managing risks within the Authority and ensures the maintenance of ethical conduct across the organisation.

Licensing and Litigation CommitteeThe Deputy CEO for Market Conduct and Operations chairs this Committee. Its members include the Deputy CEO for Prudential Supervision, the General Managers responsible for NAMFISA’s regulatory and supervisory functions, and the General Manager of Legal Services. The Committee considers applications for the approval or registration of NBFIs and makes recommendations to the CEO, who takes the ultimate decision. The Committee also considers litigation by or against the Authority and recommends appropriate action to the CEO.

Mr Kenneth S MatomolaChief Executive Officer

Ms Evangelina Nailenge General Manager: Capital Markets

Ms Grace MohamedGeneral Manager: Insurance and Medical Aid Funds

Ms Lovisa Indongo-NamandjeGeneral Manager: Pension Funds andFriendly Societies

Mr Floris FleermuysGeneral Manager:Research, Policy and Statistics

Mr Bonifatius PaulinoDeputy Chief ExecutiveOfficer: Market Conductand Operations

Mr Nolan SwartsGeneral Manager:Legal Services

Ms Hilka AlbertoGeneral Manager:Market Conduct

Mr Russell MufayaGeneral Manager:Human Resources

Mr Petrus KafidiGeneral Manager:Information andCommunicationsTechnology

Mr Johannes SmitGeneral Manager:Finance and Administration

Ms Erna MotingaDeputy Chief ExecutiveOfficer: Prudential Supervision

Mr Absalom KapendaGeneral Manager:Strategy and Projects

Figure 3: Executive Committee and its supporting Committees


Data Management and Information Technology Operations CommitteeThe General Manager of the Information and Communications Technology Division chairs this Committee. Other members are the Managers of NAMFISA’s regulatory Divisions; the Head of Governance, Risk and Compliance; the Manager of Corporate Communications. The Head of Internal Audit and the Project Manager of the Strategic Projects Office are invited to attend when required.

The Committee’s primary responsibility is to review operational data issues and recommend strategic and policy decisions to the Executive Committee. The Data Management and IT Operations Committee also serves as the executor of data quality and related projects and resolves business issues relating to IT. Furthermore, it ensures a sound relationship exists between the IT function and NAMFISA’s business activities and resolves any operational issues pertaining to the use of the Authority’s IT systems.

Investment CommitteeThe Deputy CEO for Market Conduct and Operations chairs this Committee. Other members are the General Manager of Finance and Administration and the Manager of Finance, as well as other General Managers and Managers designated by the CEO. The Committee has the duty to ensure that surplus funds are invested according to guidelines stipulated in the Investment Policy.

Procurement CommitteeThe General Manager of Finance and Administration, who is deputised by the Head of Governance, Risk and Compliance, chairs the Committee. Other members are the General Manager of Legal Services, the Manager of Finance (Financial Advisor) and the Manager of Administration and Procurement (ex officio member and Secretary) designated by the CEO to serve on the Committee.

The Committee’s primary purpose is to oversee the procurement process conducted by the Authority as per the Public Procurement Act, 2015 (No. 15 of 2015), since NAMFISA’s management are required to ensure that the Authority’s procurement activities comply with legislation.

Ad-hoc committeesA variety of other committees is constituted by the Executive Committee to work on pertinent issues from time to time.


An organisation needs a clear, well-defined strategy to operate successfully. Managing performance in terms of that strategy is vital in ensuring that organisational goals are effectively met.

4.STRATEGY &

PERFORMANCE


The 2018/19 financial year constitutes the second year in NAMFISA’s five-year strategy. The following are key milestones achieved during the reporting period (Figure 4):

• Aligning and cascading organisational performance• Finalising the Microlending Bill and its subsequent

enactment• Gazetting amended regulations for the legislation

governing short- and long-term insurance bodies, pension funds and medical aid funds

• Setting up a joint supervisory framework with the Bank of Namibia

• Implementing work culture and productivity indices• Upgrading the Electronic Regulatory System (ERS)

for RBS• Establishing the Financial Intermediary Qualification/

Certification Programme, and• Implementation of a File Plan for the electronic content

management project.

In terms of the 14 strategic objectives set for the 2018/19 reporting period, the Authority planned to execute 31 strategic initiatives, with a target of 75 percent completion. By the end of the financial year, we had either completed or were on track to finalise 76 percent of these initiatives, with 24 percent being behind schedule (Figure 4). The

main reason for the latter was the delay in Parliament’s promulgation of the NAMFISA, FIM and FSA Bills. Figure 5 also illustrates the progress made on the initiatives. In respect of NAMFISA’s five-year strategy, we have already achieved 42 percent of our strategic performance targets (Figure 5).

Financial sustainabilityThe Authority and its subsidiary (hereinafter the Group) managed its financial resources prudently and in line with the approved budget. NAMFISA acquired Metropol (Pty) Ltd on 27 October 2014. The company is an investment property holding company and owns a property situated on Independence Avenue, Windhoek. The investment in the subsidiary is listed in note 9 of the annual financial statements.

Budget implementation is closely monitored through monthly management accounts distributed to the Executive and other members of management for their information, perusal and action, ultimately ensuring compliance with internal budgetary requirements as well as financial transparency.

Overall performanceThe Group’s total income for the year ending 31 March 2019 amounted to N$261.2 million, with expenditure totalling N$195.9 million. The total comprehensive surplus for the year amounted to N$75.8 million.

NAMFISA continued its focus on the priority areas identified in the previous financial year. These priorities do not represent the totality of our work but are used to drive decisions about thematic projects and inform areas requiring specific attention in conducting our core

activities. Table 9 presents the various priorities and the key initiatives subsumed under them that will drive performance in the 2019/20 financial year. These include implementing Phase 2 of the New Dawn Project.

TABLE 9: PRIORITIES AND KEY INITIATIVES PLANNED FOR 2019/20

Priorities Key initiatives

• Implementing the Microlending Act

• Promulgation and implementation of the NAMFISA, FIM and FSA Bills

• Implementation of New Dawn Phase 2

• Effectively implementing risk-based supervision • Implementation of New Dawn Phase 2

• Attaining and maintaining adequate reserve levels

• Prudent utilisation of financial resources

• Securing an appropriate degree of protection for consumers

• Implementation of New Dawn Phase 2

• Implementation of the NAMFISA, FIM and FSA Bills once enacted

• Development of the Consumer Credit Bill

• Enhancing stakeholder and customer engagement

• Execution of the Stakeholder and Customer Engagement Plan

• Ensuring operational efficiency • Implementation and enhancement of systems and automation of processes

No opportunity to demonstrate 39%

Not achieved 19%

Achieved 42%

On track/complete 76%

Behind schedule 24%

STRATEGY

FINANCIAL PERFORMANCE

Figure 5: Overall strategy performance, 2018/19

Figure 4: Strategic initiatives performance, 2018/19


During the review period, levy income amounted to N$252.6 million. This represents an increase of 77.1

percent from the N$142.6 million recorded in the prior financial year.

The 2018/19 financial year represents the first full reporting period following the implementation of NAMFISA’s new levy structure on 1 November 2017. With the previous (‘old’) levy structure, there was a significant delay between the time certain regulated entities recovered levy payments from consumers and when those levies became payable to NAMFISA. In certain circumstances, this delay was as long as 28 months. In terms of the new levy structure, levies are payable every six months. Consequently, NAMFISA recognised levy income originating from both the old and the new levy structures during its 2018/19 financial year. We expected and budgeted for this unique situation. Its effect was also considered when levies were set for the current five-year strategy period and, as such, had the effect of reducing levy percentages.

Since the effect of income from the old levy structure largely came to an end during the 2018/19 financial year, NAMFISA will see levy income reduce in 2019/20.

ExpenditureA total expenditure of N$195.9 million was incurred by the Group, which represents a reduction of 2.9 percent from the N$201.7 million recorded for the 2017/18 period. As a regulator, NAMFISA is highly reliant on its human resources. Consequently, staff costs make up the largest share of expenditure (76.1 percent), namely N$149 million. The reduction in these compared with the N$154.8 million reported for 2017/18 was attributable to a decrease in the cost of the defined benefit medical aid plan. During the previous reporting period, NAMFISA was required to raise a liability for all staff who were found to qualify for, but had not yet been included in, the defined benefit medical aid plan. The cost relating to previously excluded staff amounted to N$12.3 million. This cost did not recur for the 2018/19 reporting period.

TABLE 10: EXECUTIVE AND MANAGEMENT APPOINTMENTS

Level of seniority Name Position Date of appointment

ExecutiveMr Nolan C Swarts General Manager: Legal Services 9 April 2018

Ms Hilka K Alberto General Manager: Market Conduct 6 November 2018

Management

Mr Allen Hatzenberg Head: Internal Audit 1 October 2018

Mr Vilho Nkandi Manager: Anti-money Laundering and Inspections

1 August 2018

Mr Marvin Daniels Manager: Conduct and Compliance 15 September 2018

Unit trust

N$

mill

ions

0

10

20

30

40

50

60

70

80

Capitalmarket

Pensionfunds

Medical aidfunds and

friendlysocieties

MicrolendingLong-terminsurance

Short-terminsurance

2016/17 2017/18 2018/19

2016/17 2017/18 2018/19

Office rentalexpenses

Professional and

consulting fees

Other operating

costs

Staff costs Total expenses

N$

mill

ions

0

50

100

150

200

250Income

Figure 6: Levies, per industry

Figure 7: Operating expenditure

Financial positionThe Group’s total assets increased by 52.9 percent, to N$244.7 million as at 31 March 2019 (31 March 2018: N$160.0 million). This increase is the result of the total comprehensive surplus of N$75.8 million plus an increase in liabilities of N$8.9 million. Financial assets (representing investments in unit trusts and fixed deposits) together with cash and cash equivalents increased by 186.9 percent to N$133.1 million as at 31 March 2019 (31 March 2018: N$46.4 million).

HUMAN RESOURCE DEVELOPMENTSExecutive or key employee changesTable 10 shows new appointments at the Executive and Management level to ensure the Authority’s mandate and strategy are properly executed.


Labour turnoverThe staff turnover rate at 31 March 2019 was 3.88 percent compared with 12.94 percent for the previous reporting period. The staff turnover rate is acceptable compared to the 5 percent benchmark labour turnover rate.

Staff complementThe staff complement, including contract staff, stood at 170 on 31 March 2019, which represents 3 percent growth from the previous financial year.

TABLE 11: STAFF COMPLEMENT

Name Staff complement

Permanent Temporary Total newrecruits % per Office/Division

Females Males Females Males Females Males Total % of total

Market Conduct Division 16 15 2 0 18 15 33 19.41

Finance and Administration Division

17 8 1 1 18 9 27 15.88

Insurance and Medical Aid Division

9 10 1 0 9 19 19 11.18

Pension Funds and Friendly Societies

8 9 0 1 8 9 17 10.00

Office of the CEO 8 6 0 0 8 6 14 8.24

Capital Markets Division 9 5 0 0 9 5 14 8.24

Name Staff complement

Permanent Temporary Total newrecruits % per Office/Division

Females Males Females Males Females Males Total % of total

Information and Communications Technology Division

6 7 0 0 6 7 13 7.65

Research, Policy and Statistics Division

2 10 1 1 2 11 13 7.65

Human Resources Division 5 1 3 1 8 2 10 5.88

Legal Services Division 3 2 0 0 3 2 5 2.94

Strategy and Projects Division 1 2 0 0 2 2 4 2.35

TOTAL 84 75 8 3 92 78 170 100.00Num

ber o

f enp

loye

es

158

160

162

164

166

168

170

172

174

178

176

Mar 2019 Mar 2018 Mar 2017

Figure 8: Staff complement

Due to a scarcity of skills in specialised areas as well as to financial constraints, NAMFISA only recruited employees in critical positions. NAMFISA remains an

equal opportunity employer. In this regard, the majority of the employees are female at 54.1 percent in comparison to males at 45.9 percent in the review period.

Staff development

BursariesDue to a moratorium placed on staff bursaries during 2016, the Authority last committed to extend financial assistance to students registering during the 2015 academic year. Due to funding constraints, NAMFISA currently sponsors only one beneficiary through the Bursary Scheme, namely a candidate in the field of Actuarial Science.

Performance managementThe Authority places significant importance in managing performance so that it fulfils its mandate effectively. To this end, the performance management framework is continuously being improved to ensure that it drives its key purpose and addresses new developments aligned with best practices.

Leadership Creed and Values SurveyThe Authority has a responsibility to serve the financial sector and Namibia at large. To assist it in this significant task, it has defined certain organisational Values and a Leadership Creed to guide employees in carrying out their roles. To assess how well employees are implementing the Values and Creed, NAMFISA created a 360-degree Values Survey that now forms part of every employee’s performance scorecard. Similarly, a Leadership Creed Survey constitutes part of the regular evaluation of Management’s performance.


Training and developmentTo continuously build capacity within NAMFISA, employees across the organisation attended various training and exposure programmes during the period under review (Figure 9).

The developmental interventions that staff undergo are directed towards developing and enhancing key and critical competencies required in their area of work and, ultimately, should enhance the Authority’s efficiency and effectiveness.

TABLE 12: GROUP-TRAINING INTERVENTIONS

Group training interventions Business areas No. of employees

Toronto Centre International Programme for Insurance and Pensions Supervisors

Regulatory 30

Toronto Centre Market Conduct Regional Supervision Programme

Regulatory 23

Toronto Centre Consolidated Supervision for Insurance and Pension Supervisors

Regulatory 18

Toronto Centre Risk-based Supervision Programme Regulatory 33

Affirmative Action Regulatory and operations 5

Health and Safety Regulatory and operations 12

Firefighting Regulatory and operations 10

First Aid Regulatory and operations 9

Strategy Execution Regulatory and operations 27

Fraud Awareness and Ethics Operations 12

Conflict Management Operations 12

(It is a process whereby a staff member is compulsorily attached to the institution for a period after being sponsored to attend a training/capacity building course)

Internship agreement with the Namibia University of Science and TechnologyA Memorandum of Understanding exists between NAMFISA and the Namibia University of Science and Technology, in which it has been agreed that students could be placed in internship programmes at NAMFISA for specified periods to gain practical experience in the workplace. The internship programme is at the Authority’s discretion as and when the need arises. NAMFISA also bears no financial obligation under the agreement.

Employment equityAs an equal opportunity employer, NAMFISA remains committed to the Employment Equity Code of Good Practice. To ensure that this commitment is sustained and that progress in respect of enhanced equality is duly monitored, the Human Resources Division updates Management as well as the Board with respect to its quarterly progress in implementing NAMFISA’s Employment Equity Plan. Figure 10 depicts the progress made during the reporting period as regards achieving the 2017–2019 Affirmative Action Plan.

Figure 10: Employment Equity

Mon

th a

nd y

ear

Number of employees0 10 20 30 40 50 60

Apr – 18May – 18Jun – 18Jul – 18

Aug – 18Sep – 18Oct – 18Nov – 18Dec – 18Jan – 19Feb – 19Mar – 19

Des

igna

ted

grou

ps

0 10 20 30 40 50 60 70 80 90 100

Temporary staff and graduates

Non-Namibian Female

Advantaged Female

Disadvantaged Female

Disabled Female (Disadvantaged)

Disabled Male (Disadvantaged)

Non-Namibian Male

Advantaged Male

Disadvantaged Male

19 – Mar 2017–2019 Affirmative Action Plan

Figure 9: Staff development

The Authority also effected several group-training interventions. These largely targeted the regulatory Divisions (Table 12). Skilled staff are vital for business

continuity. NAMFISA therefore not only strives to retain skilled staff, it also facilitates the transfer and application of acquired knowledge via the principle of bonding.


5.DIVISIONAL ACTIVITIES

NAMFISA's operations are handled by various divisions and functions group under its Market Conduct and operations and Prudential supervision clusters. Their reports are outlined in this section.




CONSUMER COMPLAINTS AND EDUCATION DEPARTMENT

ANTI-MONEY LAUNDERING AND INSPECTIONS DEPARTMENT

MARKET CONDUCT DIVISION




CONDUCT AND COMPLIANCE DEPARTMENT

LICENSING AND REGISTRATION DEPARTMENT


Market Conduct DivisionThis Division comprises the Consumer Complaints and Education Department, the Anti-money Laundering and Inspections Department, the Compliance and Conduct Department, and the Licensing and Registration Department.

Consumer Complaints and Education DepartmentThe Consumer Complaints and Education Department provides a dual function to the Authority. It receives and resolves complaints lodged by consumers of NBFI services and it executes the Authority’s Consumer Education Strategy.

Key activities during 2018/19The Department’s key activities for the reporting period were to improve consumer satisfaction by increasing access to, and awareness of, the channels used to lodge complaints at NAMFISA. The Department further ensured that consumer education initiatives gained broader geographical reach by focusing on the country’s largest Regions. As a result, the number of complaints received rose by 8.3 percent to 1,072, while the use of various channels to lodge these complaints also increased. The Division resolved over 93 percent of the complaints received in 2018/19.

Key focus areas for 2019/20The Department will continue to focus on initiatives to increase consumer satisfaction. In this regard, NAMFISA will maintain its special focus on market conduct complaints and on a high complaints resolution rate. Consumer education campaigns will become more specifically targeted. This will not only enhance stakeholders’ knowledge of the industries involved but also strengthen awareness of the various channels through which complaints can be lodged at the Authority.

Anti-money Laundering and Inspections DepartmentThis Department also has a dual role. Firstly, it is responsible for executing the Authority’s strategy relating to ensuring compliance with the Financial Intelligence Act, 2012 (No. 13 of 2012) and its subordinate instruments as well as with the Prevention and Combating of Terrorist and Proliferation Activities Act, 2014 (No. 4 of 2014) (PACOTPAA). Its second role relates to conducting targeted inspections into an NBFI’s affairs, or any part of such affairs when the need arises. The Department uses an RBS approach in executing its objectives, especially in respect of matters relating to AML/CFT/CPF.

Key activities during 2018/19During the year under review, NAMFISA continued to prioritise its AML/CFT/CPF supervisory activities in preparation for Namibia’s mutual evaluation scheduled for 2020. As a result, the Division escalated its supervisory and monitoring activities to include the development of a draft AML/CFT/CPF Risk-based Framework, and via RBS it conducted sectoral assessments on the Authority’s exposure to the risks of money laundering, financing of terrorism and proliferation financing.

Key focus areas for 2019/20In anticipation of Namibia’s mutual evaluation scheduled for 2020, NAMFISA identified that it would need to implement its AML/CFT/CPF Risk-based Framework. This includes targeting accountable and reporting institutions under NAMFISA’s supervision with training, awareness and guidance campaigns and to continue conducting its risk-based on-site and off-site inspections. Moreover, the Authority will use the Financial Intelligence Act and its subordinate instruments as well as PACOTPAA to undertake enforcement actions against NBFIs that were not duly complying with the law.

Conduct and Compliance DepartmentThe Department is predominantly responsible for the regulation and supervision of micro-lenders and insurance intermediaries. It is also tasked with oversight over micro-lenders and their finance charges, and it supervises their conduct.

Key activities during 2018/19With the assistance of the Licensing and Registration Department, the Conduct and Compliance Department carried out a simulation exercise aimed at identifying activities that had to be performed before the Microlending Act No. 7 of 2018 came into effect so that the environment was adequately prepared for the law’s successful implementation. Part of this exercise entailed drafting and gazetting a Regulation and five Standards under that Act. The Conduct and Compliance Department subsequently commenced implementing the said Act.

The Department also focused on on-site and off-site inspections of microlenders. The inspections enabled the Department to update microlenders’ status in respect of compliance and risk. Stakeholder engagement activities were also undertaken, particularly with the annual Microlending Industry Forums. The first such forum following the promulgation of the Microlending Act was held from 8 to 15 March 2019, under the theme Promoting fairness within the microlending industry.

Key focus areas for 2019/20The Department will conduct the annual Microlending Industry Forum to extend the discussion on policy initiatives and to gauge industry views and concerns on issues of mutual interest. The Department will also continue its inspection activities using the RBS approach and will focus more strongly on follow-up inspections. Further work will entail increasing conduct supervision activities, particularly in respect of the microlending sector, following the promulgation of the Microlending Act. Such activities intend to curb identified malpractices and to develop the Treating customers fairly framework.

Licensing and Registration DepartmentThe Licensing and Registration Department was established as a hub for NBFIs to enter and/or exit from the regulated space. All functions pertaining to the registration of new entities and the deregistration/cancellation of regulated entities are now performed by this Department.

Key activities during 2018/19The Department’s key activity during the period under review was to finalise the transitioning of identified functions from the Prudential supervision cluster to the Market conduct and operations cluster and specifically to the Market Conduct Division. At the same time, concerted efforts were made to get the new team members settled into their new roles as the Department team was sourced from different functions across NAMFISA.

Following these developments, there was a need to capacitate team members for their new roles. To this end, an in-house Market Conduct Training Programme was designed and successfully executed. Most of the skills development was done through on-the-job training, where team members within the Department would cross-train other staff members. This included cross-departmental training of the team by the Prudential Supervision team. Considerable effort was also made to work on cohesion among the new team members.

Another key activity for the Department was the development of process maps and detailed process descriptions of all the functions transferred to it. As mentioned earlier under the Conduct and Compliance Department’s report, it collaborated with the Licensing and Registration Department in conducting a simulation exercise aimed at identifying activities to be performed before the operationalisation of the Microlending Act so that the environment was adequately prepared for the law’s successful implementation. The two Departments subsequently executed the required activities identified through the simulation exercise.

Key focus areas for 2019/20The Department will continue to focus on skills impartation via targeted training interventions to address skills gaps identified during the recently concluded capability assessment. Our focus will be sharpened in respect of delivering outputs on time, in line with our service-level commitments to the industry. The Department will also implement and employ the newly introduced File Plan to ensure all records are duly stored. This will enhance not only the Department’s record-retrieval process but also its efficiency and effectiveness overall.

MARKET CONDUCT AND OPERATIONS



INTERNAL AUDIT DEPARTMENT

GOVERNANCE, RISK AND COMPLIANCE DEPARTMENT

Internal Audit DepartmentInternal Audit is an independent and objective assurance and consulting Department, established with the aim of contributing towards the enhancement of the Authority’s internal control systems. The Department assists the Authority with achieving its objectives by systematically reviewing internal processes. It does so by applying a risk-based approach to establish the adequacy of the design and operational effectiveness of internal controls as well as risk management and governance processes.

Key activities during 2018/19Besides undertaking risk-based audits as per the approved Internal Audit Plan, the Department facilitated and reported on the Whistle-blower Policy and Hotline Programme. It also tracked whether the accountability for follow-up actions on previously raised issues had been assumed and the actions executed. The results of these activities were duly reported at Risk Management Committee meetings as well as to the Board’s Audit and Risk Committee.

Key focus areas for 2019/20The Department will focus on executing the approved Internal Audit Plan for 2019/20 and conduct research aimed at designing a Combined Assurance Model.

This model will ensure that a coordinated (combined)

approach can be applied within the Authority to receive

assurance on whether its key risks are being managed appropriately. The internal audit function will also continue facilitating and reporting on the Whistle-blower and Hotline initiatives.

Governance, Risk and Compliance DepartmentThis Department provides secretarial services and renders a risk and governance advice function to the Board. To this end, the Department is accountable for the management of strategic and operational risk and informs the Board’s Audit and Risk Committee accordingly. In addition, it performs a compliance function for the CEO and Executive Management. The Department also provides assurance on business continuity through the Board’s Audit and Risk Committee.

Key activities during 2018/19The Department undertook governance-related tasks and provided secretarial support to the Board and its Committees as well as to the Authority’s Board of Appeal. In addition, it served the Board and Executive Management in a governance advisory capacity. The Department also assessed the Board’s performance and training needs, while tasks related to compliance risk management formed part of its duties during the period under review as well.

Key focus areas for 2019/20The Department is expected to continue offering guidance to the Board in respect of governance best practice, the development of a Combined Assurance Model to manage key risks appropriately and a review of the Risk Management Policy. Moreover, the Department is expected to develop a Social Media Policy and review the Business Continuity Management process to align it with the Authority’s Disaster Recovery Plan. Other key focus areas include monitoring and supporting Management with the hands-on administration of risk throughout the organisation.



CORPORATE COMMUNICATIONS DEPARTMENT

STRATEGY AND PROJECTS DIVISION

Corporate Communications DepartmentThe Corporate Communications Department is responsible for engaging stakeholders and managing the NAMFISA brand and the organisation’s reputation. This Department leads both the internal and external communication functions within the Authority. This includes ensuring proper communication channels and open and frequent communication with staff on matters affecting the institution. Furthermore, the Department needs to ensure that external stakeholders view NAMFISA favourably and that the Authority provides coherent and consistent messaging to them.

Key activities during 2018/19The Department offered several media engagement initiatives during the review period. These included holding a Media Day function, making visits to and holding briefings for the media to educate them in respect of the Authority’s mandate, and keeping all structures within the Authority up-to-date with the required information. The Department also helped facilitate press conferences to launch the Annual Financial Stability Report as well as media engagement opportunities with the Authority and the Bank of Namibia. The Department determined its Media Strategy Effectiveness score and reported on it to the Executive Committee. The exercise looks at both positive and negative reports in the media as a proxy for the effectiveness of an organisation’s media strategy. The media monitoring software used by the Department revealed that 61.0 percent of the reported items (sentiments) on NAMFISA and the industries it regulates were rated as Neutral, while 35.5 percent were Positive, and 3.5 percent were Negative.

Key focus areas for 2019/20The Department will continue with the implementation of the Authority’s Stakeholder Engagement and Brand Awareness Plans. These focus on conducting stakeholder satisfaction surveys, improving operational efficiencies and the design and issuing of publications. Moreover, the Department will host engagement events and enhance engagement systems such as its websites and social media platforms.

Strategy and Projects DivisionThe Division is mandated to develop and facilitate the formulation and implementation of the organisation’s Strategic Plan. The Division also defines and maintains the strategy and project management framework within NAMFISA.

Key activities during 2018/19During the period under review, the Division executed and ensured the implementation of the organisation’s File Plan, which will serve as the foundation for implementing an Enterprise Content Management Framework. Furthermore, the Division ensured Phase 1 of the New Dawn Project was fully implemented and finalised all preparations needed to roll out Phase 2 in the coming financial year. In addition, the Division managed the development of the Authority’s 2019/20 Business Plan that was subsequently approved by the Minister of Finance.

Key focus areas for 2019/20The Division will continue to improve the efficiency and effectiveness of the strategy and project management. Efforts will be particularly focused on contributing to the strategic objective of improving operational efficiency via the strategic initiatives known as Business Process Improvement and Implementation of the Feedback Management process. These initiatives entail automating processes to enhance operational efficiency by implementing software systems such as Enterprise Resource Planning, Customer Relationship Management, Electronic Content Management and Strategy Management. The Division will continue to manage regulatory reform projects such as the implementation of New Dawn Phase 2 and the drafting of the Consumer Credit Bill.


INFORMATION AND COMMUNICATIONS TECHNOLOGY DIVISION

The Division was established to provide the Authority with IT leadership and planning to ensure that its IT systems and services are effectively employed. The core of the IT support function is planning for, acquiring, implementing and maintaining IT systems and services. The Division executes this function by providing IT support to the Authority’s various business units.

Key activities during 2018/19During the review period, the division ensured the finalisation and eventual go-live of Version 2 of the Electronic Regulatory System (ERS) as part of the Authority’s move to a Risk-based Supervision regulatory regime. In this regard, Phase 3 of the Business Intelligence (BI) Project was also rolled out to business users using granular data collected as part of the ERS Version 2 deployment.

Successful testing of the Business Continuity Plan revealed that the contingencies in place were adequate for business requirements. Another key activity during the review period was the continued utilisation of the COBIT 5 Framework for the governance and management of the Authority’s IT.

Key focus areas for 2019/20The Division envisages the ongoing support, maintenance and enhancement of data management via the ERS for RBS. Other key focus areas will be to acquire and deploy Enterprise Resources Planning for the Authority and to continue analysis enhancements via Phase 3 of the Business Intelligence System.

Information and Communications Technology Division




FINANCE AND ADMINISTRATION DIVISION


FINANCE AND ADMINISTRATION DIVISION (CONT)

LEGAL SERVICES DIVISION

This Division is responsible for controlling the Authority’s finances and for providing procurement and general administrative services. Its key duties include financial accounting, producing annual financial statements, facilitating the completion of external and internal audits, strategic budgeting, budgetary control, cash flow management, revenue billing and recovery, contract management, procurement, office security, general maintenance, insurance, fleet management and the control of fixed assets.

Key activities during 2018/19The Division implemented the Framework for Measuring Cost-effectiveness, which NAMFISA uses to monitor this aspect of its operations as well as for benchmarking purposes. Much attention was devoted to implementing

the new levy structure as well as to phasing out the previous one. The Division also focused on improving the quality of the Authority’s debtor’s book and noted the improvements brought about by this effort.

Key focus areas for 2019/20The Division plans to roll out levy returns for completion via the ERS that will improve operational efficiency within these business processes. Other plans include the implementation of an Enterprise Resource Planning system, which aims to improve operational efficiency throughout the Authority. The Division continues to be central in ensuring that the Authority meets its objective of accommodating all staff in one office building. In addition, the Division will implement a records management function to ensure that the Records Management Policy and related procedures are effectively implemented.

Legal Services DivisionThis Division is responsible for providing advice to the Board, the Office of the CEO and the supervisory Divisions in respect of all financial laws administered by the Authority as well as on any other relevant laws. In addition, the Division is responsible for drafting legislation and subordinate legislation for the Authority and for ensuring that NAMFISA defends or opposes litigious actions against it.

Key activities during 2018/19The Division’s activities during the period under review mostly comprised dealing with the usual requests from the Authority for legal advice and opinions, instructions for litigation, enforcement advice, and general legal support on regulatory and supervisory issues. The Division managed all litigation in compliance with the

applicable rules and prescribed periods. Furthermore, the Division rendered advice related to legal services, in accordance with its Service-level Agreement with the Authority, Management and staff.

Key focus areas for 2019/20Apart from continuing to provide general legal advice and support to the Authority, the Division will focus on the drafting and reviewing of subordinate legislation to be issued for the effective implementation of the NAMFISA, FIM and FSA Bills, once promulgated, as well as for the Microlending Act. In addition, the Division will continue with the drafting of the Consumer Credit Bill after consultation with the public.

Finance and Administration Division



HUMAN RESOURCES DIVISION Human Resources DivisionThe Human Resources Division is tasked with the responsibility of managing human resources strategically and aligning such management to NAMFISA’s corporate strategy. Human resources policies, procedures and infrastructure exist to ensure that the Authority recruits, retains and develops a diverse, talented and committed workforce while meeting its obligations as an employer.

Key activities during 2018/19Using a Capability Framework, the Division assessed staff competencies within NAMFISA to identify gaps for talent management. The Division also implemented the

revised organisational structure and strengthened the performance management policies and systems.

Key focus areas for 2019/20The Division will embark on the formulation of a Succession Plan, roll out coaching and mentoring for continued growth and productivity, and put the Organisational Culture Improvement Programme into practice across the organisation. Another key focus area for the coming financial year is to develop a training programme for all staff based on the outcome of the Capability Framework.




INSURANCE AND MEDICAL AID FUNDS DIVISION


CAPITAL MARKETS DIVISION

The Division is tasked with supervising both the insurance and the medical aid fund sectors. The ambit of the Insurance Division’s duties includes ensuring that the respective insurance industry players adhere to the Short-term Insurance Act, 1998 (No. 4 of 1998), the Long-term Insurance Act, 1998 (No. 5 of 1998) and the Medical Aid Funds Act, 1995 (No. 23 of 1995). The regulator’s approach has gradually changed from being compliance-based to being risk- based, the latter being aimed at enhancing efficient and effective regulatory supervision by improving the allocation of limited resources to high-risk areas identified in the industry.

The Medical Aid Funds Department is entrusted with the responsibility of regulating and supervising the operations of medical aid funds to ensure that these entities comply with the law. The Department’s primary objectives include protecting fund members’ interests, safeguarding the stability of the medical aid fund industry, and contributing to the stability of the financial system as a whole.

Key activities during 2018/19The insurance function focused on conducting on and off-site inspections, which involved the monitoring of quarterly and annual financial data, as well as carrying out a study on the quantitative impact of the new capital and solvency standards for insurance. The study assessed the appropriateness and financial impact of the proposed capital adequacy requirement (CAR) under the FIM Bill. Furthermore, the Division implemented the One Chart of Accounts (oCOA) framework in the third quarter of 2018. The oCOA framework contains a detailed list of accounts in respect of all regulated NBFI sectors. The increase in regulatory efficiency and effectiveness brought about by oCOA is geared towards conducting comprehensive risk-based financial analysis.

The reporting year also saw the Division’s Medical Aid Department abolishing the practice by medical aid funds of providing their members with saving options, since such practices contravened the Medical Aid Funds Act as well as the Banking Institutions Act, 1998 (No. 2 of 1998).

Key focus areas for 2019/20The Insurance unit will be assessing NAMFISA’s readiness to implement the NAMFISA and FIM Bills once they are promulgated. Another key focus will be to finalise the Risk Model at entity, sector and individual NBFI level. Informing the Risk Model will be quantitative data derived from the oCOA and qualitative data generated from on-site inspections. Furthermore, the Division will work towards attaining professional insurance accreditation for supervisory staff so that they can gain the highest level of insurance-related knowledge and skills possible as well as for existing high levels of insurance-related knowledge and skills can be formally acknowledged.A key focus for the Medical Aid Funds Department in 2019/20 will be to assess the various funds’ liquidity levels. Due to the short-term nature of medical aid fund liabilities, it is imperative that such funds hold sufficient liquid assets. Another Department initiative set for the coming financial year is the development of a framework that will harmonise the various Regulations governing medical aid funds. This will enable members of such funds to interpret the legal provisions governing their chosen funds more easily.

PRUDENTIAL SUPERVISIONInsurance and Medical Aid Funds Division


CAPITAL MARKETS DIVISION (CONT) PENSION FUNDS AND FRIENDLY SOCIETIES DIVISION

Capital Markets DivisionThis Division regulates and supervises entities that operate within capital markets, including collective investment schemes (CIS). The Capital Markets Division’s responsibilities are carried out in terms of several pieces of legislation, namely Part 8 of the Regulations issued under the Pension Funds Act, 1956 (No. 24 of 1956); the Unit Trusts Control Act, 1981 (No. 54 of 1981); the Financial Institutions (Investment of Funds) Act, 1984 (No. 39 of 1984); and the Stock Exchanges Control Act, 1985 (No. 1 of 1985). The Division’s function entails rendering supervisory oversight and regulation of the stock exchange, stockbrokers, investment managers, unit trust management companies, linked investment service providers, unlisted investment managers and special purpose vehicles.

Key activities during 2018/19During the year under review, the Capital Markets Division formed part of a joint inspection exercise with the other three Divisions under the Prudential supervision cluster, namely the Insurance and Medical Aid Funds Division; the Pension Funds and Friendly Societies Division; and the Research, Policy and Statistics Division. The joint exercise aimed at enhancing the coordination of activities across the Divisions in this cluster, which would, in turn, ensure the cluster’s effectiveness and efficiency. This exercise allowed the four Divisions to exchange information and to gain a common understanding of the risk profile for the cluster. Other key activities

for the Capital Markets Division during the reporting period entailed the completion of regulatory guidelines for unlisted investment managers and special purpose vehicles.

Key focus areas for 2019/20During the 2019/20 financial year, the Division is expected to focus on improving regulatory and supervisory effectiveness and operational efficiency. To this end, two key focus areas will be implementing the new legislation and employing RBS. These tasks include enhancing the risk assessment framework, including the on- and off-site inspections; implementing the oCOA; and drafting standards under New Dawn Phase 2 projects. The Division also intends to solicit training from the Toronto Centre, among other initiatives, to strengthen capacity in RBS. Ongoing supervisory and regulatory activities such as joint supervisory colleges and joint inspections will constitute another key focus area for the coming financial year.

The 2019/20 reporting period will also see the Division continuing with its Back-to-Basics Project on a quarterly basis. The Project entails categorising all regulated entities in terms of their stage of compliance with the provisions of the NAMFISA Ladder of Supervisory Intervention. Supervisory action in accordance with applicable legislation will be taken against non-compliant entities.


This Division is responsible for supervising and regulating the business of pension funds and friendly societies operating in Namibia. It performs this function in terms of the Pension Funds Act and the Friendly Societies Act, 1956 (No. 25 of 1956) and their respective Regulations as well as any Directives or Circulars issued by the Registrar of Pension Funds and Friendly Societies.

Key activities during 2018/19The year under review saw the Division focus on its mandate to ensure that pension funds and friendly societies remained financially sound and that the interests of the members belonging to these bodies were protected in accordance with the relevant legislation and supporting instruments. The Division carried out this mandate by conducting on- and off-site inspections, which are categorised as Routine Full Inspections, Risk-event-driven Inspections, Thematic Inspections, and Joint Full Inspections. In addition, the Division contributed to the review and development of pertinent legislative instruments.

Key focus areas for 2019/20The Division will continue to fulfil its mandate of promoting a safe and stable environment for pension fund and friendly society members in the 2019/20 financial year by focusing on improving regulatory and supervisory effectiveness as well as operational efficiency. It will perform these duties by implementing new legislation and employing RBS. This will entail enhancing the risk assessment framework, which includes on- and off-site inspections; fine-tuning the implementation of data collection via the oCOA; and drafting standards under New Dawn Project Phase 2. The Division also intends to solicit training from the Toronto Centre, among other initiatives, to strengthen capacity in RBS. Ongoing supervisory and regulatory activities such as joint supervisory colleges and joint inspections will constitute another key focus area for the coming financial year, as will continuing with the identification and handling of industry practices that contravene the relevant legislation.

Pension Funds and Friendly Societies Division


RESEARCH, POLICY AND STATISTICS DIVISION

This Division’s main objective is to formulate the policy framework governing financial institutions by producing relevant research, policy briefs and statistical analysis. In this regard, the Division focuses on policy development and documentation and ensures that the regulatory framework conforms to international best practice. The Division also provides actuarial and policy advice to supervisory Divisions and drafts publications and statutory reports.

Key activities during 2018/19During the period under review, the Division drafted Phase 3 Standards in anticipation of the FIM Bill’s promulgation in the coming financial year. Moreover, the Division refined the Risk Model for NBFIs. The Risk Model will be used in identifying the key inherent risks to regulated entities as well as the measures necessary to mitigate such risks. Several publications were also drafted but not yet issued, including one which assesses

what drives up medical aid fund costs – especially the Public Service Employee Medical Aid Scheme’s; one that identifies the legislative gaps in the Treating Customers Fairly Framework; a policy paper supporting the drafting of a National Consumer Credit Bill; one that assesses the impact of shocks to systemically important financial institutions; and a research proposal on the deepening of financial markets. Besides these, the Division compiled the Annual Report, various Quarterly Statistical Bulletins and the Financial Stability Report.

Key focus areas for 2019/20The Division will continue drafting the relevant periodic publications and statutory reports. Moreover, we anticipate conducting research on developing the Treating customers fairly framework, on technology that will enhance supervisory work, and on deepening financial markets.

Research, Policy and Statistics Division


6.REGULATORY

UPDATE

In line with its regulatory function under the NAMFISA Act, the Authority undertook concerted efforts during the reporting period to review legislation governing NBFIs. Legislative reform focused in particular on revisions that would ensure a smooth transition from compliance to risk-based supervision.


TABLE 13: NEW LEGISLATION DRAFTEDTitle of regulatory instrument Purpose Status

Microlending Act, 2018 (No. 7 of 2018)

To regulate the carrying on of microlending business in Namibia; to establish an effective and consistent enforcement framework relating to microlending; to promote responsible borrowing and lending, and to provide for incidental matters.These aspects were not adequately provided for under the Exemption Notice issued under the Usury Act, 1968 (No. 73 of 1968), while the Usury Act itself only sets the finance charge rates to be charged by microlenders.

The Microlending Act was promulgated on 31 July 2018 (Government Notice No. 153 published in Government Gazette No. 6664 of 31 July 2018) and took effect on 15 October 2018 (Government Notice No. 261 published in Government Gazette No. 6736 of 15 October 2018).

Regulations relating to maximum penalty interest chargeable by Microlenders in event of default by Borrowers: Microlending Act, 2018

To make provision for a maximum threshold in respect of penalty interest chargeable by microlenders in the event of default by borrowers.

The Regulations were published on 15 October 2018 and took effect on the same date. (Government Notice No. 263 published in Government Gazette No. 6736 of 15 October 2018)

Determination of maximum finance charge rates chargeable in connection with microlending transactions: Usury Act, 1968

To determine the maximum threshold in respect of finance charges chargeable by microlenders registered under the Microlending Act.

The Determination was published on 15 October 2018 and took effect on the same date. (General Notice No. 571 published in Government Gazette No. 6736 of 15 October 2018)

Determination of maximum finance charge rates chargeable in connection with money lending transactions, credit transactions and leasing transactions: Usury Act, 1968

To determine the maximum thresholds in respect of finance charges chargeable by moneylenders, credit grantors and lessors.

The Determination was published on 15 October 2018 and took effect on the same date. (General Notice No. 572 published in Government Gazette No. 6736 of 15 October 2018)

TABLE 14: EXISTING LEGISLATION AMENDEDTitle of regulatory

instrument Purpose Status

Usury Amendment Act, 2018 (No. 6 of 2018)

The amendment limits finance charges in respect of microlending transactions as defined in the Microlending Act.

The amendment became operational on 15 October 2018. (Government Notice No. 260 published in Government Gazette No. 6736 of 15 October 2018)

Amendment of Long-term Insurance Regulations issued under the Long-term Insurance Act, 1998

The amendment requires registered long-term insurers to increase their domestic assets to 45 percent by 31 March 2019 and provides for administrative penalties for non-compliance.

The amendment became operational on 24 August 2018. (Government Notice No. 195 published in Government Gazette No. 6688 of 24 August 2018)

Amendment of Medical Aid Fund Regulations issued under the Medical Aid Funds Act, 1995

The amendment requires registered medical aid funds to increase their domestic assets to 45 percent by 31 March 2019 and provides for administrative penalties for non-compliance.


Regulations issued under the Pension Funds Act, 1956

These Regulations repeal those published in 1962 in their entirety and are arranged in nine distinct Parts. Parts 1 to 6 (Regulations 1 to 11) provides for the registration of pension funds as well as their regulation and supervision. Parts 7 and 8 (Regulations 12 to 40) specify the assets in which pension funds may invest and provide for the investment of pension fund assets in unlisted investments. Part 9 (Regulations 41 to 43) covers other general provisions and administrative penalties.Regulations 12 to 40 aim to deepen Namibia’s capital markets by curbing capital outflows, increasing domestic economic development, bolstering promising investment projects and promoting unlisted investments as an alternative to traditional asset classes within a legislative framework, mainly for institutional investors such as pension funds.


Amendment of Short-term Insurance Regulations issued under the Short-term Insurance Act, 1998

The amendment requires registered short-term insurers to increase their domestic assets to 45 percent by 31 March 2019 and provides for administrative penalties for non-compliance.


NEW LEGISLATION AMENDMENT OF EXISTING LEGISLATIONThe Microlending Act was promulgated and made operational during the financial year under review. In respect of other legislation, the Authority finalised the drafting of the NAMFISA, FIM and FSA Bills and

submitted them to the Minister of Finance for approval. The Bills are expected to be tabled and promulgated in the coming financial year. Table 13 summarises the background to these advances in legislative work.

During the period under review, amendments to the Regulations under the Short-term Insurance Act, the Long-term Insurance Act, the Pension Funds Act and the Medical Aid Funds Act were gazetted and became

operational. The Usury Amendment Act, 2018 (No. 1 of 2018) was gazetted and became operational on 15 October 2018. Table 14 provides more detail on these developments.


7.SUPERVISORY

UPDATE

NAMFISA supervises its regulated entities in accordance with the NAMFISA Act. It also subscribes to principles adopted by international standard-setting bodies.


NAMFISA supervises its regulated entities in accordance with the NAMFISA Act. It also subscribes to principles adopted by various international standard-setting bodies. These principles include the following:

• International Organisation for Pension Supervisors (IOPS) standards for the supervision of pension funds

• International Association of Insurance Supervisors (IAIS) core principles of supervision for insurance

• International Organization of Securities Commissions (IOSCO) principles and standards

• Southern African Development Community (SADC) Committee of Insurance, Securities and Non-banking Financial Authorities (CISNA) guidelines

• Financial Action Task Force (FATF) International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation.

Another principle that is fundamental to NAMFISA’s operations is the ongoing review of its policies and practices to ensure that they remain effective and efficient, are in line with the needs of Namibia’s financial sector and are aligned to international best practice.

NBFIs, which form part of a local banking group, are supervised on a consolidated basis. Thus, the Joint Supervision Framework that exists between NAMFISA and the Bank of Namibia and the Memorandum of Understanding signed between them permit the exchange of supervisory and other information between the two regulators for facilitating consolidated supervision.

Various Acts provide for a wide range of discretionary intervention powers to the Authority to address situations that give it cause for concern. NAMFISA, therefore, devised a guide to its Ladder of Supervisory Intervention (Table 15). This sets out the procedures that

the Authority will generally follow when it has cause for concern regarding the operations of a regulated entity, or when a regulated entity does not comply with applicable NAMFISA legislation, regulations, standards, guidelines or directives.

The objectives of the guide to the above Ladder are to:

• identify areas of concern early and to intervene effectively to protect the users of financial services

• promote awareness and enhance the transparency of the system of intervention for regulated entities and other stakeholders

• summarise the circumstances under which intervention measures may be expected, and

• set out NAMFISA’s core supervisory principles, outline its supervisory activities and provide the framework for remedial supervisory intervention.

TABLE 15: LADDER OF SUPERVISORY INTERVENTIONIndicator category Stage of intervention Reason for or nature of intervention

No significant problems Stage 1 Pursuant to its mandate, the Authority carries out ongoing supervisory and regulatory activities on a regulated entity.

Early warning Stage 2 The Authority identifies some deficiencies in policies or procedures or the existence of other practices, conditions and circumstances that could lead to the development of problems requiring a Stage 3 intervention.

Risk to viability or solvency Stage 3 Situations or problems exist that, although not presenting an immediate threat to viability or solvency, could deteriorate into a Stage 4 situation if not addressed promptly.

Future viability in serious doubt Stage 4 Situations or problems described at Stage 3 pose a material threat to future viability or solvency unless prompt, effective and corrective measures are applied.

Entity not viable or insolvency imminent

Stage 5 Severe financial, operational or market conduct difficulties are indicated, which will result in one or more of the following:• Failure or imminent failure of the regulated

institution to meet capital adequacy and solvency requirements, coupled with an inability to rectify the situation within a short period

• Failure of the regulated institution to develop and implement an acceptable business plan, thus making either of the two preceding circumstances inevitable within a short period, and

• Prolonged and consistent failure to comply with the Registrar’s directives.

SUPERVISORY PRINCIPLES LADDER OF SUPERVISORY INTERVENTION


TABLE 16: LONG-TERM INSURANCE INDUSTRY PARTICIPANTS, 2017–2018Long-term insurance industry

players31 Dec 2017 Registration De- registration 31 Dec

2018

Insurers 16 0 0 16

Reinsurers 1 0 0 1

Reinsurance brokers 2 0 0 2

Brokers – Natural persons 413 118 8 523

Brokers – Legal persons 198 69 0 267

Agents 4,385 754 85 5,054

TOTAL 5,015 941 93 5,863

TABLE 18: SHORT-TERM INSURANCE INDUSTRY PARTICIPANTS, 2017–2018Long-term insurance industry

players31 Dec 2017 Registration De- registration 31 Dec

2018

Insurers 16 0 1 15

Reinsurers 1 0 0 1

Brokers 501 39 5 535

Agents 954 83 30 1,007

TOTAL 1,472 122 36 1,558Market size reviewLong-term insuranceThe total market participants in respect of long-term insurance rose by 16.9 percent to 5,863 participants during the review period. As is customary, brokers and

agents constituted the bulk of these participants, followed by insurers and one dormant reinsurer. No new insurance companies were registered or deregistered during the 2018 calendar year.

PRUDENTIAL SUPERVISION UPDATE

Although 16 insurers were registered for all classes of insurance business as at 31 December 2018, they only traded in some classes – depending on their risk appetite.

Short-term insuranceTotal short-term insurance industry participants rose by 5.9 percent to 1,558 as at 31 December 2018. The participants consisted mainly of brokers and agents, with only 15 insurers and one active registered reinsurer in

Namibia. Table 18 presents all participants in the short-term industry as at 31 December 2018 and compares the totals with the same period in 2017.

TABLE 17: LONG-TERM INSURERS, 2014–2018Classes of insurance/reinsurance business 2014 2015 2016 2017 2018

All six classes of insurance 13 13 14 15 15

Funeral insurance only 2 2 2 0 0

Fund insurance only 1 1 1 1 1

TOTAL 16 16 17 16 16

In comparison with the previous year, only one insurer remained registered for the Miscellaneous business class of insurance in the market during the review period. This change was due to one of formerly three insurers

in this market segment upgrading its licence to include all classes of insurance, while the other insurer was deregistered by the Registrar (Table 19).

InspectionsThe Authority conducted 10 on-site and 170 off-site inspections that included both long- and short-term insurance entities as well as insurance intermediaries.

TABLE 19: SHORT–TERM INSURERS, 2014–2018Class of insurance business 2014 2015 2016 2017 2018

All classes 10 12 12 13 15

Fire (only) 0 0 0 0 0

Marine (only) 0 0 0 0 0

Aviation (only) 0 0 0 0 0

Vehicles (only) 0 0 0 0 0

Guarantee (only) 0 0 0 0 0

Miscellaneous (only) 2 2 2 3 1

Personal (only) 0 0 0 0 0

Deregistered 0 0 0 0 1

TOTAL 12 14 14 16 15

TABLE 20: TOTAL NUMBER OF INSPECTIONSType of insurance entity Number of on-site inspections Number of off-site inspections

Long-term insurance 3 84

Short-term insurance 6 80

Intermediaries 1 6

TOTAL 10 170

This section of the report discusses NAMFISA’s prudential supervisory developments during the review period.

Long and short-term insurersThe Insurance Division supervises long- and short-term insurance institutions and intermediaries (insurance brokers and agents) in terms of the governing laws.


On-site inspection findings• NamCode stipulations not adhered to in respect of

Board composition• Commission limits set in Regulation 6 under the Short-

term Insurance Act exceeded• Unregistered agents contracted• Minimum solvency margins not met• Unapproved borrowings made• Financial information incorrectly reported• Regulation 15 under the Short-term Insurance Act not

complied with• Corporate governance and risk management

framework absent• Internal controls inadequate

Supervisory interventions undertakenOne Directive was issued during the reporting period. The Directive focused on the requirement for all registered insurers to report to their respective Registrars within 30 calendar days of the end of each quarter, and the requirement to compile proper reinsurance information for NAMFISA.

Medical aid fundsMarket size reviewAs at 31 December 2018, Namibia had ten registered medical aid funds, namely five open and five closed funds. One of the closed funds was dormant, but the remaining open and closed funds were active. The dormant fund is being deregistered.

InspectionsThe Medical Aid Funds Department conducted three follow-up inspections on-site as well as 27 off-site inspections during the period under review.

On-site inspection findings• Inadequate composition of the Board of Trustees• Insufficient oversight of the Board of Trustees in

respect of risks to which funds are exposed and in respect of the funds’ general operations

• Principal Officer restricted from assessing Fund.• Over-involvement of the Fund Administrator in the

fund’s affairs and management

• Lack of segregation of duties as regards services respectively provided by the Fund Administrator and the fund

• Inadequate governance policies• Inadequate performance appraisals of the Board of

Trustees• Non-compliance to Fund rules with regards to the

convening of trustee meetings• Signatories on the fund’s bank accounts comprised

solely of representatives of the Fund Administrator• Administration of Managed Care function by

unqualified personnel• Small membership and inadequate reserves to assist

funds in buffering themselves against unexpectedly high claims

Off-site inspection findings• Reserve levels below the prudential minimum

requirement of 25.0 percent• Non-payment of contributions• Small and declining membership• Technical insolvency and illiquidity• Cancellation of reinsurance cover and lack of

alternative insurance cover• Unestablished method to calculate the provision for

costs incurred but not recorded3• Lack of formal agreements between funds and their

participating employer groups regarding the recovery of healthcare expenses incurred in terms of claims related to persons living with HIV and AIDS

Supervisory interventions undertakenBased on its findings, the Authority closely monitored entities’ adherence to prudential and legislative requirements, their submission of monthly management reports, and their proposed mitigation of the risks identified during inspections.To this end, the Authority also issued the following Directives and Circulars during the reporting year:• Directive PI/MAF/DIR/01/2018 – Provision of savings

accounts by medical aid funds to members. The purpose of the Directive was to require all medical aid funds that engage in the practice of maintaining

savings accounts on behalf of their members to cease the said practice. The background of this Directive is that such practice contravenes not only the Medical Aid Funds Act, but also the Banking Institutions Act.

• Circular NAMFISA/01/2018 – Submission of Rule amendments and Contributions and benefit changes of medical aid funds. The Circular served to confirm the agreement reached between NAMFISA and medical aid funds on 13 March 2018 pertaining to the periods for submission of rule amendments and contribution and benefit changes;

• Circular NAMFISA/01/09/2018 – Amendments to Regulations. The Minister of Finance, under Government Notice No. 193, published in Government Gazette No. 6688 of 24 August 2018, amended the investment requirements of Regulation 9 under the Medical Aid Funds Act.

TABLE 21: REGISTERED MEDICAL AID FUNDS, 2014–2018 Type of medical aid fund Size of fund 2014 2015 2016 2017 2018

Open Large* 2 2 2 3 3

Medium** 2 2 2 1 1

Small*** 0 1 1 1 1

Total 4 5 5 5 5

Closed Large* 0 0 0 0 0

Medium** 2 2 2 1 1

Small*** 3 3 3 4 4

Total 5 5 5 5 5

TOTAL Large* 2 2 2 3 3

Medium** 4 4 4 2 2

Small*** 3 4 4 5 5

Total 9 10 10 10 10

* Large fund = ≥ 30,000 beneficiaries

** Medium fund = ≥ 6,000 members but < 30,000 beneficiaries

*** Small fund = < 6,000 members

3 Amount owed by an insurer to all valid claimants who have had a covered loss but have not yet reported it.


The number of active pension funds registered with NAMFISA decreased from 138 registered as at 31 December 2017 to 134 as at 31 December 2018. The decrease was a result of four active funds being deregistered during the fourth quarter of 2018. Two of the

deregistered funds were integrated into umbrella funds, while the other two were inactive funds. The Registrar approved the registration of two new foreign funds in 2018, which brought the number of such funds to 126 as at 31 December 2018.

InspectionsDuring the period under review, the Authority performed 13 follow-up inspections on pension funds subjected to thematic inspections in the preceding year. The follow-ups aimed to determine whether progress had been made by the funds in terms of actions recommended to them after the Authority’s inspection findings. In addition, NAMFISA conducted joint inspections on three financial groups, The Authority conducted 74 off-site inspections in the 2018 calendar year as well. Such inspections are performed based on information provided in the supervised entities’ Statement of Investment Holdings quarterly returns, annual financial statements, and actuarial valuation reports received during the year.

On-site inspection findings• Composition of the board of trustees not in line with

the fund rules

• Board of trustee meetings held in a manner not conforming to the fund rules

• The relationship between board members and pension fund service providers compromised the board’s independence and created a conflict of interest for board members

• Key governance policies, agreements and practices absent

• Risk management inadequate

Off-site inspection findings• Non-compliance with the provisions relating to an

investment in dual-listed assets

• The provision of fund benefits not defined in the fund rules

• Significant increases or a lack of movement in unclaimed benefits

• Inaccurate reporting of fund investments in the Statement of Investment Holdings

• Investments not in line with the respective pension fund’s policy

TABLE 22: REGISTERED ENTITIES – CAPITAL MARKETS 1, 31 DECEMBER 2018Type of entity Active Dormant Total

Investment managers 25 2 27

Linked investment service providers 4 0 4

Unit trust management companies 13 4 17

Stockbrokers 4 0 4

Stock exchanges 1 0 1

TOTAL 47 6 53

Local retirement funds Foreign retirement funds2017 2018

Num

ber o

f fun

ds, 2

017-

2018

115

135

140

130

125

120

Pension fundsMarket size review

Figure 11: Number of retirement funds

• Non-compliance with domestic asset requirements

• Non-compliance with the conditions concerning the exemption to invest in the business of a participating employer

• Fund inactivity for a significant period

• Outstanding levy payments to NAMFISA Supervisory interventions undertaken Apart from imposing penalties for non-compliance, the Authority undertook no post-inspection supervision interventions.

Supervisory interventions undertakenApart from imposing penalties for non-compliance, the Authority undertook no post-inspection supervision interventions.

Capital MarketsDuring the year under review, the capital markets division (previously investment institutions) was restructured and two departments were created, namely Capital Markets 1 and Capital Markets 2. The Capital Markets 1 Department supervises Investment managers, linked investment

service providers, unit trust management companies, stockbrokers, financial markets infrastructure and stock exchanges. The Capital Markets 2 departments supervises unlisted investment managers and special purpose vehicles.

Capital Markets 1Market size reviewThe total of registered active entities during the period under review amounted to 53 entities. Investment managers made up the majority with 25 active entities, followed by 13 active unit trust management companies (Table 22).

InspectionsThe Authority conducted on-site inspections in respect of five entities during the 2018 review period, namely two investment managers, two unit trust management companies, and the exchange. The off-site inspection of nine entities was conducted during the reporting period as well.


On-site inspection findings• Non-adherence to the respective companies’ Code of

Ethics• Board and board committee charters either not in

place or in the draft form not yet adopted by the board• Board compositions lacking a majority of non-executive

independent directors• The chairperson of the board and of the board’s audit

committee not independent• Board chairperson’s roles and functions not formalised• Lack of formalised or documented succession plans

for the position of chairperson• Board evaluations not conducted• Insufficient or no documented induction programmes

for new directors• Directors’ annual declarations of interest not submitted• Directors’ remuneration not disclosed in audited

annual financial statements• Risk management framework not in place or not

conforming to minimum requirements of international best practice

• Business/strategic plans not submitted with recommendations to the board of directors for approval

• Annual internal audit plans not approved by audit committees

• Appointment of directors not timeously communicated to the Authority

• Service-level agreements for some providers of outsourced functions not made available to NAMFISA inspectors

• No documented business continuity plans in place

Off-site inspection findings• High overall solvency risk of some regulated entities,

mainly due to increasing debt• A balance of power on the board lacking as most

directors were not independent• Unit trust schemes managed by investment managers

not indicated as a source of funds• Documentation of key persons for the assessment of

fitness and propriety as required by paragraph 8(b) of the Determination of conditions in terms of section 4(1)(f) of the Stock Exchanges Control Act, 1985 not submitted to NAMFISA

• The appointment of directors not lodged with NAMFISA for approval as required in terms of paragraph 7(f) of the Determination of conditions in terms of section 4(1)(f) of the Stock Exchanges Control Act, 1985

• ERS details not updated after directors appointed or after they resigned

• Inadequate disclosure of items in notes to the annual financial statements, e.g. making up operating expenses not disclosed

• High cash balances in management companies’ bank account with no clear purpose not taken advantage of in terms of investment redemptions

• Certain fees not disclosed in fund fact sheets, contrary to the requirements of section 12(1)(a) of the Unit trust control Act (N0. 54 of 1981)

• Unit trust portfolios incur service fees charged in terms of the unit trust deed or supplemental deeds, but discrepancies appeared in the record of service fees charged per the unit trust fund management company’s Statement of Comprehensive Income and the total service fees charged as recorded in the unit trust fund’s own Statement of Comprehensive Income

• Source of commission earned unclearly• Failure to establish whether services had been

outsourced to companies within the group or whether group companies had outsourced services to subsidiaries and, if so, whether service-level agreements existed

• The segregation of client assets not ascertained

Supervisory interventions undertakenNAMFISA requested the inspected entities to submit action plans to the Registrar detailing how they would correct the various non-compliance issues identified during these inspections, and how they would ensure compliance going forward. The Authority will continue to conduct follow-up inspections on a quarterly basis in the coming financial year.

Capital Markets 2The Capital Markets 2 Department supervises unlisted investment managers and special purpose vehicles registered in terms of the Regulations issued under the Pension Funds Act No. 24 of 1956.

Market size reviewA total number of 38 entities were registered as at 31 December 2018. The reporting year saw one new registration that was later cancelled, constituting the second of two deregistration’s for the year.

TABLE 23: REGISTERED ENTITIES – CAPITAL MARKETS 2, 31 DECEMBER 2018

Type of entity 31 Dec 2017 Registration De- registration 31 Dec

2018

Unlisted investment managers 22 0 1 21

Special purpose vehicles 17 1 1 17

Total 38 1 2 38

InspectionsThe Authority held on-site inspections for four entities during the financial year ended 31 December 2018. The entities concerned were two unlisted investment managers and two special purpose vehicles. The Authority also conducted off-site inspections on ten unlisted investment managers during the same period. Its key findings are set out in more detail below.

On-site inspection findings• Boards lack a balance of power because some

directors were not independent• Board chairman not an independent or non-executive

director• No policy on the retention of records as per the

Financial Intelligence Act• Either no documented business continuity plans were

in place or, where in place, were found not to conform to best practice

• Lack of annual declarations of actual or potential conflicts of interest

• No voting register indicating investment decisions as prescribed in the investment plan

• No conflict of interest declaration register in place as specified in the investment plan

• NAMFISA not informed of changes in directors registered business addresses or portfolio managers

• Service-level agreement outstanding in respect of outsourced functions

• No evidence of monitoring or evaluation of board performance

• No evidence of evaluation of unlisted investment managers’ performance

Off-site inspection findings• Boards lack non-executive and independent directors• Appointment of key persons not communicated to the

Authority• Information not updated on NAMFISA’s ERS• Inadequate staff resulting in high fees being paid to

related parties for services rendered• These entities recorded liquidity, solvency and

profitability risks that are rather considered high in industry norms, as well as high finance costs, were incurred

Supervisory interventions undertakenNAMFISA requested the inspected entities to submit action plans to the Registrar detailing how they would correct the non-compliance issues and ensure compliance going forward. The Authority will conduct follow-up inspections on a quarterly basis in the coming financial year.

TABLE 24: REGISTERED ENTITIES – ACTIVE VS DORMANT LICENCESType of entity Active Dormant Total

Unlisted investment managers 14 7 21

Special purpose vehicles 14 3 17

Out of the 38 registered entities, 28 were active and 10 were dormant during the reporting period ended 31 December 2018. The dormant unlisted investment managers do not submit audited annual financial statements and do not

have mandates with special purpose vehicles. Table 24 presents the number of registered entities with active or dormant licences, respectively.


Market conductConsumer complaintsIn pursuit of its mission to protect consumers, NAMFISA made significant progress during the reporting period in respect of heightening awareness among consumers of NBFI services that their feedback would be welcomed. In this regard, NAMFISA experienced a significant increase in the number of complaints received as well as in the use of various channels to lodge them. The total number of complaints received increased from 990 in 2017 to 1,072 as at 31 December 2018 (Table 25).

A significant portion of these (93.0 percent) was resolved before the end of the reporting period, bearing testimony to the importance the Authority places on consumer protection. Progress was also made in the unresolved portion of complaints, namely 7.0 percent (Figure 12). After NAMFISA’s intervention in terms of resolving complaints between entities and their clients, the industries concerned paid out a combined total of N$14.9 million to 237 complainants in 2018, in comparison with N$58.5 million paid out in 2017.

The highest number of complaints lodged was against the microlending industry, which 400 complaints in 2018 (2017: 345 complaints). This was followed by 326 complaints in the long- term insurance industry in 2018 (2017: 276 complaints), and 178 complaints in the pension funds industry in 2018 (2017: 209 complaints). Although complaints against pension funds decreased during 2018, in comparison with 2017, they are still one of the three industries that received the most complaints in the reporting period.

As shown in Table 26, the nature of complaints was diverse, and included –• non-cancellation of contracts, non-payment of pension

contributions and non-payment of pension and withdrawal benefits

• repudiation of funeral benefit claims, disability benefit claims and hospital benefit claims

• queries, overcharged interest and non-payment of refunds, and

• poor information on loans granted, services not delivered, services not acceptable, claim disputes, investments/savings value discrepancies, illegal deductions and unauthorised extension of loan repayment periods.

Received Resolved In progress

050

100150200250300350400

Num

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Microle

nding

Long

-term

Insu

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Short-

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Pensio

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Medica

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funds

Collec

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Capita

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Friend

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TABLE 25: COMPLAINTS RECEIVED PER INDUSTRY, 2014–2018

Type of medical aid fundNumber of complaints received

2014 2015 2016 2017 2018

Microlending 256 242 211 345 400

Long-term insurance 150 223 252 276 326

Short-term insurance 57 89 116 138 151

Pension funds 86 144 188 209 178

Collective investment schemes 0 0 5 1 1

Capital markets 0 3 4 6 3

Medical aid funds 1 9 13 8 13

Friendly societies 0 2 0 0 0

Other 0 0 7 7 0

TOTAL 550 712 796 990 1,072

Figure 12: Complaints received, resolved and in progress per industry, 2018

Across all industries, the main reasons for the recurrence of some of the complaints were as follows:

• Change in behaviour caused by a lack of understanding of a particular financial benefit or product based on the prevailing global and domestic economic conditions

• Information mismatch between consumers and financial service providers in the industry

• Lack of service providers’ in-depth understanding of complaints, leading to wrong diagnoses followed by inappropriate corrective measures, and

• Service providers suffered administrative challenges in solving complaints, resulting in consumer dissatisfaction.

The total value of refunds provided per sector owing to the Authority’s intervention is illustrated in Figure 13.

MARKET CONDUCT AND OPERATIONS UPDATEThis section of the report discusses NAMFISA’s supervisory developments in respect of NBFI market conduct and operations during the review period.


TABLE 26: TOP FIVE COMPLAINTS PER INDUSTRYIndustry Type of complaint

Microlenders

• Unauthorised extension of loan periods• Non-cancellation of contracts• Overcharged interest• Illegal deductions• Non-payment of refunds

Long-term insurance companies

• Non-cancellation of insurance contracts• Repudiation of funeral benefit claims• Low investment/savings values• Disputes regarding the correctness of payments received• Illegal deductions

Short-term insurance companies

• Repudiation of motor vehicle accident claims• Non-cancellation of insurance contracts• Repudiation of legal representation claims• Service not acceptable• Illegal deductions

Pension funds

• Delay in pension benefit payments• Non-payment of withdrawal benefits• Withholding of pension benefits• Non-payment of death benefits• Non-payment of retirement annuity benefits

The total amount paid out to complainants decreased significantly in the reporting year, i.e. by 294 percent in comparison with the same period in 2017. The highest amount, namely N$7.2 million, was recovered from the pension funds industry, followed by N$4.2 million from its long-term insurance counterpart.

Consumer educationVarious campaign platforms were engaged during the review period. These took the form of publications, radio and television interviews regional trade fairs, Road Shows, Workplace Forums, and student engagements. These consumer education initiatives were conducted with the aim of sharing information with the public on NAMFISA’s mandate, consumer financial protection and the operations of the Microlending Act.

PublicationsThe Authority distributed a total of 30,000 copies of the Consumer Education Quarterly Bulletin during the 2018 reporting period. The content, which reflected

the Authority’s supervisory and consumer protection agenda, was largely guided by issues emanating from the complaints registered with the Authority. The year under review also saw another publication launched, namely the less formal Consumer Education Comic Booklet. Some 20,000 copies of the new comic booklet were distributed. Its principal focus was on informing the public about the provisions of the Microlending Act.

Radio interventionsThe Authority was interviewed by nine different radio stations during 2018. Among other things, this platform enabled the Authority to broadcast its Brand Awareness Campaign and inform the public about the Microlending Act having taken effect.

TV interviewsThe Authority was interviewed 20 times on Good Morning, Namibia during the year under review. On this platform, the Authority discussed various topical issues that affected consumers of financial services.

02 000 0004 000 0006 000 0008 000 000

10 000 00012 000 00014 000 00016 000 000

Microle

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Long

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Total

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Short-

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Pensio

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N$'

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Figure 13: Payments to complainants


TABLE 27: COMPLAINTS RECEIVED PER REGION, 2014–2018

Regions 2014 2015 2016 2017 2018

Erongo 57 57 88 108 109

Hardap 30 38 39 43 52

//Karas 35 52 68 78 57

Kavango East and West 9 16 18 30 55

Khomas 203 263 326 415 387

Kunene 24 31 23 22 52

Ohangwena 25 26 1 30 43

Omaheke 15 19 16 19 19

Omusati 21 33 21 32 60

Oshana 57 56 77 92 122

Oshikoto 12 18 17 21 25

Otjozondjupa 33 65 41 68 68

Zambezi 11 19 17 31 22

Outside Namibia 1 2 2 1 1

Region not stated 17 15 1 0 0

TOTAL 550 710 755 990 1,072

Money laundering, terrorist financing and proliferation financingOn an annual basis, NAMFISA prepares a supervisory plan with the intention of guiding its supervisory activities. As mentioned earlier herein, besides its RBS approach in principle, NAMFISA is further obliged to comply with FATF international standards. In the spirit of these guides, the Authority conducted various on- and off-site inspections of the entities under its supervisory mandate with regard to AML/CFT/CPF activities.

Inspections On-site inspectionsDuring the period under review, the Authority conducted 13 AML/CFT/CPF on-site inspections in the capital markets, microlending, long-term insurance and short-term insurance industries (Figure 15). The ultimate objective of these inspections was to assess whether AML/CFT/CPF measures had been implemented by the various accountable and reporting institutions under NAMFISA’s supervision in terms of the Financial Intelligence Act, its subordinate instruments and PACOTPAA. The inspections were also guided by the findings of the 2012 National Risk Assessment, specifically in respect of medium- to high-risk sectors.

Figure 15: On-site AML/CFT/CPF inspections conducted

Industries inspected

Num

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asse

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ents

0

1

2

3

4

5

6

7

Microlending Long-term Insurance Short-term InsuranceCapital markets

Decem

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Novem

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Octobe

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Septem

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Augus

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March

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60

80

100

120

140

160

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159

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Regional trade fairs, Road Shows, Workplace Forums, and student engagementThe reporting period saw the Authority taking part in trade fairs in various regions of the country as well as hosting Road Shows and Workplace Forums and engaging students from the University of Namibia in this part of the consumer education drive. A total number of 4,130 individuals were recorded as having attended the various interventions. The interventions focused on creating awareness about NAMFISA’s role in protecting the consumers of NBFI services, explaining what rights and responsibilities consumers had in this regard, and

contributing to consumers’ financial inclusion. The Authority also informed the public of their responsibility as consumers to assist in combating money laundering.

These efforts are clearly paying off. The Authority saw a significant increase of 47.0 percent compared with the 2017 reporting year in respect of its engagement with consumers in the regions visited in 2018. Table 27 reflects this positive outcome by way of the total number of complaints addressed to the Authority from various parts of the country in respect of NBFI services.

Figure 14: Use of toll-free number, January–December 2018

Consumer education initiatives also focused on making the public aware that several channels existed for them to access NAMFISA. One of these was the availability

of a toll-free number. The use of this specific channel by consumers showed a sharp increase as a result (Figure 14).


Off-site inspectionsThe Authority also conducted 27 AML/CFT/CPF off-site inspections of accountable and reporting institutions across the capital markets, microlending, long-term insurance and short- term insurance industries (Figure 16). The aim was to assess the progress achieved by these industries in implementing remedial action

after previous on-site inspections, to take enforcement actions where necessary, and to provide feedback and guidance to the relevant institutions regarding AML/CFT/CPF compliance measures required under the Financial Intelligence Act, its subordinate instruments, and PACOTPAA.

On- and off-site inspection findings• Inadequate or absence of institutional risk assessments

and risk management processes on ML/TF/PF risks

• Inadequate information in respect of customer due diligence

• Inadequate or ineffective account and transaction monitoring

• Non-reporting of suspicious transactions and activities

• Non-reporting of cash transactions above the stipulated threshold

• Inadequate scope for an independent audit function to evaluate the effectiveness of controls

• Inadequate AML/CFT/CPF staff training and awareness

• Unsatisfactory or absence of progress towards remediation of non-compliance detected during previous inspections

Supervisory interventions undertakenThe Authority identified 13 accountable and reporting institutions that are eligible for administrative sanctioning. Out of 13 accountable and reporting institutions so identified, seven (7) have been served with notices of intention to impose administrative sanctions in terms of section 56(5) of FIA.

Compliance among microlending and intermediary industriesSupervisory principlesOn an annual basis, a supervisory plan is prepared, which is intended to guide supervisory activities. In its supervisory approach, NAMFISA is further obliged to comply with IOPS, IAIS and IOSCO international principles. The Authority conducted the full-compliance inspections that were aimed at assessing the compliance status of the microlenders or intermediaries with relevant legislation and the conditions upon which the registration was granted. The unregistered lenders’ inspections focused on determining whether such lenders are involved in any microlending activities and to ascertain the extent of interest charged. The follow-up inspections conducted concentrated on whether the microlenders or the intermediaries have adequately addressed the findings from prior full-compliance inspections or addressed issues that were identified during the course of ongoing supervision. The aim of themed joint inspections that the Authority conducted was to better coordinate supervisory activities holistically across supervisory Divisions to ensure the effectiveness and efficiency of supervision.

Inspections On-site inspectionsA total of 10 full-compliance inspections were conducted on microlenders. In this regard, one full-compliance inspection on an intermediary and four inspections on unregistered lenders were conducted during the period under review. In addition, there was 1 follow-up inspection on a microlender and 1 themed joint inspection conducted during the same period.

Off-site inspectionsDuring the period under review, the Authority conducted four off-site full-compliance inspections on intermediaries. As with the on-site inspections, these focused on compliance with relevant legislation.

On- and off-site inspection findingsRegistered microlenders• Unlawful retention of bank cards and personal

identification numbers (PINs) and original identity documents (IDs), voter registration documents, passports and driver’s licences to ensure loan repayments

• Inadequate or a lack of knowledge of the provisions of the Financial Intelligence Act on the part of microlending loan officers, office managers and/or business owners

• Conducting of parallel activities without prior NAMFISA approval

• No affordability calculations performed

• No proper records of transactions kept for accounting purposes

• Non-subscription to a registered credit bureau

• Non-submission of required returns

• Levies not paid to NAMFISA

• Approved principal officer for the microlending business not in its full-time employ

Unregistered lenders• Finance charges exceeded the permitted rate• Unlawful retention of borrowers’ bank cards and PINs

as well as their original IDs• No loan agreements in place

During the period under review, NAMFISA also concluded off-site assessments of the loan schedules used to calculate term loans. The general findings revealed principal debt and finance charges were calculated in a way that contravened the relevant legislation.

Supervisory interventions undertakenThe findings of the inspections were communicated to the respective registered microlenders and unregistered lenders, together with the suggested remedial actions. The respective lenders were expected, where applicable, to provide NAMFISA with feedback within a given time frame about the extent to which the required remedial actions had been taken, together with documentary evidence to that effect.

Microlenders and unregistered lenders were also directed to provide a plan indicating how all borrowers affected by excessive deductions would be refunded. NAMFISA followed up on the implementation of these plans and required documentary evidence of refunds made, including the borrowers’ signatures to that effect.Furthermore, microlenders that had engaged in term lending were directed to revise their loan schedules where necessary, and to submit the revised versions to NAMFISA. The review and assessment of the reviewed schedules will be conducted on an ongoing basis during the 2019/20 financial year.

Directives and Circulars issuedNAMFISA issued three Circulars to the microlending industry during the 2018/19 financial year, as follows:

• Circular No. MC/ML/1/2018 issued on 23 October 2018 informed the industry of the commencement of the Microlending Act and the Usury Amendment Act, 2018 (No. 6 of 2018). The Circular also informed the industry of various other Government and General Notices relating to the Act that also became operational on the Circular’s date of issue.

• Circular No. MC/ML/2/2018 issued on 30 October 2018 informed the industry of the standards issued under the Microlending Act. The Circular also encouraged the industry to submit representations regarding the standards to NAMFISA in writing within 30 working days of the Circular’s date of issue.

• Circular No. MC/ML/3/2018 issued on 22 November 2018 informed the industry that the standards issued under the Microlending Act and published in Government Gazette No. 6745 of 24 October 2018 also served as the drafts of the proposed standards in terms of section 35(4)(b) of the Act.

Industries inspected

Num

ber o

f com

plia

nce

asse

ssm

ents

0

2

4

6

8

10

12

14

Microlending Long-term Insurance Short-term InsuranceCapital markets

Figure 16: Off-site AML/CFT/CPF inspections conducted


8.INDUSTRY

DEVELOPMENTSThis chapter presents an overview and analysis of global, regional and domestic economic and financial developments.


Global growth slowed in the 2018 calendar year compared with 2017, as activities softened in most of the major economies. The International Monetary Fund, in its April 2019 World Economic Outlook update, estimated that global economic activity had reduced marginally to 3.6 percent in 2018, compared with 3.8 percent in 2017. This minimal shift was attributed to sluggish economic activity in both advanced economies and emerging market and developing economies.

Apart from the United States (US), whose economy expanded by 2.9 percent in 2018, all other advanced economies slowed due to financial tightening4, alongside the normalisation of monetary policies. In the case of the US, its economy was supported by a strong fiscal stimulus (reduction in taxes) and subsequent robust escalation in domestic demand. On the other hand, the pace of emerging economies slackened on the back of weakened economic activity in China. This retardation was attributed to domestic regulatory tightening to reduce debt, constrained shadow financial intermediation and rising trade tensions between China and the US.

Global economic growth is projected to decelerate further to 3.3 percent during 2019, before rising to 3.6 percent in 2020. The global forecast reflects a combination of weakening cyclical forces and a return to tepid potential expansion in advanced economies as the fate of the fiscal stimulus plays out in the US. The forecast also predicts a precarious recovery in emerging market and developing economies, driven largely by some of these countries currently experiencing severe macroeconomic distress.

In sub-Saharan Africa, gross domestic product growth is expected to pick up to 3.5 percent in 2019 from 3.0 percent in 2018 and scale up to 3.7 percent in 2020. Economic activity in Angola is expected to increase to 0.4 percent and 2.9 percent in 2019 and 2020, respectively, from an estimated contraction of 1.7 percent in 2018. Nigeria’s economic expansion is projected to accelerate to 2.1 percent in 2019 and 2.5 percent in 2020, up from the 1.9 percent experienced in 2018. Growth in South Africa

is expected to improve slightly to 1.2 percent in 2019, compared with the 0.8 percent gain it recorded in 2018. The modest projected recovery in the South African economy owes itself mainly to domestic policy uncertainties and risk aversion in emerging economies.

DOMESTIC ECONOMIC DEVELOPMENTSThe domestic economy recorded a contraction of 0.1 percent in 2018, which is a slight improvement when compared with the 0.9 percent contraction it experienced in 2017. These contractions can be attributed to the secondary and tertiary industries, which recorded contractions of 3.4 percent and 2.4 percent, respectively, mainly owing to a contraction of 18.3 percent in the construction sector and subdued business activity in the wholesale, retail and repairs sectors. Namibia’s average consumer price inflation rate declined in 2018 compared with 2017. The lower inflation was largely reflected in housing, food and non-alcoholic beverages, whereas inflation for transport rose during the year under review.

Going forward, the Namibian economy is expected to recover gradually over the medium term, primarily supported by anticipated improvements in the construction sector on the back of a substantial increase in the Government’s development budget during 2019/20, a low base created because of consecutive contractions over the past three reporting years and increased tourist numbers and spending (Bank of Namibia economic outlook report; April 2019).

The domestic economy is projected to grow by 0.3 percent and 1.9 percent in 2019 and 2020, respectively, which is a recovery from the estimated contraction of 0.1 percent in 2018 as per the Namibia Statistics Agency’s preliminary figures. Risks to the domestic economic outlook emanate from low uranium prices that continue to adversely impact the prospects on expected uranium production in the country, while the erratic rainfall may sustain its negative effects on the performance of the agriculture sector in 2019 and beyond. Furthermore, China–US trade tensions may negatively affect the demand for Namibian minerals.

FINANCIAL SECTOR DEVELOPMENTS According to the International Monetary Fund’s 2019 Global Financial Stability Report, the rising global uncertainty underpinned by tightening financial conditions and trade tensions increases vulnerabilities within global financial markets. In this regard, near-term risks to global financial stability have risen modestly, while medium-term risks remain elevated due to persistent financial vulnerabilities, coupled with increased debt levels and stretched asset valuations.

The above global conditions have implications on the domestic financial sector, particularly for NBFI sector, which is highly exposed to equity markets. About 57.5 percent of NBFI assets are invested in equity markets, which have been very volatile. For instance, after a strong performance in 2017, the NBFI sector’s asset growth retracted from 18.0 percent in 2017 to 0.9 percent for the reporting period ended 31 December 2018, when total assets stood at N$290.3 billion. The moderate rise in NBFI assets was mainly reflected in those of the pension fund industry, where a minor growth in investment income was responsible for the position. Other major elements of this broader picture impacting on Namibia were volatile financial markets attributed to a softening of global economic activity influenced mainly by trade tensions and tariff hikes between the US and China, a decline in

business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies. Nonetheless, the domestic NBFI sector has a strong asset position, as reflected in its solvency and funding status outlined in the below sector write-ups below for the year under review, and it held sufficient buffers to cushion it against any adverse movement in financial markets.

LONG-TERM INSURANCEPerformance reviewThe long-term insurance industry remained stable, solvent and well capitalised as at 31 December 2018. Despite the moderation of growth in total assets, excess assets increased over the reporting period. This shows that the industry has sufficient coverage of assets over the industry’s liabilities.

AssetsThe industry’s total assets for the period under review increased by 5.0 percent to N$56.6 billion as at 31 December 2018 (Figure 17). This is compared with a growth rate of 13.4 percent in the previous period. This moderate escalation reflects the volatile and declining financial market performances.

4 Action undertaken by a central bank to slow down overheated economic growth. Such action aims to constrict spending in an economy that is seen to be accelerating too quickly by raising short-term interest rates through contractionary monetary policy changes to the discount rate.

Total assets (N$ ‘000)

2014

2015

2016

2017

2018

0 10,000 20,000 30,000 40,000 50,000 60,000

Figure 17: Long-term insurance industry total assets

GLOBAL AND REGIONAL ECONOMIC DEVELOPMENTS


LiabilitiesThe industry’s total liabilities increased by 4.7 percent to N$47.4 billion as at 31 December 2018 (Figure 18). The increase in total liabilities mainly resulted from increased policyholder liabilities. Overall, policyholder

liabilities make up the greater portion of liabilities, since they represent liabilities related to the industry’s core business.

The 15 insurers are classified as follows in terms of their financial soundness (Table 28): three insurers covered between 1 and 2 times, one insurer covered between 2 to 5 times, one insurer covered between 5 and 10 times, and 11 insurers covered 10 times and more. The CAR cover indicates that all 15 insurers had a sufficient buffer of free assets to withstand shock in the event of adverse market movements. Furthermore, liquidity levels were observed to be well above the recommended norm of 1 time, namely they were recorded as being at 6.2 times, which is a slight increase from 5.1 times observed during the previous reporting year.

Gross written premiumThe gross written premium (GWP) of the long-term insurance industry increased by 7.9 percent in 2018

compared with 2017, namely to N$9.8 billion as at 31 December 2018 (Figure 19). The higher GWP resulted from a growth of 7.0 percent in single premiums and 8.4 percent in recurring premiums. This movement demonstrates that the industry continues to grow despite the sluggish economic performance experienced in Namibia.

Capital adequacy requirementThe financial soundness of long-term insurers is measured by calculating the ratio of the value of excess (surplus) assets to CAR. A cover ratio equal to 1 (one) time is acceptable for the industry; however, a cover of 1.5 times is preferred. The cover ratio during the period

under review was 152 times, increasing5 from the ratio of 142.5 times reported in the preceding year. These figures indicate that the industry remains well capitalised, financially sound and sufficiently stable to withstand unforeseen adverse market events.

TABLE 28: LONG-TERM INSURERS – COVER IN TERMS OF CAPITAL ADEQUACY REQUIREMENTS

Ratio of surplus assets to capitaladequacy requirement

Number of long-term insurers

2014 2015 2016 2017 2018

Cover 1 time 0 0 0 1 0

Cover 1–2 times 0 2 1 1 3

Cover 2–5 times 7 3 1 2 1

Cover 5–10 times 2 3 0 0 1

Cover 10+ times 7 8 14 12 10

TOTAL 16 16 16 16 15

Figure 19: Long-term insurance industry gross written premium

Total liabilities (N$ ‘000)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

50,000

2014

2015

2016

2017

2018

Gross written premium (N$ ‘000)

0 2,000 4,000 6,000 8,000 10,000 12,000

2014

2015

2016

2017

2018

Figure 18: Long-term insurance industry total liabilities

5 Calculated as per section 20 of the Long-term Insurance Act.


Investment incomeAdverse performance in financial markets led to a decline in investment income. The industry’s investment income fell by 33.0 percent to N$3.1 billion as at 31 December 2018 (Figure 20). The reduction in investment income was attributed to unfavourable market conditions, as evidenced by fair value adjustments. Uncertainty in global economic growth, the trade war between

the United States and China and risk aversion from emerging economies continued to weigh negatively on the performance of financial markets. Moreover, asset prices continued to be overvalued and often led to market corrections. In this regard, the industry was significantly exposed to equities – hence the increasing concentration and market risks.

Claims and expensesAs at 31 December 2018, the industry had paid gross benefits to the value of N$7.1 billion, which represents an increase of 16.4 percent in comparison with the previous review period. This rise in benefits paid was triggered by unfavourable claims experienced, mainly in the life and

fund insurance classes of business (Figure 21). Claims in the fund insurance business were mostly attributed to terminations of investment policies, possibly due to consumers liquidating their investments in the context of the economy’s contraction.

Figure 21: Long-term insurance industry gross claims paid

Figure 20: Long-term insurance industry investment income

Figure 22: Long-term insurance industry profit before tax

The industry commissions paid increased by 7.4 percent to N$645.2 million during the review period, in comparison with the position reflected as at 31 December 2017. Similarly, expenses for the industry rose by a significant 22.3 percent to reach N$1.5 billion at the end of 2018, when compared with the same period in 2017. This escalation in industry expenses was driven largely by significantly higher finance costs, which shot up by 191.8 percent, and increased management expenses of 32.3 percent.

Policy statisticsThe total number of policies during the review period amounted to 1,984,649 as at 31 December 2018, which represents a decrease of 10.4 percent in comparison with 2017 figures. This decline reflected the higher number of policy lapses, terminations, cancellations and maturities experienced during the review period, the effect of which

was not adequately offset by new policies issued in 2018. Despite this reduction, however, the number of new policies issued rose sharply, namely by 82.7 percent, to 808,063 as at 31 December 2018. An enhanced appetite among policyholders for life insurance, funeral insurance and fund insurance chiefly drove the increase.

Profit before taxThe long-term insurance industry’s profit before tax increased by 20.7 percent between the 2017 and 2018 reporting periods, levelling to N$2.4 billion as at 31 December 2018 (Figure 22). The growth in profit before tax emanated from strong business experienced by the industry during the financial year. Also contributing to the higher profit before tax figure for the review period in comparison with 2017 was a 30.4 percent decline in other expenses, namely to N$136 million.

Investment income (N$ ‘000)0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

2014

2015

2016

2017

2018

Gross claims paid (N$ ‘000)0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

2014

2015

2017

2016

2018

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

Profit before tax (N$ ‘000)

2014

2015

2017

2016

2018


SHORT-TERM INSURANCEPerformance reviewThe short-term insurance industry remained robust, resilient and well capitalised during the review period, showing a 4.9 percent growth in assets as at 31 December 2018 in comparison with the same period in 2017. Sufficient solvency and liquidity levels were also observed for the financial year, since they were maintained above the minimum prudential requirement.

AssetsThe industry’s total assets increased by 4.9 percent to N$6.5 billion during the review period in comparison with 2017 (Figure 23). The rise in assets resulted from the strong growth of 18.4 percent in total investments, as reflected at 31 December 2018.

LiabilitiesTotal liabilities for the industry grew by 5.2 percent when compared with the prior reporting year, to stand at N$4.4 billion as at 31 December 2018. This elevated position

was derived from strong increases in policyholder liabilities during the period under review (Figure 24).

Figure 23: Short-term insurance industry total assets

Figure 24: Short-term insurance industry total liabilities

Figure 25: Short-term insurance industry gross written premium

TABLE 29: SHORT-TERM INSURANCE INDUSTRY SOLVENCY RATIO

Solvency ratioNumber of short-term insurance companies

2014 2015 2016 2017 2018

1–20 percent 3 2 4 3 2

21–25 percent 0 1 0 1 1

26–30 percent 0 0 0 0 1

31–35 percent 0 2 0 2 3

>35 percent 9 9 8 8 8

TOTAL 12 12 14 14 15

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Total liabilities (N$ ‘000)

2014

2015

2017

2016

2018

Total assets (N$’000)

2014

2015

2017

2016

2018

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

3,100 3,200 3,300 3,400 3,500 3,600 3,700 3,800 3,900

Gross written premium (N$ ‘000)

2014

2015

2017

2016

2018

6 The solvency ratio is calculated as total assets over total liabilities.

SolvencyThe short-term insurance industry solvency ratio6 remained steady at 33.0 percent in 2018. It is recommended that insurers maintain a sufficient solvency buffer above the threshold limit of 25.0 percent in order to cushion their book value against adverse market movements. As

shown in Table 29, the number of insurers with solvency ratios at or below the 25 percent prudential requirement declined from four insurers as at the end of 2017 to three for the same period in 2018.

Insurers’ liquidity levels also remained above the required minimum prudential requirements. The industry’s liquidity ratio7 was recorded at 3.0 times the required commitment for 2018, which is a slight increase if one compares it with the reporting period ended 31 December 2017.

Gross written premiumThe short-term industry GWP gained by 2.0 percent in comparison with levels for 2017, to reach N$3.8 billion by 31 December 2018 (Figure 25). The slight growth in GWP resulted mainly from a rise in new business and in endorsements on existing policies.


Investment incomeWhen compared with levels for the year ended 31 December 2017, investment income during the same period in 2018 moderated by 1.7 percent to N$355.4

million (Figure 26). The drop in investment income is attributable to low returns from the money market during the review period.

Claims and expensesThe industry’s total net claims paid for the period under review declined by 0.9 percent to N$1.4 billion as at 31 December 2018 (Figure 27). Chiefly responsible for

driving the total of net claims down was a 57.8 percent increase in gross claims and loss adjustment expenses recovered from reinsurers.

Management expenses also decreased by 1.3 percent, in comparison to 2017 figures, to register at N$658.0 million by the end of 2018. The marginal decline in these

expenses during the review period could be traced mainly to reduced staff bonuses and other lower operational expenditures.

The commission incurred by the industry decreased by 5.3 percent in comparison with figures recorded for 31 December 2017, levelling out at N$433.0 million by the end of 2018. Lower expenses relating to commission incurred were attributed to the reduced use of financial intermediaries to source new business. Regarding the industry’s cession ratio, which is determined by the level of risk appetite and risk mix or risks underwritten that were subject to reinsurance, the level of 27.0 percent recorded as at 31 December 2017 remained constant during 2018. This outcome was viewed to be in line with the 1.9 percent increase in GWP.

Profit before taxIn comparison with the 2017 financial year, profit before tax for the industry declined by 9.6 percent to N$662.9 million during the period under review as a result of fewer claims having been submitted by insured parties (Figure 28). This decrease, contributed to the higher profit before tax recorded for the industry.

0 100 200 300 400

500 600 700 800Profit before tax (N$ ‘000)

2014

2015

2017

2016

2018

0 50 100 150 200 250 300 350 400

Investment income (N$ ‘000)

2014

2015

2017

2016

2018

1,220 1,240 1,260 1,280 1,300 1,320 1,340 1,360 1,380 1,400

Claims and expenses (N$ ‘000)

2014

2015

2017

2016

2018

7 The liquidity ratio is calculated as liquid assets over liquid liabilities

Figure 26: Short-term insurance industry investment income

Figure 27: Short-term insurance industry claims and expenses

Figure 28: Short-term insurance industry profit before tax


TABLE 31: MEDICAL AID FUND BENEFICIARIES

Category of beneficiary2014 2015 2016 2017 2018

Number of beneficiaries

Principal members 76,522 77,109 79,979 82,785 81,490

Dependents 96,073 98,246 100,757 103,296 103,282

Pensioners 6,769 9,468 9,700 9,338 11,033

TOTAL 179,364 184,823 190,436 195,419 195,805

Change in year-on-year total % change

Principal members 2.3 3.0 3.0 2.6 -1.6

Dependents -0.7 2.3 2.6 2.5 -0.01

Pensioners 43.6 39.9 2.5 -3.7 18.2

TOTAL 2.3 3.0 3.0 2.6 0.2

Dependent and pensioner ratiosThe dependent ratio, which measures the average number of dependents per principal member, stood at 1.27 for the year ended 31 December 2018, compared with 1.26 the year before (Figure 29). A low dependent ratio is desirable, as higher-contributing members (i.e. principal members) should outnumber lower-contributing

members (typically dependents) to ease financial pressure on medical aid funds. Pensioner beneficiaries8

accounted for 5.6 percent of all beneficiaries as at 31 December 2018. In nominal terms, pensioners increased by 4.4 percent to 11,033 as at the end of 2018, compared with 10,568 pensioners by the end of 2017.

ContributionsCompared with the previous reporting period, in 2018 gross contributions received rose by 5.5 percent to N$4.0 billion. On average, gross contributions over the past five financial years have increased by 11.8 percent, while claims over the same five-year period have grown at a higher rate, namely 12.1 percent. For 2018, claims outpaced contributions by 2.2 percent, resulting in a

lower net surplus than the previous reporting year. Nonetheless, the claims ratio has remained well below 100 percent (between 83.1 percent for 2014 and 86.1 percent for 2016) over the last five years, with the highest ratio experienced during the 2016 financial year (Figure 30). Contributions were thus sufficient to settle healthcare expenditure, with excess funds available to cover non- healthcare expenses and contribute to building reserves.

Figure 30: Medical aid fund industry – Gross healthcare contributions vs Gross healthcare expenditure

Figure 29: Medical aid fund industry dependent and pensioner ratios

Dependent ratio Pensioner ratio (RHS)

1.25

3.77%

5.12% 5.09%5.41% 5.63%

2014

1.26

2017

1.26

2018

1.27

2016

1.26

2015

1.27

1.28

1.28

1.27

1.27

1.26

1.26

1.25Dep

ende

nt ra

tio

0.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

Contributions received Claims Claims ratio (RHS)

0 82%82%83%83%84%84%85%85%86%86%87%

5001,0001,5002,0002,5003,0003,5004,0004,500

2014 2015 2016 2017 2018N

$ m

illio

n

Cla

ims

ratio

83.1%

83.5%

86.1%

83.9%

85.8%

8 Pensioner beneficiaries are principal members and dependents aged 60 years or older.

TABLE 30: SHORT-TERM INSURANCE EXEMPTIONS – LLOYD’S AND NON-LLOYD’S COVER

Class of insuranceShort-term insurance exemptions (N$ '000)

2014 2015 2016 2017 2018

Aviation 17,964 37,485 49,361 26,683 28,620

Fire 24,388 28,640 22,254 9,766 10,824

Guarantee 37,044 0 35,245 52,702 55,436

Marine 183,483 127,446 131,842 64,310 55,367

Personal 0 232 170 52,798 220

Vehicle 6 0 0 122 0

Miscellaneous 269,043 93,734 34,388 42,002 31,452

TOTAL VALUE OF EXEMPTIONS 531,928 287,537 273,260 248,383 181,719

TOTAL NUMBER OF EXEMPTIONS 251 249 321 329 274

MEDICAL AID FUNDS

Performance reviewThe medical aid funds industry remained well capitalised, reporting a net surplus during the 2018 calendar year. Furthermore, the industry is deemed financially sound as it maintained a reserves level above the minimum prudential requirement of 25.0 percent.

BeneficiariesAs illustrated in Table 31, the total number of beneficiaries increased slightly from the previous reporting period,

namely by 0.2 percent to 195,805 as at 31 December 2018. This is the lowest level of change in total beneficiaries for the five reporting years illustrated. The total number of dependents reduced by 0.01 percent from 2017 levels to 103,282 during 2018, while total principal members declined by 1.6 percent to 81,490 between 2017 and 2018. The increase in total beneficiaries is a result of a year-on-year rise in the number of pensioners enrolled in medical aid funds.

Foreign insurance and reinsuranceTable 30 provides an overview of insurance covered by foreign insurers over the past five reporting years, following the Authority’s granting of exemptions to foreign insurers in terms of sections 2(2), 3(1)(c)(ii) and 65 of the

Short-term Insurance Act to issue reinsurance policies in Namibia for risks for which local insurers have no appetite or capacity. These figures include the business of Lloyd’s, which is an approved insurer in terms of the stated Act.


TABLE 32: MEDICAL AID FUND INDUSTRY – DISTRIBUTION OF HEALTHCARE BENEFITS PAID

Health service provider 2017 2018

Hospitals 36.1% 34.6%

General practitioners 8.9% 8.7%

Pharmacies/medicine 16.1% 16.0%

Medical specialists 11.8% 12.7%

Auxiliary services 5.0% 4.9%

Pathologists 4.9% 5.6%

Optometrists 3.2% 2.8%

Dentists 4.5% 4.6%

Radiologists 4.1% 5.3%

Dental specialists 0.5% 0.5%

Dental therapists 0.1% 0.2%

Psychiatric institutions 0.2% 0.3%

Optic payouts 0.0% 0.2%

Movement in claims incurred but not reported 2.1% 0.7%

Other 2.6% 3.1%

Medical aid funds experience seasonal fluctuations in benefit claim patterns. In keeping with this trend, claims were generally higher in the second and third quarters of

the reporting period, which covered maladies associated with the winter season (Figure 32a).

9 Except for 2018, this was an average annual increase of 2.8 percent in total beneficiaries. With an increase in beneficiary claims normally increase above the inflation rate due to utilisation. Moreover, during 2018, there were buy-downs to lower options, which impacted utilisation, and thus healthcare costs, in a downward direction. The increase in healthcare costs, because of low membership growth and the buy-down in benefit options, was thus around healthcare inflation (as per data collected and analysed by the Namibian Association of Medical Aid Funds, NAMAF).

Healthcare expenditureHealthcare expenditure is the sum of the benefits paid from the risk pool of medical aid funds. The 2018 financial year saw total healthcare expenditure climb by 7.7 percent from the previous reporting period levels, namely

to N$3.5 billion. This rise was reflected principally in inflationary increases in healthcare costs (Table 32). The average healthcare expenditure amount per beneficiary for the year in 2018 was N$17,681, which was 7.5 percent higher than the 2017 financial year’s figure.

As experienced in previous years, hospitals, pharmacies and medical specialists comprised the bulk of healthcare expenditure in the 2018 financial year (Table 32). Claims associated with these three groups accounted for 63.3 percent, or N$2.2 billion, of total benefits paid. Hospital claims were the highest, at N$1.2 billion, followed by pharmacies (medicine) at N$554.1 million, while specialist claims paid were placed third-highest at N$438.5 million.

Healthcare expenditure, which is influenced by the annual inflation in medical costs, has consistently exceeded the Namibia Consumer Price Index (NCPI) for the past five reporting years (Figure 31). This could lead to private healthcare cover for the average Namibian citizen becoming unaffordable in the years to come. However, in recent periods, the gap between the two indicators9. has narrowed.

Figure 32a: Medical aid fund claim seasonality, 2018

NCPI Healthcare cost increases

0

2

4

6

8

10

12

14

16

2014 2015 2016 2017 2018

Perc

ent

7.7

5.16.2

11.2

15.214.3

3.45.4

11.9

7.3

0

100

200

300

400

500

600

700

800

900

1,000

Mar–18 Jun–18 Sep–18 Dec–18

2014 532 587 580 498

2015 611 661 678 558

2016 667 761 792 670

2017 790 873 845 706

2018 841 921 922 77N

$ m

illio

n

Figure 31: Medical aid funds industry – Healthcare expenditure growth vs Namibia Consumer Price Index


Claims generally increase during the first quarter, i.e. the period ending 31 March, as members gain access to new benefits, while the lowest frequency of claims is usually experienced in the last quarter as benefits become depleted. Furthermore, beneficiaries often do not access extensive health treatment during the last quarter of the year, opting rather to postpone such treatment to the first quarter of the new benefit year when

annual benefits are renewed. The lower claims evident in the fourth quarter (Figure 32a) were expected, therefore, as annual benefits are normally near depletion by then, and beneficiaries are often away on holiday. Moreover, healthcare expenditure has increased steadily over the five-year period between 31 December 2014 and 31 December 2018 (Figure 32b).

Non-healthcare expenditureThe non-healthcare expenditure by medical aid funds primarily consists of administration expenditure, managed healthcare expenditure (i.e. fees for managing healthcare benefits), operational expenditure and consultant fees.

The administration of medical aid funds is the most substantial activity these entities outsource. Administration costs consist of a fixed cost element (which is paid regardless of a fund’s membership) and a variable cost element (which is paid per registered member of a medical aid fund). The cost of administering medical aid funds generally accounts for two thirds of all non-healthcare expenditure.

Total non-healthcare expenditure increased by 9.2 percent to N$404.0 million between the 2017 and 2018 reporting years (Table 33). Administration costs continued to be the largest component of non-healthcare expenditure, which grew by 5.9 percent in comparison to 2017, totalling N$268.8 million in 2018. This rise was due to inflationary adjustments of the fee charged per member.

Table 33 also illustrates that the growth in gross contributions received and in gross healthcare and gross non-healthcare costs was consistently higher than the NCPI values for 2018 – as well as for the four prior reporting years.

TABLE 33: MEDICAL AID FUND INDUSTRY – GROSS CONTRIBUTIONS AND GROSS EXPENDITURE VS NAMIBIA CONSUMER PRICE INDEX

Reporting period

Gross contributions

received

Gross healthcare expenditure

Gross non- healthcare

expenditure Namibia Consumer Price Index

% change, year-on-year



2014 14.1 11.9 8.4 5.4

2015 13.6 14.3 4.2 3.4

2016 11.8 15.2 8.9 7.3

2017 14.1 11.2 13.4 6.2

2018 5.5 7.7 9.2 5.1

2,1972,508

2,8903,214

3,462

0

1,500

2,500

3,500

500

1,000

2,000

3,000

4,000

N$

mill

ion

2014 2017 201820162015

Figure 32b: Medical aid fund industry – Annual healthcare expenditure

10 Membership to a medical aid fund is an employee benefit to most members. Different employers subsidise the member contributions at different levels, with some offering more generous subsidisation than others offer. Salaries, this is total cost to company, are normally increased in line with NCPI, i.e. inflation – at least according to anecdotal evidence from medical aid funds. In the absence of other reports on salary increases, NAMFISA normally accepts the MAF industry’s claims as the industry enters conversation with human resources of the various employer groups when communicating new contribution rates. Managed healthcare costs is a component of operational costs of the industry and the service is generally outsourced (obtained via administrators). NAMFISA observed that the increase in these outsourced costs are normally closer to NCPI increases than they are to healthcare inflation (as reported by NAMAF).

Similar to the previous reporting period, managed healthcare costs increased, by 8.8 percent as at 31 December 2018 to N$59.3 million, which was higher than the NCPI growth of 5.1 percent for 2018 (Table 33). Managed healthcare costs contributed 14.7 percent to the total of non-healthcare costs incurred by medical aid funds, amounting to 1.5 percent of gross contributions in 2018. The aggregate proportion of managed healthcare and administration costs to gross contributions was 8.1 percent in 2018.

Membership of medical aid funds is gradually becoming less affordable as salaries are usually increased in line with inflation and not medical inflation. This is troubling since the cost of membership of a medical aid fund and medical aid fund expenses continue to rise at a rate higher than inflation.10 Healthcare expenditure and administration costs together accounted for 92.4 percent of gross contributions in 2018 (Table 34). The 7.6 percent contribution that remained was used to settle other expenses and supplement the industry’s reserves.

TABLE 34: MEDICAL AID FUND INDUSTRY – RATIO OF HEALTHCARE COSTS (CLAIMS) TO ADMINISTRATION COSTS

Cost item Percentage of gross contributions (%)

2014 2015 2016 2017 2018

Healthcare costs 83.1 83.5 86.1 83.9 85.8

Administration costs 7.4 6.8 6.7 6.6 6.6

TOTAL 90.5 90.3 92.8 93.6 92.4


Net healthcare resultsDespite an increase in expenditure, the industry reported an operational surplus of N$77.7 million for 2018. This amount, which is the result obtained after deducting healthcare and non- healthcare costs from net contributions11 before investment and other income, is a decline of 18.7 percent from 2017’s operational surplus

of N$95.5 million. Total expenditure increased by N$282 million, which exceeded the N$208.0 million increase in contributions. This rise in total expenditure led to the lower operational surplus being reported for the 2018 financial year. As revealed by Figure 33, the trend in the operational surplus and the net surplus of the medical aid fund industry fluctuated over the past five reporting years.

The net surplus (operational surplus plus investment and other income) decreased in comparison with the figures for 2017, namely by 36.5 percent to N$142.1 million during 2018 (Figure 33). This outcome was driven mainly by lower investment income earned during the year. Open medical aid funds reported a net surplus of N$126.4 million, while their closed fund counterparts reported a net surplus of N$15.7 million.

The lower net surplus in 2018 resulted from a combination of expenditure that outgrew contributions and from a significant reduction in investment income. Investment income decreased sharply in 2018, with the industry recording N$55.8 million compared with N$119.7 million for 2017. The low investment income arose because of weaker financial market performances as medical aid funds’ total exposure to equity increased from 16.4 percent to 33.6 percent year-on-year, influenced in turn by foreign equity exposure climbing by 207.8 percent to N$477.7 million in 2018 compared to N$155.2 million in 2017.

AssetsTotal industry assets grew by 9.1 percent to N$1.9 billion as at 31 December 2018, principally due to a portion of the net surplus of N$142.1 million being reinvested in 2018.

LiabilitiesThe industry reported total liabilities of N$414.5 million as at 31 December 2018, which reflected low growth of 0.5 percent. Accounts receivable decreased by 33.6 percent from the prior reporting year’s levels to close at N$28.0 million on 31 December 2018. The substantial drop was ascribed to the successful collection of arrear contributions. Nonetheless, accounts receivable balances were exceptionally high during the 2018 financial year due to slow payment of contributions by public enterprises.

The arrear contributions ratio12 was 0.5 percent as at 31 December 2018, remaining at the same level as that recorded for 31 December 2017. The reported arrear contributions ratio was lower than the prudential limit of 1.5 percent, however, the overdue contributions do not pose an immediate or significant risk to the industry due to the size of the arrear contributions ratio and adherence to payment plans by the medical aid funds’ debtors.

LiquidityThe difference between a fund’s current assets and its current liabilities constitutes a liquidity gap. A positive value for this gap indicates that a fund has sufficient current assets to meet its current liabilities. In this respect, the industry held current assets of N$1.9 billion and current obligations of N$414.5 million, which represents a positive liquidity gap of N$1.5 billion. Thus, the industry was able to settle its current liabilities as at 31 December 2018.

The current ratio13 measures whether the industry holds

sufficient current assets with which to settle its current liabilities. The industry’s current ratio improved from 4.1:1 in 2017 to 4.5:1 in 2018, mainly due to an increase in short-term investments. Although the industry’s liquidity ratio of 4.5:1 is above the stated benchmark of between 1.5:1 and 3:1, it allows for a strong liquidity position. This, in turn, enables the industry to disinvest at short notice, allowing it access to sufficient cash resources when adverse claims are experienced.

The liquidity position of a fund is further measured by its ability to pay claims from cash and cash equivalents. Figure 34 shows the industry’s ability to pay claims, as measured in months of cover. The cash coverage of claims measures the number of months that a fund’s available cash and cash equivalents can be used to pay for claims if no contributions are received by the fund. In other words, this is the number of months for which the industry can pay claims from its existing cash and cash equivalents.

Figure 34: Medical aid fund industry liquidity by cash coverage of claims

Figure 33: Medical aid fund industry operational surplus and net surplus

Operational surplus (deficit) Net surplus (deficit)

-50.0

50.0100.0150.0200.0250.0

0

145.0165.3

64.695.5

223.7

142.1

77.7

-5.5

50.0 61.0

2014 2017 201820162015

N$

mill

ion

2014 2017 201820162015

N$

mill

ion

Rat

io

Average gross healthcare costs covered by cash and cash equivalents

500 0.2

0.4

0.6

0.8

1.0

1.2

1.4

-

1,000

1,500

2,000

3,000

4,000

2,500

3,500

0

Cash and cash equivalents Claims Months of cover (RHS)

12 The arrear contributions ratio constitutes overdue contributions divided by annual contributions. 13 The current ratio constitutes a ratio of current assets to current liabilities.

11 Net contributions constitute gross contributions less savings contributions and health reinsurance.


Over the past five reporting years, the cash coverage of the claims period has shown a slight downward trend. The cash held by the industry as at 31 December 2018 could cover less than a month’s worth of claims, evidenced by a cash coverage of claims ratio of 0.8. The low cash coverage ratio is a result of the industry’s cash management governance policies, which requires funds to invest excess cash reserves. Therefore, the low cash coverage ratio does not indicate poor liquidity in the industry. As Figure 34 shows, the industry held a firm liquidity position as at 31 December 2018.

InvestmentsTotal investments increased by 15.4 percent to N$1.7 billion between the previous reporting period and 31 December 2018, primarily due to the reinvestment of the net surplus experienced during the year. Regulation 9 under the Medical Aid Funds Act, as published in Government Notice No. 193 of 2018 and taking effect on 24 August 2018, obliges all medical aid funds to invest a minimum of 42.5 percent of their total assets in Namibia by 30 November 2018, and 45 percent by 31 March 2019. As at the end of the period under review, i.e. 31 December 2018, medical aid funds held 59.2 percent of their assets in Namibia.

Medical aid funds held 33.6 percent of their investments in equities, followed by unit trusts at 31.7 percent, and bonds and cash equivalents at 15.9 percent and 15.4 percent, respectively. Due to exceptionally high claims, medical aid funds invested most of their assets in unit trusts, bonds, and cash and cash equivalents to ensure these investments could easily be liquidated. Because the short- term nature of medical aid funds’ expenses requires that investments be easily liquidated, a high proportion (63.0 percent) of such investments held by the industry during the reporting period could easily be converted to cash.

ReservesThe accumulated funds (or reserves) of medical aid funds are obliged to be maintained at the required minimum prudential reserves level of 25.0 percent of gross contributions. The reserves level is used as a benchmark to determine the ability of medical aid funds to absorb losses as they occur. A high solvency margin, as indicated by the reserves level, serves to both protect members’ interests and provide assurance of the funds’ ability to continue operations. The reserves level also acts as a buffer against unforeseen adverse claims.

During the 2018 financial year, the industry remained adequately capitalised, with the solvency ratio14 being well above the required minimum prudential level. The solvency ratio for 2018 was 37.6 percent, higher than that of 35.5 percent reported for 2017, primarily due to the net surplus experienced for the year under review. Specifically, two open funds experienced a significant decline in reserves levels and breached the 25.0 percent required prudential minimum.

The average solvency ratio for open medical aid funds was 34.7 percent as at 31 December 2018, and an increase from 32.5 percent at the end of 2017, while that for closed funds decreased from 61.9 percent to 60.8 percent as at 31 December 2018 (Figure 35).

FRIENDLY SOCIETIES

Performance reviewThe friendly societies industry remained financially sound at the end of 2018. Not only did the industry hold more assets than liabilities, but it also held sufficient cash and cash equivalents to settle obligations when they came due.

MembershipTotal active beneficiaries increased by 6.1 percent from 31 December 2017 to 2,109 for the same period in 2018, as new members were recruited by the single active society (Figure 36).

Figure 36: Friendly societies – Total beneficiaries

Figure 35: Medical aid fund industry solvency trend

Industry reserves level Open funds Closed funds Prudential reserves level

Res

erve

s le

vel (

solv

ency

) - p

erce

nt

Year2014 2015 2016 2017 2018

Num

ber o

f ben

efici

arie

s0

500

1,000

1,500

2,000

3,000

3,500

2,500

3,062

1,990 1,949 1,988 2,109

2014 2015 2016 2017 20180.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

14 The solvency ratio is determined by dividing accumulated funds by annual gross contributions.


Contributions and expensesTotal contributions received by the industry rose by 7.8 percent after 31 December 2017 to reach N$194,376 for the 2018 financial year. The increase in contributions correlated with a gain in memberships. In comparison with the previous reporting period, claims expenditure for the year ended 31 December 2018 decreased by 5.3 percent to N$47,467 as fewer claims were paid during the year under review. Operational expenditure, which is the only non-benefit claim expense, dropped by 14.3 percent from 2017 levels to total N$43,772 for 2018.

Investments and investment incomeIn comparison with the same period in 2017, investment assets increased by 14.0 percent to reflect a balance of N$1.5 million as at 31 December 2018. The elevated figures were due to capitalised investment gains and the investment of surplus cash. Also with respect to the prior review period, the industry reported a 20.3 percent increase in investment income, which stood at N$96,458 by the end of 2018. During the period under review, investment income as a proportion of contributions amounted to 48.6 percent compared with 42.9 percent in 2017. The combined effect of higher contributions and lower expenses caused the net surplus to rise by 28.4 percent to N$200,673 in 2018.

Assets and liabilitiesAs at 31 December 2018, total assets grew by 15.4 percent to N$1.6 million in 2018 in comparison with 2017 figures. This increase was primarily influenced by the 14.0 percent growth in investment assets. Accounts receivable rose by 35.1 percent to N$21,646 as at 31 December 2018. In respect of annual contributions received, accounts receivable for the review period amounted to 11.1 percent of the total. The reporting year also saw NAMFISA direct the friendly societies industry to ensure the timely collection of outstanding contributions.The solvency ratio15 for the industry as at 31 December 2018 was 771.3 percent, even higher than the 715.3 percent recorded for 2017. The 2018 ratio is well above the prudential margin of 25 percent.

PENSION FUNDS

Performance reviewAlthough the pension fund assets’ value was adversely affected by volatile financial markets during 2018, the sector nonetheless grew its assets on an annual basis.

AssetsTotal pension fund investments16 (including insurance policies) increased by 3.7 percent year-on-year to N$158.5 billion. In addition, investments held in insurance policies accounted for 12.1 percent of the industry’s total investments.Investments held directly by pension funds grew by 3.5 percent in comparison with 2017 figures, to reflect a balance of N$139.4 billion as at 31 December 2018. Investments held in insurance products decreased by 5.4 percent after 2017, declining to a level of N$19.1 billion (Figure 37).The top five pension funds in the industry held 75.2 percent of its total investment holdings during the review period, while the top fund’s investment holdings alone comprised 67 percent of that total. This proportion of investment holdings poses a concentration risk and may have other consequences to the Namibian economy should these five pension funds, especially the large defined benefit fund, experience extreme shocks.

Assets by class allocationsInvestments of pension funds are subject to the provisions of Regulation 13 under the Pension Funds Act, which specify the minimum and maximum investment limits applicable across asset classes. With an exposure of 55.7 percent in equities during the period under review, the industry continued to show a strong appetite for these investments compared with other asset classes. The long-term growth of equities, coupled with higher returns for 2018, was commensurate with the industry’s long-term liabilities. The second most popular class for asset allocations was Namibian Government bonds, with an investment holding of 12.0 percent as at 31 December 2018. The unlisted investments class recorded drawn-down capital of 0.7 percent for the same period, while committed capital reflected a level of 4.2 percent by the end of 2018. Thus, the committed capital allocation breached the limits of the permitted range of 1.75– 3.5 percent. All other asset classes as defined in Regulation 13 remained fairly stable during the financial year, with minimal movements and exposures of below 11.0 percent per asset class (Table 35).

Investments Other assets (Insurance policies) Total investments

Q4 2015 Q4 2016 Q4 2017 Q4 2018

N$

mill

ion

0

180,000160,000140,000120,000100,00080,00060,00040,00020,000

15 The solvency ratio is determined by dividing the industry’s accumulated funds by its annualised contributions.

16 In accordance with Regulation 13, Total pension fund investments comprise investments held directly by pension funds as well as other investments held in the form of long-term insurance policies. Regualtion 13(9) reads as follows: “With regard to the total assets of a fund, including any fund exempted under section 2(3)(a)(ii) of the Act, a fund policy issued to the fund concerned by an insurer carrying on long-term insurance business as contemplated in the Long-term Insurance Act is considered not to be an asset of the fund.”

Figure 37: Total pension fund investments including insurance policies


TABLE 35: PENSION FUND ASSET ALLOCATIONS PER ASSET CLASS

Asset class Q4 2018 Q4 2017 % change Regulation 13 limit

Credit balances 10.6% 8.2% 2.4% 95%

Government bonds 12.0% 11.6% 0.4% 95%

State-owned enterprise bonds 0.8% 4.9% -4.1% 30%

Corporate bonds 6.4% 1.9% 4.5% 50%

Foreign bonds 8.6% 5.6% 3.0% 50%

Property 3.7% 2.3% 1.4% 25%

Shares 55.7% 65.0% -9.3% 75%

Other claims 1.1% 0.0% 1.1% 25%

Other assets 0.3% 0.1% 0.2% 2.5%

Unlisted investments17 0.7% 0.5% 0.2% 1.75–3.5%

TOTAL 100.00% 100.00% n/a n/a

17 These are drawn-down amounts, while compliance is measured in terms of committed capital amounts.18 The South African Rand depreciated by about 16 percent during 2018.

TABLE 36: PENSION FUND ASSETS – OVERARCHING LIMITS

Overarching limit % of total assets: Q4 2018

% of total assets: Q3 2018 % change Regulation

13 limit

Regulation 13(1)(a) 59.5% 60.5% -1.0% <90.00%

Regulation 13(1)(b) 60.9% 64.0% -3.1% <95.00%

Regulation 13(2)(a) - 39.7% - >40.00%19

Regulation 13(2)(b) 41.8% - - >42.50%20

Regulation 13(3)(e) 8.0% 5.5% 2.5% <15.00%

Regulation 13(5) 4.2% 2.0% 2.2% <3.50%

Common Monetary Area(CMA)Namibia Africa (excluding CMA) International

Q4 2015 Q4 2016 Q4 2017 Q4 2018

41%

27%

3%

28%

48%

20%

4%

27%

42%

27%

4%

26%

42%

27%

3%

28%

Figure 39: Pension fund assets – Investment income

Investment income (N$ bn) Return on investment (%): RHS

perc

ent

N$

billi

on0 -

1.0 2.0

4.0

6.0

8.0

10.0

12.0

14.011.9

8.7

2.0

3.0

4.0

5.0

2014 2015 2016 2017 2018

7.5

10.7

6.4

19 Limit effective 31 August 2018.20 Limit effective 30 November 2018.

Assets by geographic allocationThe industry failed to meet the domestic asset requirement determined in Regulation 13(2)(a)–(b) under the Pension Funds Act, namely 42.5 percent by 30 November 2018, as it only held 41.8 percent of its assets in Namibia as at 31 December 2018 (Figure 38). Industry’s failure to meet the domestic asset requirements is ascribed to the

depreciation of the South African Rand18 (to which the Namibia Dollar is pegged), which decreased the value of domestic assets relative to assets denominated in foreign currency. CMA assets stood at 26.8 percent, African assets at 3.5 percent and international assets at 28 percent for the year ending 31 December 2018.

Figure 38: Pension fund assets per geographic allocation

Overarching limitsBesides the domestic asset requirement breach in respect of Regulation 13(2)(a)–(b) as reported in the previous section, the pension funds industry complied with the other limits relating to assets in which registered funds may invest, as set out in Regulations 13(1)(a)–(b) and 13(3)(e) (see Table 36). The provisions in Regulation 13(1)(a)–(b) prescribe that the aggregate market value of investments in property and shares, expressed as a percentage of total assets, is not permitted to exceed

90.0 percent; and that the aggregate market value of investments in property, shares, other claims and other assets, expressed as a percentage of total assets, is not permitted to exceed 95.0 percent.

In addition, the provisions in Regulation 13(3)(e) prescribe a 10.0 percent limit applicable from 1 January 2018 in respect of the industry’s assets invested in dual-listed shares. As at the third quarter of 2018, the industry reported a level of 5.5 percent of its assets having been invested in dual-listed shares (Table 36).

Market riskThe fall in asset prices in 2018 adversely increased market risks for pension funds. This is evident by the dwindling investment income over the past five reporting years (Figure 39). Pension funds remain broadly

exposed to the equity markets, and such exposure, especially to international markets, holds significant market and exchange rate risks for both the value of total investments as well as investment returns in the form of investment income.


MICROLENDINGPerformance reviewDriven by the credit transactions between term lenders and borrowers, the value of the microlending loan book reflected a growth trend if one compares the figures at the end of 31 December 2017 with those on the same date in 2018. As reflected in the stock of the outstanding value of the loan book for the reporting year, households clearly continued to take up excessive loans, mainly for consumption purposes, as they faced weak economic conditions and, inevitably, increased their indebtedness. The reverse was true in respect of the number of new loans issued, which recorded a contraction during the review period. This contraction is reflected in the figures for payday lenders (Figure 42).

Loan book valueThe total loan book outstanding stood at N$6.5 billion on 31 December 2018, which is an increase of 18.0 percent compared with the 2017 financial year (Figure 40). The increase was driven by a higher amount of credit extended by term lenders. Consequently, of the total value of loans disbursed, term lender loans outstanding amounted to N$3.2 billion, which accounted for 78.2 percent of the total amount of loans disbursed.

DisbursementFigure 40 also shows that the total value of loans disbursed during 2018 had grown since 31 December 2017, by 12.4 percent to N$4.0 million. The increase emanated principally from the value of the transactions between term loan lenders and term loan borrowers, which had risen by 19.9 percent at the end of 2018. However, in comparison with the prior reporting year, the credit extended by payday lenders had declined by 5.9 percent by the end of 2018.

Average loan amountThe average loan amount extended by term lenders continued to be a larger sum than that issued by payday lenders. During the period under review, the average amount of loans extended by term and payday lenders, respectively, stood at N$25,755 and N$1,725 (Figure 41). With respect to the legislative requirement that loan disbursements should not exceed N$50,000, the industry continued to operate below the limit.

Number of new loansThe total number of new loans issued as at 31 December 2018 contracted by 29.3 percent compared with the previous reporting year (Figure 42). This relative decline in the total of new loans issued overall was consistent with that of the lower number of new loans issued by

payday lenders, which accounted for 75.0 percent of total new loans. Conversely, the number of new loans issued by term lenders rose during 2018, but their impact was offset by the lower payday lender totals.

Number of borrowersRegarding the cumulative number of household borrowers that advanced from the microlending transactions, a contraction of 26.8 percent was realised. Both term- and payday-loan household borrowers drove this contraction during 2018. The total number of household borrowers

stood at 238,640, which was lower than the 326,164 recorded in this regard for 2017 (Figure 43). The number of term-loan household borrowers continued to dominate, constituting 90.4 percent of the total number of borrowers, while their payday-loan counterparts made up only 9.6 percent of the total.

Total new loans issued Term lenders Payday lenders

20152014 2016 2017 2018

Num

ber o

f new

loan

s

0

100,000

80,000

60,000

40,000

20,000

Term lenders Payday lenders

0

5,000

10,000

15,000

20,000

25,000

30,00025,755

1,7251,5541,4291,1301,148

21,83520,615

15,76615,501

2014 2015 2016 2017 2018

N$

2014 2015 2016 2017 2018

N$

mill

ion

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2,259

3,382

2,621

4,257

3,154

4,222

3,606

5,460

4,078

6,447

Value of loans disbursed Value of loans outstanding

Figure 40: Value of microlending disbursement and loan book

Figure 41: Average microlending loan amounts

Figure 42: Number of new microlending loans disbursed


CAPITAL MARKETSPerformance reviewAssets under management decreased slightly during the period under review in line with a decline in sources of funds. Asset management entities continue to be the main conduit between NBFIs and other sectors within the financial system. Pension funds maintained their position as the largest investors in the local market. Furthermore, in terms of geographic allocation, the domestic market had the most investments, followed by the CMA market and the offshore market. The increase in domestic assets is a result of the promulgation of Regulation 13(2) under the Pension Funds Act. The Regulations increased the pension funds minimum domestic asset requirement to 40 percent by 31 August 2018 and 42.5 percent by 30 November 2018. A 45 percent minimum is mandatory by 31 March 2019.

Securities and investment markets

Equity marketsThe Namibian Stock Exchange (NSX) had 44 securities listed on it as at 31 December 2018. These included 35 listings on the Main Board (of which ten were primary listings), five on the Development Capital Board, and four exchange-traded funds (ETFs). One ETF was listed on the over-the-counter (off-exchange) market.

The overall market capitalisation21 of the companies listed on the NSX decreased by 4.5 percent in comparison with the previous reporting period, registering at N$1.99 trillion on 31 December 2018. In addition to the general level of negative market performance, listed companies could attribute the decrease in market capitalisation on the Main Board to a decline in the volume of shares during the period under review.

Similarly, the local market capitalisation decreased from its position at the end of 2017, by 1.7 percent to N$35.4 billion by 31 December 2018. Again, this decline was in line with the general level of negative market performance experienced on the Main Board during the reporting period.

The Main Board capitalisation increased by 4.1 percent to N$1.97 trillion between 31 December 2017 and 31 December 2018, while the capitalisation of the ETFs fell sharply from its end-of-year levels in 2017, by 29.9 percent, to register at N$22.4 billion by the end of 2018. A similar year-on-year decline was experienced in the Development Capital Board’s market capitalisation, which was 42.6 percent lower for the reporting year, ending at N$1.9 billion by 31 December 2018.

Although overall market capitalisation decreased in comparison with its position at the end of the previous financial year, the prices of securities on the local market, as measured by the local index,22 increased, namely by 3.9 percent to reach 886.13 points as at 31 December 2018, compared with 852.99 points at the end of 2017. The NSX Overall Index, on the other hand, followed the Financial Times Stock Exchange (FTSE)/Johannesburg Stock Exchange Ltd (JSE) All Share Index, significantly declining from 2017 levels by 11.8 percent to 12,218.17 points as at 31 December 2018 (Figure 44).

The FTSE/JSE All Share Index declined by 11.4 percent to 52,737 points at the end of 2018 in relation to the same period in 2017, driven by an uncertain domestic policy environment (property rights), depressed growth prospects and a general aversion of emerging market risks (Figure 45). Furthermore, the overall value traded

since 2017 dropped slightly to N$11.9 billion as at 31 December 2018. The liquidity of the overall market decreased by 7.7 percent between the two periods, namely from 0.67 percent in 2017 to 0.61 percent in 2018.

2015 2016 2017 20180

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Total number of borrowers Term lenders Payday lenders

Poin

ts

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2014 2015 2016 2017 2018

21 Commonly referred to as the market cap, this is calculated by multiplying a company’s shares outstanding by the current market

price of one share.

22 Indices are weighted in relation to the market cap of the individual companies listed on them.

Figure 43: Number of microlending borrowers

Overall securities Local securities

2014 2015 2016 2017 20181

10,000

100,000

1,000

100

10

Figure 44: NSX indices

Figure 45: FTSE/JSE All Share IndexSource: JSE Ltd

Poin

ts


Debt marketsIn the debt market, the total nominal Government debt outstanding increased by 9.5 percent from 31 December 2017 to N$49.4 billion as at 31 December 2018 (Figure 46). The N$49.4 billion constituted 88.6 percent of total outstanding debt for 2018. The largest increase was in inflation-linked bonds, which rose by 32.9 percent

from December 2017 to December 2018. Treasury bills outstanding grew by 21.5 percent to N$21.8 billion as at 31 December 2018. Internal registered stocks increased as well, namely by 12.6 percent to N$28.0 billion between the 2017 and 2018 reporting periods.

Investment managementAssets managed by investment managers for the financial year ended 31 December 2018 decreased by 0.1 percent to N$164.2 billion compared to their closing balance for 2017. When their geographic allocation is taken into account, assets under management show

that those domiciled in Namibia as at the end of 2018 constituted 50.4 percent of total assets (Figure 47), which is an increase of 4.2 percent on the previous financial year’s position.

Figure 46: Debt markets – Debt outstandingSource: NSX

Figure 47: Investment management assets per geographic allocation

Figure 48: Investment management assets per asset class

Figure 49: Investment management assets per source of funds (investor)

A total of 49.6 percent of assets under management was invested outside Namibia. Of this proportion, investment managers invested an amount of N$22.2 billion in the

offshore market, which constituted 13.5 percent of total assets, while 34.0 percent of the total was invested in the CMA.

As illustrated in Figure 48, investment managers held 43.7 percent (N$71.7 billion) of investments in listed equity as at 31 December 2018, down from 45.8 percent (N$75.3 billion) on the same date in the previous year. Investments in money market instruments constituted 26.5 percent (N$43.5 billion) of total assets under management by the end of the reporting period, while listed debt accounted for 20.1 percent (N$33.0 billion) of the total at that date. Other assets, comprised of derivatives and foreign exchange instruments, accounted for the remaining 7.4 percent of the total.

Assets under management per source of funds (Figure 49) show that pension fund assets continued to constitute the biggest portion of total assets held by investment managers as at 31 December 2018, namely 49.8 percent

(N$81.7 billion). A comparison of the 2017 financial year figures with those of 2018 in respect of investments by pension funds shows a decrease by 4.3 percent to N$3.7 billion.

At N$46.97 billion, unit trust schemes comprised the second-largest share, representing 28.6 percent of total assets under management by the end of 2018. Investments in unit trust schemes increased by 49.1 percent since their 31 December 2017 level, largely due to a required correction entailing some reclassifications to other source-of-funds categories. Long-term insurance companies held the third largest portion at 16.2 percent of total assets under management for the period under review (Figure 49).

49,390.0

1,241.04,816.0

309.0

21,789.0

Deb

t out

stan

ding

per

sec

tor

(N$

mill

ion)

0

10,000

20,000

30,000

40,000

50,000

Central government bonds

State-owned enterprise bonds

Banking institution & corporate bonds

Corporate bonds Treasury bills (Outstanding)

Namibia CMA Offshore

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2014

45.2%

35.1%

12.0%

2015

47.8%

34.9%

15.3%

2016

48.6%

30.8%

12.3%

2017

48.3%

37.3%

14.4%

2018

50.4%

34.0%

13.5%

0.0

10.0

20.0

30.0

40.0

50.0

Asset classes

26.5%

Money market investments

43.7%

Listed equity

20.1%

Listed debt

1.2%

Unlisted equity

1.1%

Unlisted debt

1.1%

Other assets

0.0%

Unlisted property

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Long-term insurance companies

OtherCompaniesMedical aid funds


Natural persons

Unit trust schemes

Pension funds

Perc

ent

Perc

ent

Perc

ent


TABLE 37: COLLECTIVE INVESTMENT SCHEME ASSETS PER GEOGRAPHIC ALLOCATION

Geographic areaAllocations (N$ million)

2014 2015 2016 2017 2018

Namibia 19,859 26,449 27,723 32,506 39,591

Common Monetary Area 18,458 16,129 15,716 18,708 18,860

Africa - - - - 129

Offshore 3,794 5,194 4,874 4,705 4,433

TOTAL 42,111 47,772 48,313 55,920 63,014

The asset allocations per type of investment instrument show that money market instruments continued to be the asset class of choice, accounting for 62.9 percent of total assets under management during the reporting period.

Listed equities represented 17.7 percent of the total for 2018, while the remaining 19.4 percent was spread amongst listed and unlisted debt, unlisted equity and other assets (Figure 51).

Compared with levels recorded as at 31 December 2017, assets sourced from companies, pension funds and natural persons by the end of the 2018 reporting year increased by 50.1 percent to N$22.9 billion, by 27.9 percent to N$6.3 billion and by 12.6 percent to N$17.9 billion, respectively (Figure 52). The sources of

investments from unit trust schemes, on the other hand, declined by 44.2 percent to N$8.0 billion. The availability of instruments in the financial markets as well as the maturity of instruments continues to influence the choice of the asset class in which to invest.

Figure 52: Collective investment scheme assets per source of funds (investor)

Offshore Namibia CMA Africa

0.0

20.0

40.0

60.0

80.0

100.0

2014

7.9%

41.6%

38.5%

0.0%

2015

10.8%

54.7%

33.4%

0.0%

2016

8.7%

49.6%

28.1%

0.0%

2017

8.4%

58.1%

33.5%

0.0%

2018

7.0%

62.8%

29.9%

0.2%

62.9%

17.7%

10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%0.0%

12.2%

2.0%

3.6%

0.0%

1.7%

Money market investments

Listed equity

Listed debt

Unlisted equity

Unlisted debt

Unlisted property

Other assets

2017 2018

Valu

e of

ass

ets

(N$

mill

ion)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

Natural persons


Medical aid funds

Companies Other Long-term insurance companies

Unit trust schemes

Pension funds

Collective investment schemesAs at the end of December 2018, the total assets under management in respect of collective investment schemes increased by 12.7 percent to N$63.0 billion compared to the previous year (Table 37). In terms of the source of

funds, has the bulk of unit trust funds were sourced from companies and households (Figure 52). Investments from unit trust schemes, on the other hand, declined by 44.2 percent to N$8.0 billion as at 31 December 2018 compared to 31 December 2017.

The geographic allocation of funds under management indicates that 62.8 percent is invested in Namibia, 29.9 percent in the CMA, 0.2 percent in Africa and 7.0 percent in offshore markets. Statutory exposure limits together with individual portfolio mandates continue to influence the geographic allocation decisions made by collective investment schemes.

In comparison with the prior reporting year, levels recorded as at 31 December 2018 revealed that assets invested in the Namibian market had increased by 21.8 percent to N$39.6 billion, while those invested in the CMA rose by 0.8 percent to N$18.9 billion. However, offshore investments decreased by 5.4 percent to N$4.4 billion during the period under review in comparison with their 2017 levels (Figure 50).

Figure 50: Collective investment scheme assets per geographic allocation

Figure 51: Collective investment scheme assets per asset class

Perc

ent


9.STATISTICS

Statistics represents the practice of collecting and analysing numerical data in large quantities, especially for the purpose of inferring proportions in a whole from those in a representative sample.


TABLE S1: LONG-TERM INSURANCE – INCOME STATEMENT, 2014–2018 (N$ '000)

Income and expenses 2014 2015 2016 2017 2018

Single premiums 2,681,468 2,804,923 2,516,267,000 3,600,275 3,852,341

Recurring premiums 4,751,746 4,545,129 5,187,428,000 5,475,307 5,936,727

Gross premiums written 7,433,214 7,350,052 7,703,695 9,075,582 9,789,068

Less: Reinsurance premium 170,231 233,218 294,168,000 654,217 300,724

Net premiums written 7,262,983 7,116,834 7,409,527 8,421,365 9,488,344

Gross policyholder benefits paid 4,999,082 4,551,487 5,023,125,000 6,073,904 7,072,031

Reinsurance recoveries 71,782 153,181 188,835,000 198,069 161,445

Net policyholder benefits 4,927,300 4,398,306 4,834,290 5,875,835 6,910,586

Change in policyholder liabilities 1,312,797 2,616,183 2,205,485,000 4,229,483 1,442,446

Commission paid 522,703 597,257 580,706,000 600,965 645,223

POLICYHOLDER BENEFITS AND COMMISSION 6,762,800 7,611,746 7,620,481 10,706,283 8,998,255

GROSS PROFIT/(LOSS) 500,183 -494,912 -210,954 -2,284,918 490,089

Investment income 3,790,416 3,019,522 2,853,806 4,658,550 3,121,301

Other income 153,506 245,430 247,588,000 521,699 355,351

TOTAL INCOME 3,943,922 3,264,952 3,101,394 5,180,249 3,476,651

Management expenses 420,725 834,294 894,904 1,020,023 1,349,950

Other expenses 105,114 1,715 1,901 195,870 136,370

Finance costs 716 294,307 306,507 46,732 57,356

TOTAL EXPENSES 526,555 1,130,316 1,203,312 1,262,625 1,543,676

PROFIT BEFORE TAXATION 3,917,550 1,639,724 1,687,128 1,632,706 2,423,065

TABLE S2: LONG-TERM INSURANCE – BALANCE SHEET, 2014–2018 (N$ '000)

Assets and liabilities 2014 2015 2016 2017 2018

Immovable property 455,341 491,299 516,530 520,856 413,500

Property, plant and equipment 24,169 21,188 27,587 34,249 33,746

Intangible assets 279,813 316,325 364,088 403,739 277,646

Deferred tax 44 0 0 0 1,000

Other assets 3,319,555 3,830,059 3,679,789 4,310,864 4,238,164

Investments 26,355,263 28,469,784 31,883,062 37,079,041 44,713,393

NON-CURRENT ASSETS 30,434,185 33,128,655 36,471,056 42,348,749 49,677,449

Reinsurer’s debtors 152,165 161,062 275,942 292,034 92,695

Premium debtors 254,637 284,044 131,945 179,052 395,629

TECHNICAL ASSETS 406,802 445,106 407,887 471,086 488,324

Cash and cash equivalents 3,021,720 3,370,324 3,017,075 3,101,637 1,305,545

Receivables 835,902 1,372,891 1,513,148 1,446,986 1,340,474

Investments 5,525,840 6,429,514 6,144,814 6,565,744 3,828,495

CURRENT ASSETS 9,383,462 11,172,729 10,675,037 11,114,367 6,474,514

TOTAL ASSETS 40,224,449 44,746,490 47,553,980 53,934,202 56,640,287

Ordinary share capital 0 0 74,942 70,952 108,995

Share premium 0 0 971,153 1,710,453 1,677,411

Retained earnings 0 0 6,836,357 7,942,226 8,585,580

Other reserve 0 0 (1,061,847) (1,033,788) (1,080,761)

CAPITAL AND RESERVE 4,361,329 6,253,284 6,820,605 8,689,843 9,291,226

Deferred tax 274 309 0 0 12,373

Other liabilities 175,863 73,558 27,823 32,161 480,012

NON-CURRENT LIABILITIES 176,137 73,867 27,823 32,161 492,385

Policyholder liabilities 33,942,623 36,558,806 38,769,944 43,002,615 44,834,171

Reinsurance creditors 60,548 27,072 70,035 42,220 982,679

TECHNICAL LIABILITIES 34,003,171 36,585,878 38,839,979 43,044,835 45,816,850

Trade and other payables 826,340 592,532 627,932 1,084,393 582,776

Current income taxation 5,553 2,985 1,402 (4,293) 963

CAR 516,172 191,451 219,694 295,848 0

Other liabilities 335,747 1,046,493 1,016,545 791,415 456,088

CURRENT LIABILITIES 1,683,812 1,833,461 1,865,573 2,167,363 1,039,827

TOTAL LIABILITIES 35,863,120 38,493,206 40,733,375 45,244,359 47,349,062

Excess assets 4,361,329 6,253,284 6,820,605 8,689,843 9,291,225


TABLE S3: SHORT-TERM INSURANCE – INCOME STATEMENT, 2014–2018 (N$ '000)

Income and expenses 2014 2015 2016 2017 2018

Gross premiums written 3,338,281 3,493,466 3,521,970 3,714,136 3,788,126

Net reinsurance expense 1,054,454 993,145 973,591 1,005,602 1,038,480

Net premiums written 2,283,827 2,500,321 2,548,379 2,708,534 2,749,645

Change in provision for UPR 42,623 153,152 114,205 161,786 248,586

Net premiums earned 2,214,532 2,347,169 2,434,174 2,546,748 2,501,059

Gross claims and loss adjustment expenses 662,172 1,674,514 2,066,118 1,702,219 1,917,090

Change in claims incurred but not reported 8,590 9,786 (7,597) 13,150 -6,046

Less: Gross claims and loss adjustment expenses recovered from reinsurers

112,713 394,253 667,214 350,576 553,386

Net claims incurred 1,324,230 1,290,047 1,391,307 1,364,793 1,352,892

Commission incurred 199,964 405,140 457,063 457,666 433,282

Less: Commission earned 90,106 167,101 225,259 244,799 220,251

Net commission incurred 233,532 238,039 231,804 212,867 213,031

CLAIMS AND COMMISSION 1,557,762 1,528,086 1,623,111 1,577,660 1,565,922

Underwriting surplus 656,770 819,083 811,063 969,088 935,137

Management expenses 459,232 527,180 648,956 666,602 657,980

Finance costs 657 344 300 368 582

Investment income 192,621 203,041 342,522 361,682 355,386

Other income 176,214 38,232 21,579 109,670 59,784

Other expenses - 880 13,827 39,882 28,816

Profit before tax 565,716 532,832 512,081 733,588 662,929

LESS: Est. taxation (Current + def.) 98,995 111,812 94,394 161,454 118,605

PROFIT FOR THE YEAR 466,721 420,141 417,687 572,134 544,324

Other comprehensive income for the year (22,328) (12,777) 11,674 (37,263) (3,045)

Total comprehensive income for the year 444,393 407,364 429,361 534,871 541,279

Performance ratios 2014 2014 2016 2017 2018

Cession ratio 32% 28% 28% 27% 27%

Net loss ratio 59% 55% 57% 54% 54%

Underwriting expense ratio 32% 33% 37% 36% 36%

Net combined ratio 91% 88% 94% 90% 91%

TABLE S4: SHORT-TERM INSURANCE – INDUSTRY EXPERIENCE PER CLASS OF BUSINESS, 2014–2018

Class of business 2014 2015 2016 2017 2018

Premium earned by class of insurance (% of total)

Fire 18% 15% 14% 14% 12%

Marine 1% 1% 0% 0% 1%

Aviation 0% 0% 0% 0% 0%

Vehicles 29% 23% 27% 25% 24%

Guarantee -7% 1% 0% 0% 1%

Miscellaneous 22% 21% 19% 20% 20%

Personal 37% 39% 40% 41% 45%

Co-insurance business 0% 0% 0% 0% 0%

Loss ratio by class

Fire 46% 38% 49% 37% 99%

Marine 85% 74% 65% 108% 37%

Aviation 62% 232% -4% -39% 20%

Vehicles 60% 70% 60% 67% 56%

Guarantee 175% 9% -12% -186% -27%

Miscellaneous 49% 61% 49% 38% -184%

Personal 58% 62% 59% 61% 56%


Expense ratio by class

Fire 32% 0% 0% 0% 0%

Marine 23% 0% 0% 0% 0%

Aviation 36% 0% 0% 0% 0%

Vehicles 28% 0% 0% 0% 0%

Guarantee 90% 0% 0% 0% 0%

Miscellaneous 35% 0% 0% 0% 0%

Personal 23% 0% 0% 0% 0%


Underwriting results (% of premiums earned)

Fire 16% 7% 7% 7% -1%

Marine 2% 0% 0% 0% 0%

Aviation 71% 0% 0% 0% 0%

Vehicles 9% 5% 5% 6% 8%

Guarantee -235% 2% 2% -1% 0%

Miscellaneous 8% 11% 11% 17% 12%

Personal 15% 11% 11% 11% 16%

Co-insurance business -775% 0% 0% 0% 0%


TABLE S5: SHORT-TERM INSURANCE – BALANCE SHEET, 2014–2018 (N$ '000)Assets and liabilities 2014 2015 2016 2017 2018

NON-CURRENT ASSETS 1,251,240 1,505,922 1,419,997 1,285,276 1,380,994Immovable property 1,756 1,987 1,763 2,281 1,388Property, plant and equipment 13,507 11,273 11,023 20,018 17,984Intangible assets 13,582 19,847 26,994 27,427 39,846Deferred tax 11,172 9,640 10,889 39,138 38,433Other assets 231,801 304,268 357,086 52,554 53,801Investments 979,422 1,158,907 1,012,242 1,143,858 1,229,542TECHNICAL ASSETS 900,333 1,057,286 1,045,961 1,061,675 1,466,064Reinsurers’ share of unearned premiums 494,145 572,700 404,342 387,673 308,042Reinsurers’ share of outstanding claims 87,312 152,510 242,165 222,715 363,436Reinsurers’ share of claims incurred but not reported

60,356 60,716 73,476 62,180 55,266

Commission receivable 26,367 19,747 17,865 21,375 716Premium debtors 232,153 251,613 308,113 367,732 738,604CURRENT ASSETS 2,597,529 3,023,571 3,303,352 3,885,821 3,693,358Cash and cash equivalents 1,343,310 1,454,932 1,081,237 1,080,674 908,552Other receivables 129,765 108,342 110,570 538,600 271,267Investments 1,124,454 1,460,297 2,111,545 2,266,547 2,513,538TOTAL ASSETS 4,749,102 5,586,779 5,769,310 6,232,772 6,540,417CAPITAL AND RESERVES 1,353,146 1,637,255 1,825,174 2,080,299 2,172,407Ordinary share capital 47,551 67,661 63,598 80,602 67,305Share premium 100,774 172,801 180,901 187,506 209,085Retained earnings 984,472 1,179,250 1,427,261 1,734,598 1,814,572Contingency reserve 218,692 216,551 151,727 75,963 74,946Other reserve 1,657 992 1,687 1,630 6,499NON-CURRENT LIABILITIES 61,984 56,900 31,432 34,621 59,592Deferred taxation 44,577 33,974 20,572 29,600 1,195Other liabilities 17,407 22,926 10,860 5,021 58,397TECHNICAL LIABILITIES 2,705,717 3,111,452 3,232,651 3,421,446 3,820,792Gross provision for unearned premiums 1,654,638 1,886,336 1,832,533 1,976,667 2,139,702Gross outstanding claims 588,575 675,828 755,587 686,300 775,783Gross claims incurred but not reported 203,588 217,456 222,762 221,861 221,621Commission due 30,817 15,840 17,327 15,716 118,552Reinsurance creditors 228,099 315,992 404,442 520,902 565,134CURRENT LIABILITIES 628,255 781,172 680,047 696,406 487,625Trade and other payables 214,731 324,547 317,825 414,692 326,447Current income taxation 4,621 15,992 28,210 47,490 3,289Other liabilities 408,903 440,633 334,012 234,224 157,889TOTAL EQUITY AND LIABILITIES 4,749,102 5,586,779 5,769,310 6,232,778 6,540,416

SOLVENCY RATIO 28% 29% 30% 33% 33%

TABLE S6: MEDICAL AID FUNDS – MEMBERSHIP, 2014–2018Membership 2014 2015 2016 2017 2018

Principal members 76,522 77,109 79,979 81,952 81,490

Dependents 96,073 98,246 100,757 102,899 103,282

Pensioners 6,769 9,468 9,700 10,568 11,033

Total members 179,364 184,823 190,436 195,419 195,805

TABLE S7: MEDICAL AID FUNDS – INCOME STATEMENT, 2014–2018 (N$ ’000)Income and expenses 2014 2015 2016 2017 2018

Contributions received 2,642,485 3,001,636 3,355,224 3,828,283 4,036,760

Roll-over contributions 89,611 97,379 109,876 124,083 65,450

Net reinsurance expense 20,142 35,686 35,034 24,724 27,619

Net contributions 2,532,732 2,868,570 3,210,314 3,679,476 3,943,690

Claims 2,194,981 2,507,821 2,889,425 3,213,803 3,461,965

Administration costs 196,224 204,805 223,323 253,825 268,837

Operational expenses 51,588 52,473 56,387 61,773 75,866.03

Managed care: Management services 39,927 42,443 46,725 54,538 59,315

Underwriting surplus 50,012 61,028 -5,546 95,538 77,706

Other income 12,402 7,357 13,755 8,520 8,515


Net surplus 144,971 165,273 64,559 223,748 142,095

TABLE S8: MEDICAL AID FUNDS – CLAIMS TYPOLOGY, 2014–2018 (N$ ’000)Service provider 2014 2015 2016 2017 2018

Hospitals 763,242 886,994 1,050,096 1,160,088 1,198,124

General practitioners 215,641 245,093 267,583 518,498 554,083

Pharmacies/Medicine 373,131 420,673 482,944 287,187 299,823

Specialists 251,504 299,137 345,285 377,719 438,522

Auxiliary services 110,091 120,248 146,137 157,341 193,944

Pathologists 103,363 120,105 139,473 102,092 95,279

Optometrists 59,973 83,262 83,330 143,759 159,812

Dentists 100,454 115,303 131,566 160,332 170,264

Radiologists 78,767 97,403 120,349 130,667 181,810

Dental specialists 10,846 15,141 16,082 16,581 17,575

Dental therapists 2,510 3,137 2,856 82,032 106,043

Psychiatric institutions 3,315 4,187 6,212 6,035 8,932

Optic payouts 4,358 - - 3,888 6,380

Movement in claims incurred but not reported

- 24,170 17,321 - 8,163

Other 117,786 72,970 80,190 67,583 23,211

Total 2,194,981 2,507,821 2,889,425 3,213,803 3,461,965


TABLE S9: MEDICAL AID FUNDS – BALANCE SHEET, 2014–2018 (N$ ’000)

Assets and liabilities 2014 2015 2016 2017 2018

Non-current assets 11,687 12,193 68,535 68,639 68,955

Property, plant and equipment 11,687 3,893 3,867 4,051 4,090

Investments - 8,300 64,668 64,588 64,865

Current assets 1,150,220 1,347,590 1,376,236 1,703,404 1,864,241

Investments 913,152 1,098,333 1,092,503 1,391,379 1,605,801

Accounts receivable 26,144 21,545 44,708 42,146 27,994

Cash and cash equivalents 210,923 227,712 239,025 269,879 230,446

TOTAL ASSETS 1,161,907 1,359,783 1,444,771 1,772,043 1,933,196

FUNDS AND LIABILITIES

Members’ funds 897,689 1,062,445 1,130,031 1,359,673 1,517,641

Accumulated funds 897,689 1,062,445 1,130,031 1,359,673 1,517,641

Revaluation reserve - Investments - - - - -

Non-current liabilities - - - - -

Long-term loans (Borrowings) - - - - -

Current liabilities 264,217 297,339 314,741 412,370 415,555

Accounts payable (Creditors) 75,629 76,811 77,845 106,638 106,586

Provision for outstanding claims/claims incurred but not reported

158,506 184,049 198,624 257,854 261,864

Bank overdraft - - - - -

Roll-over benefit liability 28,336 32,906 34,964 44,210 39,295

Provision for bad debt 1,747 1,574 1,558 1,919 7,810

Short-term loans (Borrowings) 2,000 1,750 1,750 -

TOTAL FUNDS AND LIABILITIES 1,161,907 1,359,783 1,444,771 1,772,043 1,933,196

TABLE S10: MEDICAL AID FUNDS – CAPITAL INVESTMENTS, 2014–2018 (N$ ’000)

Capital invested 2014 2015 2016 2017 2018

Investments in Namibia 379,683 482,744 643,231 928,096 988,988

Government and other stock/(bonds) 97,049 120,485 107,541 127,265 163,965

Shares/equities 66,515 66,979 109,488 82,872 93,670

Unit trust schemes 52,850 67,128 142,307 280,723 438,421

Debentures 2,594 - 8,926 2,871 -

Fixed deposit and savings accounts - - 805 750 7,635

Cash and equivalents (Call accounts) 156,043 222,770 264,138 393,857 233,968

Treasury bills - - - 29,434 35,732

Properties 3,355 4,450 7,450 7,450 15,597

Loans stock investment 1,276 932 2,577 2,874 -

Investments outside Namibia 533,469 623,889 513,940 527,871 681,678

Cash outside Namibia 27,667 36,020 82,994 41,514 22,402


Bonds 43,429 51,962 27,881 27,830 90,963

Equities/shares 261,345 240,232 134,209 155,199 477,737

Properties 3,234 4,453 2,289 3,141 -

TOTAL INVESTMENT ASSETS 913,152 1,106,633 1,157,171 1,455,968 1,670,666

TABLE S11: PENSION FUNDS – STATEMENT OF INVESTMENT HOLDINGS: INVESTMENT LIMITS – Q4 2015 TO Q4 2018 (N$’000)

Investment holdings Q4 2015 Q4 2016 Q4 2017 Q4 2018

Credit balances 11,523,829 8,560,735 10,913,820 14,788,982

Government bonds 5,885,904 13,638,906 15,580,402 16,747,236

State-owned enterprise, local authority and Regional Council bonds

385,792 7,070,617 6,611,312 1,069,120

Corporate bonds 1,739,685 2,349,903 2,597,734 8,956,310

Foreign bonds 13,932,979 7,365,315 7,530,802 12,045,837

Property 2,468,710 2,495,787 3,071,680 5,206,428

Shares 80,943,421 74,201,263 87,615,422 77,664,798

Other claims 611,896 1,889,992 14,238 1,587,569

Other assets 206,242 315,872 72,729 408,762

Unlisted investment 961,370 426,751 624,196 915,024

TOTAL VALUE OF INVESTMENTS 118,659,829 118,315,139 134,632,334 139,390,068

Other assets: Insurance policies 12,150,728 17,346,211 20,227,770 19,124,328

TOTAL INVESTMENTS 130,810,556 135,661,350 154,860,104 158,514,396

*Note: The analysis on the pension fund industry at year-end is thus limited to the consolidated Statement of Investment Holdings as at 31 December 2018.


TABLE S12: FRIENDLY SOCIETIES - MEMBERSHIP, 2014–2018

Membership 2013 2014 2015 2016 2017 2018

Principal members 1,174 1,702 594 565 604 611

Dependents 0 1,360 1,396 1,384 1,384 1,498

Total members 1,174 3,062 1,990 1,949 1,988 2,109

TABLE S13: FRIENDLY SOCIETIES - INCOME STATEMENT, 2014–2018 (N$)

Income and Expenses 2014 2015 2016 2017 2018

Contributions received 156,171 220,365 170,194 179,175 194,376

Net contributions 156,171 220,365 170,194 179,175 194,376

Claims 40,500 43,033 103,218 50,000 47,467

Administration fees - - - - -

Operational expenses 17,160 16,506 50,942 50,046 43,772

Underwriting surplus 98,511 160,826 16,033 79,129 103,137

Other income - - 200 250 1,078


Net surplus 150,065 234,818 98,206 156,231 200,673

TABLE S14: FRIENDLY SOCIETIES BALANCE SHEET, 2014–2018 (N$)

Assets and liabilities 2014 2015 2 016 2 017 2018

Assets

Current assets 882,282 1,041,814 1,192,345 1,363,435 1,572,901

Accounts receivable 18,406 26,463 9,924 16,023 21,646

Cash and cash equivalents 863,876 126,468 13,391 22,115 40,253

Short-term Investments - 888,883 1,169,030 1,325,297 1,511,002

Total Assets 882,282 1,041,814 1,192,345 1,363,435 1,572,901

Funds and liabilities

Members’ funds 857,433 1,027,065 1,125,271 1,281,604 1,499,301

Accumulated funds 857,433 1,027,065 1,125,271 1,281,604 1,499,301

Revaluation reserve – Investments - - - - -

Current liabilities 24,849 14,749 67,074 81,831 73,600

Accounts payable (creditors) 14,849 14,749 17,074 16,181 14,600

Future claims liability 10,000 - 50,000 50,000 50,000

Other liabilities - - - 6,650 -

Provision for bad debt - - - 9,000 9,000

Total funds and liabilities 882,282 1,041,814 1,192,345 1,363,435 1,572,901

TABLE S15: COLLECTIVE INVESTMENT SCHEMES (CIS) - TOTAL FUND UNDER MANAGEMENT, 2014- 2018 (N$ MILLIONS)

2014 2015 2016 2017 2018

Country allocation

Namibia 19 88 26 449 27 723 32 506 39 591

Common Monetary Area 18 409 16 129 15 716 18 708 18 860

Offshore 3 794 5 194 4 874 4 705 4 563

Total 42 083 47 772 48 313 55 920 63 014

Asset allocation

Money market investments: 24 799 28 655 29 326 35 885 39 611

Treasury bills 751 2 713 3 275 4 450 5 205

Negotiable certificates of deposit 10 632 12 783 11 428 15 791 18 911

Banker's acceptances - - 0 - 0

Debentures 28 74 63 144 620

Notice, call and other deposits 8 787 8 446 9 550 10 454 7 590

Other 4 601 4 639 5 010 5 045 7 285

Listed equity 9 844 10 886 10 568 10 698 11 162

Listed debt 4 266 4 583 4 993 5 765 7 663

Unlisted equity 1 515 1 453 1 375 1 356 1 257

Unlisted debt 548 638 617 657 2 247

Unlisted property - - 0 - 0

Other assets 1 111 1 557 1 434 1 558 1 074

Total funds under management 42 083 47 772 48 313 55 920 63 014


TABLE S17: INVESTMENT MANAGERS- TOTAL FUNDS UNDER MANAGEMENT, 2014–2018 (N$ MILLION)

Total funds under management 2014 2015 2016 2017 2018

Country allocation

Namibia 66,682 72,043 79,881 79,367 82,717

Common Monetary Area 51,725 52,608 50,677 61,318 55,891

Offshore 17,779 23,038 20,217 23,598 25,544

Total 136,186 147,689 150,775 164,283 164,152

Asset allocation

Money market investments 35,963 41,562 42,929 50,424 43,450

Treasury bills 14,836 17,715 18,278 20,850 4,766

Negotiable certificates of deposit 6,128 7,172 7,224 8,136 18,910

Banker’s acceptances - - 0 23 0

Debentures 28 74.31 63 163 620

Notice, call and other deposits 10,867 12,338 12,473 17,368 15,578

Other 4,104 4,263 4,891 3,884 3,576

Listed equity 67,233 68,840 71,655 75,267 71,657

Listed debt 19,211 20,195 21,679 22,487 33,014

Unlisted equity 1,685 1,464 1450 2,006 2,047

Unlisted debt 94 128.89 87.9 105 1,854

Unlisted property 685 702.65 768 823 0

Other assets 11,315 14,796 12,206 13,171 12,129

Total funds under management 136,186 147,689 150,775 164,283 164,152

TABLE S18: INVESTMENT MANAGERS- SOURCES OF FUNDS, 2014–2018 (N$ MILLION)

Source of funds (Capital markets) 2014 2015 2016 2017 2018

Pension funds 77,735 80,587 79,613 85,431 81,742

Short-term insurance companies 428 460 525 687 542

Long-term insurance companies 20,523 22,649 23,697 26,430 26,607



Companies 1,285 1,446 2,971 5,533 2,843

Natural persons 56 76 91 7,175 458

Other 3,880 4,203 4,559 7,071 4,494

Total 136,186 147,689 150,775 164,283 164,152

TABLE S16: COLLECTIVE INVESTMENT SCHEMES (CIS) - SOURCE OF FUNDS, 2014- 2018 (N$ MILLIONS)

Unit Trust funds per sector 2014 2015 2016 2017 2018

Pension funds 6 482 5 996 5 693 5 047 6 348

Short-term insurance companies 157 418 409 529 803

Long-term insurance companies 1 926 2 289 2 427 2 551 3 202


Unit trust schemes 5 073 12 485 11 317 13 928 8 021

Companies 718 8 498 9 459 15 054 22 918

Natural persons 2 002 15 893 16 611 13 355 17 858

Other 1 196 2 059 2 222 5 145 3 455

Total 42 083 47 772 48 313 55 920 63 014


TABLE S19: CAPITAL MARKET – MARKET PERFORMANCE, 2014–2018 (N$ MILLION)

Market performance 2014 2015 2016 2017 2018

NSX Overall Index (points) 1,098 1,014 1,069 1,300 1,307

NSX Local Index (points) 389 498 547 600 621

JSE All Share Index (points) 49,771 50,694 50,654 59,505 52,737

Overall value of equity securities traded (N$ m) 8,315 5,066 276 2,552 3,554

Local value of equity securities traded (N$ m) 263 59 16 254 372

Total shares in issue (m) NSX Overall Index 26,674 27,074 27,775 29,818 30,981

Total shares in issue (m) NSX Local Index 1,515 1,526 1,527 2,049 4,059

Overall market capitalisation (N$ m) 1,722,577 1,637,708 1,693,022 2,083,149 1,989,913

Local market capitalisation (N$ m) 22,322 29,430 32,017 36,018 35,406

Overall volume of securities traded (m) 174 24 69 34 62

Local volume of securities traded (m) 34 3 8 9 15

TABLE S20: CAPITAL MARKET – NOMINAL DEBT ISSUED, 2014–2018 (N$ MILLION)

Nominal debt issued 2014 2015 2016 2017 2018

Central Government 17,335 31,808 41,478 45,087 49,390

State-owned enterprises 1,427 1,334 450 741 1,241

Banking institutions 2,899 3,391 3,117 4,236 4,816

Corporate 145 0 0 0 21,789

Treasury bills (Outstanding) 8,797 8,797 14,327 17,987 309

Total 30,603 45,330 59,372 68,051 77,545

TABLE S21: CAPITAL MARKET – DEBT SECURITIES TRADED, 2014–2018 (N$ MILLION)

Debt securities traded 2014 2015 2016 2017 2018

Central Government 171 175 505 171 530

State-owned enterprises 26 0 0 0 0

Banking institutions - 0 0 0 0

Corporate - 0 0 0 0

Total 197 175 505 171 530

TABLE S22: MICROLENDER CREDIT EXTENSION, 2014–2018 (N$ MILLION)Credit extension 2014 2015 2016 2017 2018

Loans outstanding (N$ ’000)

Total loans 3,382,060 4,257,312 4,221,602 5,460,147 6,446,923

Term lenders 3,302,017 4,166,886 4,121,612 5,341,221 6,407,930

Payday lenders 80,043 90,426 99,990 118,926 38,993

Loans disbursed (N$ ’000)

Total loans 2,259,908 2,620,904 3,153,261 3,606,919 4,074,599

Term lenders 1,551,699 1,892,999 2,326,156 2,661,344 3,189,280

Payday lenders 708,209 727,905 827,105 945,575 889,319

Number of loans

Total loans 717,031 764,328 691,695 722,194 516,502

Term lenders 100,104 120,067 112,837 121,886 129,353

Payday lenders 616,927 644,261 578,858 600,308 387,149

Average loan amount

Term lenders (N$) 15,501 15,766 20,615 21,835 24,820

Payday lenders (N$) 1,148 1,130 1,429 1,554 7,684

TABLE S23: NUMBER OF COMPLAINTS RECEIVED, 2014–2018Industry 2014 2015 2016 2017 2018

Microlending and credit agreements 236 236 207 345 400



Pension funds 95 144 143 209 178

Collective investment schemes 0 0 4 1 1




Other 10 9 5 7 0

Total 537 712 796 990 1,072

TABLE S24: NUMBER OF COMPLAINTS RESOLVED BY INDUSTRY, 2014–2018Industry 2014 2015 2016 2017 2018

Microlending and credit agreements 220 235 189 341 374



Pension funds 61 135 137 192 167

Collective investments schemes 0 0 3 1 13




Others 10 9 12 7 0

Total 455 702 672 965 1,001


10.ANNUAL

FINANCIAL STATEMENTS

Namibia Financial Institutions Supervisory Authority and Subsidiary Consolidated Annual Financial Statements for the year ended 31 March 2019.



ContentsBOARD’S RESPONSIBILITY FOR FINANCIAL REPORTING

The Board of the Authority is responsible for the maintenance of adequate accounting records and the preparation and integrity of the consolidated annual financial statements and related information. The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards and in the manner required by the Namibia Financial Institutions Supervisory Authority Act No. 3 of 2001 (“NAMFISA Act”). The Authority’s independent external auditors have audited the consolidated annual financial statements and their report appears on pages 162 to 164.

The Board is also responsible for the systems of internal control. These are designed to provide reasonable but not absolute assurance as to the reliability of the consolidated annual financial statements; to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect material misstatement and loss. The systems are implemented and monitored by

experienced personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the Board to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

The consolidated annual financial statements are prepared on a going concern basis. Nothing has come to the attention of the Board to indicate that the Authority will not remain a going concern for the foreseeable future.

BOARD’S APPROVAL OF THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

The consolidated annual financial statements set out on pages 166 to 222 were approved by the Board and are signed on its behalf by:

Gersom R Katjimune Chairperson: Board

28 June 2019

Date

Jauque Jansen Chairperson: Audit and Risk Committee

28 June 2019

Date

Board’s responsibility for financial reporting ..................................................................................161

Board’s approval of the consolidated annual financial statements ............................................... 161

Independent auditor’s report ........................................................................................................ 162 - 164

Report of the board ....................................................................................................................... 166 - 167

Consolidated statement of surplus or deficit and other comprehensive income .......................... 168

Consolidated statement of financial position ............................................................................... 169

Consolidated statement of changes in reserves .......................................................................... 170

Consolidated statement of cash flows ......................................................................................... 171

Notes to the annual financial statements ...................................................................................... 172 - 222


INDEPENDENT AUDITOR’S REPORTTo the Directors of Namibia Financial Institutions Authority

Our opinionIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Namibia Financial Institutions Supervisory Authority (the Authority) and its subsidiaries (together the Group) as at 31 March 2019, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the Namibia Financial Institutions Supervisory Authority Act.

What we have auditedNamibia Financial Institutions Supervisory Authority’s consolidated and separate financial statements set out on pages 166 to 222 comprise:

• the report of the board for the year ended 31 March 2019;

• the consolidated and separate statements of financial position as at 31 March 2019;

• the consolidated and separate statements of surplus or deficit and other comprehensive

• income for the year then ended;• the consolidated and separate statements of changes

in reserves for the year then ended;• the consolidated and separate statements of cash

flows for the year then ended; and• the notes to the consolidated annual financial

statements, which include a summary of significant accounting policies.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

IndependenceWe are independent of the Group in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (Code of Conduct) and other independence requirements applicable to performing audits of financial statements in Namibia. We have fulfilled our other ethical responsibilities in accordance with the Code of Conduct and in accordance with other ethical requirements applicable to performing audits in Namibia.

Other informationThe directors are responsible for the other information. The other information comprises the information included in the Namibia Financial Institutions Supervisory Authority and Subsidiary Consolidated Annual Financial Statements for the year ended 31 March 2019. Other information does not include the consolidated and separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the board for the consolidated and separate financial statementsThe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Namibia Financial Institutions Authority Act, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and the Authority’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Authority or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated and separate financial statementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Authority’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Authority’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or Authority to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether


the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

PricewaterhouseCoopersRegistered Accountants and Auditors Chartered Accountants and Auditors Per: Trofimus ShapangePartnerWindhoekDate 28 June 2019


REPORT OF THE BOARD31 March 2019

The Board of the Authority has pleasure in presenting their report on the activities of Namibia Financial Institutions Supervisory Authority (“NAMFISA”) and its subsidiary (the “Group”) for the year ended 31 March 2019 (“the period”).

GENERAL REVIEWNAMFISA was established by the Government of the Republic of Namibia on 14 May 2001 in terms of the NAMFISA Act.

NAMFISA was established to exercise supervision over the businesses of financial institutions and over financial services, and to advise the Minister of Finance on matters related to financial institutions and financial services.

RESULTSThe financial results of NAMFISA and the Group are set out in the attached annual financial statements on pages 168 to 222.

BOARD MEMBERS AND SECRETARYThe composition of the board is as follows:

FINANCIAL YEAR ENDThe financial year end of NAMFISA is defined in the NAMFISA Act as 28 March of every year. The Board is of the view that the intention of the legislature was that the year-end be 31 March, and therefore the financial statements have been prepared as of 31 March.

The secretary to the board of NAMFISA is Bryan Kandjiriomuini, appointed as from 01 December 2017, whose business and postal addresses are set out below:

Business address:13th floor, Sanlam Centre Independence Avenue WINDHOEKNamibia

Board members Designation Date

Gersom R. Katjimune Chairperson Re-appointed: 1 April 2017

Simeon Amunkete Member Re-appointed: 1 April 2017

Hettie Garbers-Kirsten Vice-Chairperson Appointed: 1 April 2017

Leonie Dunn Member Appointed: 1 April 2017

Jauque Jansen Member Appointed: 1 April 2017

Postal address: P O Box 21250 WINDHOEK Namibia

SUBSIDIARYNAMFISA acquired Metropol (Pty) Ltd on 27 October 2014. The company is an investment property holding company and owns a property situated in Independence Avenue, Windhoek. The investment in the subsidiary is listed in note 9 of the annual financial statements.

OTHER MATTERS

Litigation:As is public record, NAMFISA is a co-defendant in a case brought against the Authority by Alwyn Petrus van Straten N.O. and others on 12 March 2012 claiming a total amount of N$105 million. Following the successful appeal by the plaintiffs in the Supreme Court against the judgment of the High Court, which upheld the exceptions filed by NAMFISA, the matter was referred back to the High Court to continue through the normal process.

The latest status hearing was held on 18 January 2019 where the plaintiffs were instructed to file their outstanding witness statements on or before 29 March 2019. NAMFISA filed its witness statements on 10 June 2019 with the expert’s witnesses filing a joint report by 21 June 2019.

A joint pre-trial report shall be filed on or before 5 July 2019 with a pre-trial conference set down for 15 July 2019.

Post-retirement medical liability:In terms of NAMFISA’s staff rules it is a condition for staff to be members of a medical aid fund approved by NAMFISA in order to qualify for the Post-Retirement Medical Aid benefit. As at 31 March 2019, there are some employees who do qualify for Post-Retirement Medical Aid benefit but are not currently on a qualifying medical aid scheme. The contingent liability for these employees amount to N$5 219 000 at 31 March 2019 (2018: N$4 576 000).

SUBSEQUENT EVENTSThe Board of the Authority is not aware of any fact or circumstance, which occurred between the end of the financial year and the date of this report, which might influence an assessment of the Authority’s affairs.


CONSOLIDATED STATEMENT OF SURPLUS OR DEFICIT AND OTHER COMPREHENSIVE INCOMEfor the year ended 31 March 2019

GROUP AUTHORITY

Notes 2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Revenue from exchange transactions 2 497 700 608 230 497 700 608 230

Income from non-exchange transactions 2 252 607 569 142 618 994 252 607 569 142 618 994

Investment income 3 5 939 057 3 691 102 5 939 057 3 691 102

Other income 4 2 119 970 2 474 706 2 119 970 2 374 089

Total Income 261 164 296 149 393 032 261 164 296 149 292 415

Consumer education costs (1 042 327) (937 272) (1 042 327) (937 272)

Depreciation and amortization expense 7&8 (3 044 784) (2 807 831) (3 044 784) (2 807 831)

Finance charges – Post-retirement benefits 16.2 (4 179 000) (3 258 000) (4 179 000) (3 258 000)

Inspection and enforcement costs (41 960) (214 915) (41 960) (214 915)

Legal costs (2 137 223) (1 244 004) (2 137 223) (1 244 004)

Office rental expenses 5 (16 158 979) (16 763 626) (16 158 979) (16 763 626)

Professional and consulting fees (7 022 284) (8 179 312) (7 017 109) (8 179 312)

Staff costs 5 (149 047 573) (154 759 403) (149 047 573) (154 759 403)

Other operating costs 5 & 25 (13 227 645) (13 564 604) (12 719 943) (13 068 394)

Total Expenses (195 901 775) (201 728 967) (195 388 898) (201 232 757)

SURPLUS/(DEFICIT) FOR THE YEAR BEFORE TAXATION 5 65 262 521 (52 335 935) 65 775 398 (51 940 342)

Taxation 6 - - - -

SURPLUS/(DEFICIT) FOR THE YEAR AFTER TAXATION 65 262 521 (52 335 935) 65 775 398 (51 940 342)

Other comprehensive income:

Gain on revaluation of property 7 - 5 400 000 - -

Actuarial gain – Post-retirement medical aid 16.2 9 009 554 5 544 008 9 009 554 5 544 008

Actuarial gain – Severance 16.2 1 489 520 1 135 843 1 489 520 1 135 843

TOTAL COMPREHENSIVE SURPLUS/(DEFICIT) FOR THE YEAR 75 761 595 (40 256 084) 76 274 472 (45 260 491)

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 31 March 2019

GROUP AUTHORITY

Notes 2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

ASSETS

Non-current assets

Property, plant and equipment 7 85 131 437 86 337 768 3 496 677 4 703 009

Intangible assets 8 1 860 233 3 079 779 1 860 233 3 079 779

Investment in subsidiary 9 - - 42 000 000 42 000 000

Total non-current assets 86 991 670 89 417 547 47 356 910 49 782 788

Current assets

Accounts receivable 11 24 547 997 24 246 441 24 509 846 24 204 550

Other financial assets 10 58 354 979 14 105 591 58 354 979 14 105 591

Loan to subsidiary 19.3 - - 36 250 124 36 200 295

Cash and cash equivalents 12 74 779 982 32 279 615 74 687 401 31 755 635

Total current assets 157 682 958 70 631 647 193 802 350 106 266 071

TOTAL ASSETS 244 674 628 160 049 194 241 159 260 156 048 859

EQUITY AND LIABILITIES

Accumulated income 154 607 341 90 845 746 156 598 650 92 324 178

General reserve 17 12 000 000 - 12 000 000 -

Revaluation surplus 7 5 400 000 5 400 000 - -

Total equity 172 007 341 96 245 746 168 598 650 92 324 178

Non-current liabilities

Post-retirement benefit obligations 16.2 39 666 149 40 308 149 39 666 149 40 308 149

Current liabilities

Accounts payable 13 28 079 436 23 495 299 27 972 759 23 416 532

Deferred income 14 4 921 702 - 4 921 702 -

Total current liabilities 33 001 138 23 495 299 32 894 461 23 416 532

TOTAL EQUITY AND LIABILITIES 244 674 628 160 049 194 241 159 260 156 048 859


CONSOLIDATED STATEMENT OF CHANGES IN RESERVESfor the year ended 31 March 2019

Accumulated Income General Reserve Revaluation Surplus Total Reserves

GROUP (N$)

AUTHORITY (N$)

AUTHORITY (N$)

GROUP (N$)

GROUP (N$)

AUTHORITY (N$)

Balance at 1 April 2017

136 501 830 137 584 669 - - 136 501 830 137 584 669

Deficit for the year (52 335 935) (51 940 342) - - (52 335 935) (51 940 342)

Other comprehensive income

6 679 851 6 679 851 - 5 400 000 12 079 851 6 679 851

Total Comprehensive (deficit)/surplus

(45 656 084) (45 260 491) - 5 400 000 (40 256 084) (45 260 491)

Balance at 31 March 2018 90 845 746 92 324 178 - 5 400 000 96 245 746 92 324 178

Surplus for the year 65 262 521 65 775 398 - - 65 262 521 65 775 398

Other comprehensive income

10 499 074 10 499 074 - - 10 499 074 10 499 074

Total Comprehensive surplus

75 761 595 76 274 472 - - 75 761 595 76 274 472

Transfer to general reserve

(12 000 000) (12 000 000) 12 000 000 - - -

Balance at 31 March 2019 154 607 341 156 598 650 12 000 000 5 400 000 172 007 341 168 598 650

CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 March 2019

GROUP AUTHORITY

Notes 2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Cash flows from operating activities

Net cash generated/(utilized) by operating activities 21 81 418 247 (4 061 573) 81 899 475 (5 417 075)

Cash flows from investing activities

Acquisition of property, plant and equipment 7 (627 400) (532 478) (627 400) (532 478)

Proceeds on disposal of equipment 19 852 55 824 19 852 55 824

Acquisition of intangible assets 8 - (732 659) - (732 659)

Loan (to)/from subsidiary 19.3 - - (49 829) 831 522

Interest received 3 3 689 669 1 982 937 3 689 669 1 982 937

Dividends received 3 2 249 388 1 708 165 2 249 388 1 708 165

(Increase)/decrease in other financial assets (44 249 389) 4 291 834 (44 249 389) 4 291 834

Net cash (utilized)/generated in investing activities (38 917 880) 6 773 623 (38 967 709) 7 605 145

Net increase in cash and cash equivalents 42 500 367 2 712 050 42 931 766 2 188 070

Cash and cash equivalents at beginning of the year 32 279 615 29 567 565 31 755 635 29 567 565

Cash and cash equivalents at end of the year 12 74 779 982 32 279 615 74 687 401 31 755 635

See note 17 for the disclosure of the General Reserve.


1. ACCOUNTING POLICIESThe consolidated annual financial statements of the Group are prepared in accordance with and comply with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB.

The annual financial statements of NAMFISA and the Group are prepared on the historical cost basis except for the following financial assets and liabilities that have been measured at fair value:

• Financial assets and financial liabilities classified as held for trading;

• Financial assets and financial liabilities designated at their fair value through profit or loss; and

• Financial assets classified as available-for-sale.

Non-current assets held for sale are stated at the lower of its carrying amount and fair value less costs to sell.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

In the preparation of the financial statements, NAMFISA and the Group recorded various assets and liabilities on the presumption that the Group is a going concern.

1.1. Adoption of new and revised standardsNAMFISA and the Group adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting interpretations Committee (the IFRIC) of the IASI that are relevant to its operation and effective for annual periods beginning 1 April 2018. However, the adoption of the Standards and Interpretations did not result in any material adjustments to the reported figures.

Number Effective date

IFRS 9 – Financial Instruments (2009 &2010)Financial liabilities, De-recognition of financial instruments, Financial assets and General hedge accounting; Amendment to IFRS 9 - Financial instruments, on general hedge accounting

Annual periods beginning on or after 1 January 2018

Amendment to IFRS 9 - Financial instruments, prepayment features with negative compensation and modification of financial liabilities


IFRS 15 – Revenue from contracts with customers. Annual periods beginning on or after 1 January 2018

Amendment to IFRS 15 – Revenue from contracts with customers.


Amendment to IAS 40 – Investment propertyTransfers of investment property


Annual improvements 2014-2016 Annual periods beginning on or after 1 January 2018

1. ACCOUNTING POLICIES (CONTINUED)

1.1. Adoption of new and revised standards (continued)A reliable estimate of the impact of the adoption of the recent amendments on the Authority and Group’s Financial Statements was determined at the end of March 2018. The Authority anticipates that the adoption of the recent standards and interpretations have no material impact on the financial statements in future periods, except for disclosure to the financial statements.

In the current year, the Group has applied IFRS 9 Financial Instruments and the related consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of IFRS 9 allow an entity not to restate comparatives. The Group has elected not to restate comparatives in respect of the classification and measurement of financial instruments.

The following table contains International Financial Reporting Standards and International Accounting Standards recently issued but not yet effective, which have not been early adopted by the Group and that might affect future financial periods:

Number Effective date

IFRS 16 – Leases

Annual periods beginning on or after 1 January 2019 – earlier application permitted if IFRS 15 is also applied.

(Published January 2016)

Amendments to IFRS 10 – Consolidated financial statements and IAS 28 – Investments in associates and joint ventures on sale or contribution of assets

Effective date postponed

(Initially 1 January 2016)

IFRS 17 – Insurance contracts


Early application is permitted for entities that apply IFRS 9 – Financial Instruments, and IFRS 15 – Revenue from Contracts with Customers, at or before the date of initial application of IFRS 17.

(Published May 2017)

Amendments to IAS 28 – Investments in associates and joint ventures – long-term interests in associates and joint ventures.


(Published October 2017)

IFRIC 23 – Uncertainty over income tax treatments


(Published 7 June 2017)

Annual improvements cycle 2015-2017


(Published December 2017)

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019




1.1. Adoption of new and revised standards (continued)IFRS 16 will change the way in which the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance sheet.

On initial application of IFRS 16 – Leases, the Group will:

a) Recognise right-of-use assets and lease liabilities in the consolidated statement of financial position;b) Recognise depreciation of right-of-use assets and interest on lease liabilities in statement of profit or loss;c) Separate the total amount of cash paid into a principal and interest in the consolidated cash flow statement.

A reliable estimate of the impact of the adoption of the recent amendments on the Authority and Group’s Financial Statements was determined at the end of March 2019.

1.2. Consolidation

1.2.1. Basis of preparation and consolidationThe annual financial statements have been prepared on the going concern basis in accordance with, and in compliance with, International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued and effective at the time of preparing these annual financial statements and the NAMFISA Act 3 of 2001 of Namibia, as amended.

The annual financial statements have been prepared on the historic cost convention, unless otherwise stated in the accounting policies, which follow and incorporate the principal accounting policies set out below. They are presented in Namibia Dollars, which is the Authority's functional currency.

The consolidated financial statements incorporate the financial statements of the Authority and all entities

controlled by the Authority.These accounting policies are consistent with the previous period.

The Authority has control of an entity when:

• it has power over the investee;• it is exposed, or has rights to the variable returns from its

involvement with the investee; and• it has the ability to use its power over the investee to

affect the amount of the investor’s returns.

The Authority reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

1.2.2. SubsidiariesSubsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income and inter-company transactions,

balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.

All intragroup transactions, balances, income and expenses are eliminated in full on consolidation.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.

1.3. Significant judgements and sources of estimation uncertainty The preparation of annual financial statements in conformity with IFRS requires management, from time to time, to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

1.4. Property, plant and equipmentLand and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period.

Any revaluation increase arising on the revaluation of such land and buildings is recognised in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.

Properties in the course of construction for administrative processes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are classified to appropriate categories of buildings and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation of revalued buildings is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.

Freehold land is not depreciated.

Land and buildings are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of land and buildings is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.





1.4. Property, plant and equipment (continued)Equipment is stated at cost, less accumulated depreciation. Depreciation is calculated on cost, less residual value over the estimated useful lives of the assets using the straight line method.

The residual value and the useful life of each asset are reviewed at each financial period-end.

Each part of an item of equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from de-recognition of an item of equipment is included in profit or loss when the item is derecognised. The gain or loss arising from de-recognition of an item of equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

The depreciation rates applicable are as follows:

Computer equipment 3 – 20 yearsOffice equipment 3 – 20 yearsFurniture and fittings 20 yearsMotor vehicles 5 – 10 years

1.5. Intangible assetsThe Group carried capitalised software assets at cost less amortisation and any impairment losses and amortises these assets on a straight-line basis at a rate applicable to the expected useful life of the asset, but not exceeding fifteen (15) years.

1.6. Investment propertyInvestment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Subsequent to initial measurement investment property is measured at fair value. A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arise.

1.7. Revenue and income recognition

1.7.1. Revenue from exchange transactionsRevenue from exchange transactions for the year ended 31 March 2018 in terms of IAS 18Revenue is the gross inflow of economic benefits during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Revenue is measured at the fair value of the consideration that is received or is receivable, net of any trade discounts or rebates. Revenue is recognized when the amount of revenue can be measured reliably, it is probable that future economic benefits will flow to NAMFISA group and specific criteria have been met as described below.

Revenue from exchange transactions comprises registration and licence fees charged to financial institutions.

Registration and licence fees charged are raised in terms of the regulations published by the Government Gazette and are recognized when they become due.

Revenue from exchange transactions for the year ended 31 March 2019 in terms of IFRS 15Revenue comprises fees for registration applications and license renewals.

Revenue from registration and licence fees is recognised at the point in time when the Authority has a present right to receive payment of fees for registration applications and license renewals in terms of the relevant legislation.

Revenue is measured at the prescribed fee as per relevant legislation.

1.7.2. Income from non-exchange transactionsNon-exchange transactions are defined as transactions where the entity receives value from another entity without directly giving approximately equal value in exchange.

This income is recognized when the asset is recognized and if obligation arises from the receipt of the asset, the income is recognized to the extent that there is no further obligation. Income from non-exchange transactions comprises levies. All registered entities are required to pay annual levies to maintain their licences in terms of the NAMFISA Act 3 of 2001. Levies are raised in terms of the regulations published in the Government Gazette and are accounted for on an accrual basis.

Fines and penalties for late submissions of returns are recognized on an accrual basis. This Income from fines and penalties is credited to the Consolidated Profit or Loss Statement, but as this income is not considered to form part of the normal operating activities of NAMFISA, it is recorded under Other income.

1.7.3. Investment IncomeInvestment income comprise interest and dividend income received.

Interest income is accrued on an apportionment basis, with reference to the principal outstanding using the effective interest method.

Dividend income is recognised when NAMFISA’s right to

receive payment is established.

1.8. Interests in subsidiariesIn NAMFISA’s separate financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of:

• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the authority; plus

• any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

1.9. TaxationThe income tax expense or revenue for the year is the tax payable on the current period’s taxable income based on the applicable income tax rate for the jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the financial year. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of





1.9. Taxation (continued)an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current tax is recognised in profit and loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

1.10. Cash and cash equivalentsCash and cash equivalents comprise cash on hand, bank balances and demand deposits, and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

1.11. Retirement benefitsContributions to the NAMFISA provident fund are calculated so as to provide funding at a constant percentage of pensionable remuneration. Contributions are therefore charged to profit or loss as incurred.

1.12. Financial instruments for the year ended 31 March 2018 in terms of IAS 39

1.12.1. ClassificationThe Group classifies financial assets and financial liabilities into the following categories:

• Held-to-maturity investment• Loans and receivables• Available-for-sale financial assets

• Financial liabilities measured at amortised costClassification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

A financial asset classified as available-for-sale that would have met the definition of loans and receivables may be reclassified to loans and receivables if the entity has the intention and ability to hold the asset for the foreseeable future or until maturity.

1.12.2. Initial recognition and measurementFinancial instruments are recognised initially when the Authority becomes a party to the contractual provisions of the instruments.

The Authority classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

Regular way purchases of financial assets are accounted for at trade date.

1.12.3. Subsequent measurementFair values and the recognition methods of the different financial instruments are disclosed in the notes to the

annual financial statements. Fair value represents an approximation of the year end value, which may differ from the value that will be finally realised.

Held-to-Maturity Financial assetsHeld-to-maturity investments are financial assets with fixed determinable payments and fixed maturity that the Authority has the positive intent and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost using effective interest method less any impairment, with revenue recognised on an effective yield.

Investments are classified as financial assets in terms of IAS39: Financial Instruments – Recognition and Measurements. Investments are classified as held-to-maturity assets (HTM), financial assets at fair value through profit and loss (FVTPL) and available for sale (AFS). Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that NAMFISA has the intent and ability to hold to maturity. Such investments are measured at amortised cost using the effective interest rate method, less any impairment.

Available-for-Sale Financial assetsUnlisted shares and listed redeemable notes are investments held by the Authority that are traded in the active market are classified as being Available-for-Sale and are stated at fair value. Fair value is determined in the manner described in note 23.9. Gains and losses arising from changes in the fair value are recognised directly in profit and loss. Dividends on Available-for-Sale equity instruments are recognised in profit or loss when the Authority’s right to receive the dividends is established.

Fair-Value-through-Profit-and-Loss Financial assetsFinancial assets are classified as at Fair-Value-through-Profit-and-Loss where the financial asset is either held for trading or it is designated as at fair value through profit and loss.

A financial asset is classified as held for trading if:

• It has been acquired principally for the purpose of selling

in the near future; or• It is a derivative that is not designated and effective as a

hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit and loss upon initial recognition if:

• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at fair value through profit and loss.

Financial assets at fair value through profit and loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned in the financial asset. Fair value is determined in the manner described in note 23.9.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assetsFinancial assets, other than those at fair value through profit and loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.





1.12. Financial instruments for the year ended 31 March 2018 in terms of IAS 39 (continued)

1.12.3. Subsequent measurement (continued) For unlisted shares classified as Available for Sale, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment includes:

• Significant financial difficulty of the issuer or counterparty;• Default or delinquency in interest or principal payments;

or• It becoming probable that the borrower will enter

bankruptcy or financial re-organisation.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on an individual basis. Objective evidence of impairment for a portfolio of receivables could include the Authority’s past experience of collecting payments, and increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised in profit

or loss.With the exception of available for sale equity instruments, if in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available for sale equity securities, impairment losses previously recognised through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

Financial liabilities at fair value through profit and loss (FVTPL)Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. The Authority only has financial liabilities as held for trading under this category.

A financial liability is classified as held for trading if:

• it has been incurred principally for the purpose of repurchasing in the near future; or

• it is a derivative that is not designated and effective as a hedging instrument.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Trade and other payablesTrade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Bank overdrafts and other short-term borrowingsInterest-bearing bank overdrafts and other short-term

borrowings are recorded at the proceeds received, net of direct issue costs.

1.12.4. Offsetting financial instruments and related incomeFinancial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset and intention to settle either on a net basis or to realise the asset and settle the liability simultaneously.

1.12.5. De-recognitionThe Group derecognises a financial asset when:

• The contractual rights to the cash flows arising from the financial assets have expired or been forfeited by the Group; or

• It transfers the financial assets including substantially all the risks and rewards of ownership of the assets; or

• It transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership of the asset, but no longer retains control of the asset.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or has expired.

On de-recognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. In contrast, on de-recognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or has expired.

1.13. Financial Instruments for the year ended 31 March 2019 in terms of IFRS 9

1.13.1. Financial InstrumentsFinancial assets and financial liabilities are recognized in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Initial measurementFinancial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1.13.2. Financial assetsAll regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.

Classification of financial assetsDebt instruments that meet the following conditions are measured subsequently at amortized cost:

• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.





1.13. Financial Instruments for the year ended 31 March 2019 in terms of IFRS 9 (continued)

1.13.2. Financial assets(continued)Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:

• the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met (see (iii) below); and

• the Group may irrevocably designate a debt investment that meets the amortized cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

Amortized cost and effective interest methodThe effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period.

For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received

that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortized cost of the debt instrument on initial recognition.

The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.

Interest income is recognized using the effective interest method for debt instruments measured subsequently at amortized cost and at FVTOCI. For financial assets other than purchased or originated credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired, interest income is recognized by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognized by applying the effective interest rate to the gross carrying amount of the financial asset.

For purchased or originated credit-impaired financial assets, the Group recognises interest income by applying the credit-adjusted effective interest rate to the amortised cost of the financial asset from initial recognition. The calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently improves so

that the financial asset is no longer credit-impaired.

Interest income is recognised in profit or loss and is included in the "investment income" line item.

Equity instruments designated as at FVTOCIOn initial recognition, the Group may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

A financial asset is held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a recent actual pattern of short-term profit-taking; or

• it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss is not be reclassified to profit or loss on disposal of the equity investments, instead, it is transferred to retained earnings.

Dividends on these investments in equity instruments are recognised in profit or loss in accordance with IFRS 9, unless the dividends clearly represent a recovery of part of the cost of the investment.

Financial assets at FVTPLFinancial assets that do not meet the criteria for being measured at amortized cost or FVTOCI are measured at FVTPL. Specifically:

• Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition.

• Debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria and are classified as at FVTPL. In addition, debt instruments that meet either the amortized cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency (so called ‘accounting mismatch’) that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the investment income line item.

Foreign exchange gains and lossesThe carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. Specifically:

• for financial assets measured at amortized cost that are not part of a designated hedging relationship, exchange differences are recognized in profit or loss;

• for debt instruments measured at FVTOCI that are not part of a designated hedging relationship, exchange differences on the amortized cost of the debt instrument are recognized in profit or loss. Other exchange differences are recognized in other comprehensive income in the investments revaluation reserve;






1.13.2. Financial assets(continued)• for financial assets measured at FVTPL that are not

part of a designated hedging relationship, exchange differences are recognized in profit or loss; and

• for equity instruments measured at FVTOCI, exchange differences are recognized in other comprehensive income in the investments revaluation reserve.

See hedge accounting policy regarding the recognition of exchange differences where the foreign currency risk component of a financial asset is designated as a hedging instrument for a hedge of foreign currency risk.

Impairment of financial assetsThe Group recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Group recognises lifetime ECL for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

For all other financial instruments, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures

the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Significant increase in credit riskIn assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the future prospects of the industries in which the Group’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organizations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group’s core operations.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

• an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;

• significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time or the extent to which the fair value of a financial asset has been less than its amortized cost;

• existing or forecast adverse changes in business, financial or economic conditions that are expected to

cause a significant decrease in the debtor’s ability to meet its debt obligations;

• an actual or expected significant deterioration in the operating results of the debtor;

• significant increases in credit risk on other financial instruments of the same debtor;

• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

• The financial instrument has a low risk of default,• The debtor has a strong capacity to meet its contractual

cash flow obligations in the near term, and• Adverse changes in economic and business conditions

in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Group considers a financial asset to have low credit risk when the asset has external credit rating of ‘investment grade’ in accordance with the globally understood definition or if an external rating is not available, the asset has an internal rating of ‘performing’. Performing means that the counterparty has a strong financial position and there is no past due amounts.

For financial guarantee contracts, the date that the Group becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument

for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of a financial guarantee contracts, the Group considers the changes in the risk that the specified debtor will default on the contract.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

Definition of defaultThe Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable:

• when there is a breach of financial covenants by the debtor; or

• Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assetsA financial asset is credit-impaired when one or more events that have a detrimental impact on the estimatedfuture cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includesobservable data about the following events:

• significant financial difficulty of the issuer or the borrower;• a breach of contract, such as a default or past due event

(see (ii) above);






1.13.2. Financial assets(continued) • the lender(s) of the borrower, for economic or contractual

reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

• it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or

• the disappearance of an active market for that financial asset because of financial difficulties.

Write-off policyThe Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.

Measurement and recognition of expected credit lossesThe measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date; for financial guarantee contracts, the exposure includes the amount drawn down as at the reporting date, together with any additional amounts expected to be drawn down in the future by default date determined based on historical trend, the Group’s

understanding of the specific future financing needs of the debtors, and other relevant forward-looking information.

For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate. For a lease receivable, the cash flows used for determining the expected credit losses is consistent with the cash flows used in measuring the lease receivable in accordance with IAS 17 Leases.

For a financial guarantee contract, as the Group is required to make payments only in the event of a default by the debtor in accordance with the terms of the instrument that is guaranteed, the expected loss allowance is the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive from the holder, the debtor or any other party.

If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12-month ECL at the current reporting date, except for assets for which simplified approach was used.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset in the statement of financial position.

De-recognition of financial assetsThe Group de-recognizes a financial asset only when the contractual rights to the cash flows from the asset expire,

or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

On de-recognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. In addition, on de-recognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. In contrast, on de-recognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.

1.13.3. Financial Liabilities and equityClassification as debt or equityDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Compound instrumentsThe component parts of convertible loan notes issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently re-measured. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion option.

Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.






1.13.3. Financial Liabilities and equity (continued) All financial liabilities are measured subsequently at amortized cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for de-recognition or when the continuing involvement approach applies, and financial guarantee contracts issued by the Group, are measured in accordance with the specific accounting policies set out below.

Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL when the financial liability is

• contingent consideration of an acquirer in a business combination,

• held for trading or• it is designated as at FVTPL.

A financial liability is classified as held for trading if:

• it has been acquired principally for the purpose of repurchasing it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a

measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be designated as at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognized in profit or loss to the extent that they are not part of a designated hedging relationship. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in profit or loss.

However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value of liability is recognized in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are recognized in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained earnings upon de-recognition of the financial liability.

Gains or losses on financial guarantee contracts issued by the Group that are designated by the Group as at FVTPL are recognized in profit or loss.

Financial liabilities measured subsequently at amortized costFinancial liabilities that are not contingent consideration of an acquirer in a business combination, held-for-trading, or

designated as at FVTPL, are measured subsequently at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortized cost of a financial liability.

Financial guarantee contract liabilitiesA financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL and do not arise from a transfer of an asset, are measured subsequently at the higher of:

• the amount of the loss allowance determined in accordance with IFRS 9 (see financial assets above); and

• the amount recognized initially less, where appropriate, cumulative amortization recognized in accordance with the revenue recognition policies set out above.

Foreign exchange gains and lossesFor financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments. These foreign exchange gains and losses are recognized in profit or loss for financial liabilities that are not part of a designated hedging relationship. For those which are designated as a hedging instrument for a hedge of foreign currency risk foreign exchange gains and

losses are recognized in other comprehensive income and accumulated in a separate component of equity.

The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency andtranslated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss for financial liabilities that are not part of a designated hedging relationship.

De-recognition of financial liabilitiesThe Group de-recognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognized and the consideration paid and payable is recognized in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability.

It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability.

If the modification is not substantial, the difference between the carrying amount of the liability before the modification and the present value of the cash flows after modification, should be recognized in profit or losses.






1.13.4. Derivative financial instruments The Group may enter into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, options and interest rate swaps.

Derivatives are recognized initially at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. Derivatives are not offset in the financial statements unless the Group has both legal right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Embedded derivativesAn embedded derivative is a component of a hybrid contract that also includes a non-derivative host – with theeffect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.Derivatives embedded in hybrid contracts with a financial asset host within the scope of IFRS 9 are not separated. The entire hybrid contract is classified and subsequently measured as either amortized cost or fair value as appropriate.

Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risk and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

If the hybrid contract is a quoted financial liability, instead of separating the embedded derivative, the Group generally designates the whole hybrid contract at FVTPL. An embedded derivative is presented as a non-current asset or non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realized or settled within 12 months.

1.13.5. Hedge accountingThe Group may designate certain derivatives as hedging instruments in respect of foreign currency risk and interest rate risk in fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:

• there is an economic relationship between the hedged item and the hedging instrument;

• the effect of credit risk does not dominate the value changes that result from that economic relationship; and

• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item

that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.

If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.

The Group designates the full change in the fair value of a forward contract (i.e. including the forward elements) as the hedging instrument for all of its hedging relationships involving forward contracts.

The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the fair value of the aligned time value of the option are recognized in other comprehensive income and accumulated in the cost of hedging reserve. If the hedged item is transaction-related, the time value is reclassified to profit or loss when the hedged item affects profit or loss. If the hedged item is time-period related, then the amount accumulated in the cost of hedging reserve is reclassified to profit or loss on a rational basis – the Group applies straight-line amortization. Those reclassified amounts are recognized in profit or loss in the same line as the hedged item. If the hedged item is a non-financial item, then the amount accumulated in the cost of hedging reserve is removed directly from equity and included in the initial carrying amount of the recognized non-financial item. Furthermore, if the Group expects that some or all of the loss accumulated in cost of hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.

Fair value hedgesThe fair value change on qualifying hedging instruments is recognized in profit or loss except when the hedging instrument hedges an equity instrument designated at FVTOCI in which case it is recognized in other comprehensive income.

The carrying amount of a hedged item not already measured at fair value is adjusted for the fair value change attributable to the hedged risk with a corresponding entry in profit or loss. For debt instruments measured at FVTOCI, the carrying amount is not adjusted as it is already at fair value, but the hedging gain or loss is recognized in profit or loss instead of other comprehensive income. When the hedged item is an equity instrument designated at FVTOCI, the hedging gain or loss remains in other comprehensive income to match that of the hedging instrument.

Where hedging gains or losses are recognized in profit or loss, they are recognized in the same line as the hedged item.

The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized to profit or loss from that date.

Cash flow hedgesThe effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.

The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognized in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is






reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified immediately to profit or loss.

Hedges of net investments in foreign operationsHedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the foreign currency forward contracts relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the ‘other gains and losses’ line item.

Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operation.

1.14. Impairment of tangible and intangible assetsAt each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss if any.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.

An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at the revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.15. Post-retirement benefits

1.15.1. Medical benefitsThe Group provides for post-retirement medical benefits in the form of a medical aid scheme for eligible employees and pensioners. The cost of providing benefits is determined using the Projected Unit Credit Method prescribed by IAS19 Employee Benefits. The liability for the Group’s contribution to the scheme is in respect of current and future periods, provided for by means of a liability on the statement of financial position. The magnitude of the liability is based on an annual actuarial valuation. Actuarial gains and losses on the post-retirement medical benefits are accounted for in the year in which they arise.

The amount recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduces by the fair value of plan assets.

1.15.2. Severance payIn accordance with the Namibian Labour Act of 2007, severance benefits are payable to an employee, if:

• The employee is retrenched;• Dies while employed; or• Retires on reaching the age of 60.



The obligation for severance benefits to current employees is actuarially determined in respect of all its employees and is provided for in full. The cost of providing benefits is determined using the Projected Unit Credit Method, prescribed by IAS 19 Employee Benefits, with actuarial valuations being carried out at each reporting date.

Actuarial gains and losses on severance pay are accounted for in the year in which they arise. The magnitude of the liability is based on an annual actuarial valuation. The amount recognised in the statement of financial position represents the fair value of the severance pay obligation adjusted for unrecognised actuarial gains and losses.

1.16. ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event and it is probable that this will result in an outflow of economic benefits that can be reliably estimated.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

1.17. Leases

1.17.1. Operating leasesRentals payable under operating leases are charged to income on a straight-line basis over the relevant period.Any contingent rents are expensed in the period they are incurred.

1.18. Critical accounting estimates and judgements in applying accounting policiesIn the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements.

1.18.1. ContingenciesBy their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential quantum of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.

1.18.2. Recovery of deferred tax assetsJudgement is required to determine which arrangements are considered to be a tax on income as opposed to an operating cost. Judgement is also required to determine whether deferred tax assets are recognised in the statement of financial position. Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions) and judgement about the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted.

In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods. Refer note 6.



2. INCOMEAn analysis of the Authority’s income for the year is as follows:

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Revenue from exchange transactions (IAS 18) - 608 230 - 608 230

Revenue from contracts with customers (IFRS15) 497 700 - 497 700 -

Income from non-exchange transactions 252 607 569 142 618 994 252 607 569 142 618 994

Levies per Industry segment

Unit Trusts 24 819 901 15 480 794 24 819 901 15 480 794

Capital Markets 36 451 189 21 515 262 36 451 189 21 515 262

Short Term Insurance 71 547 488 42 665 012 71 547 488 42 665 012

Long Term Insurance 53 745 931 23 558 922 53 745 931 23 558 922

Pension Funds 14 515 631 5 122 922 14 515 631 5 122 922

Medical Aid Funds and Friendly Societies 6 643 738 1 951 171 6 643 738 1 951 171

Micro Lending 44 883 691 32 324 911 44 883 691 32 324 911

252 607 569 142 618 994 252 607 569 142 618 994

Interest received

-Bank deposits 3 689 669 1 982 937 3 689 669 1 982 937

3 689 669 1 982 937 3 689 669 1 982 937

Dividend received

-Unit trusts 2 249 388 1 708 165 2 249 388 1 708 165

5 939 057 3 691 102 5 939 057 3 691 102

3. INVESTMENT INCOME

4. OTHER INCOME

Interest on late payments 1 000 507 803 078 1 000 507 803 078

Rules amendments 9 825 4 110 9 825 4 110

Penalty fees 631 000 859 207 631 000 859 207

Other income 478 638 808 311 478 638 707 694

2 119 970 2 474 706 2 119 970 2 374 089

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Office rental expenses:

- Office equipment 563 830 646 297 563 830 646 297

- Parking 1 855 661 1 826 876 1 855 661 1 826 876

- Offices 13 739 488 14 290 453 13 739 488 14 290 453

16 158 979 16 763 626 16 158 979 16 763 626

Staff costs:

- Salaries and bonuses 91 109 700 87 222 227 91 109 700 87 222 227

- Housing and transport allowances 22 933 780 22 772 039 22 933 780 22 772 039

- Defined contribution pension plan 14 825 980 13 844 310 14 825 980 13 844 310

- Defined benefit medical aid plan 4 140 000 14 839 008 4 140 000 14 839 008

- Other medical aid costs 7 206 606 7 059 756 7 206 606 7 059 756

- Training and development 4 312 469 3 549 768 4 312 469 3 549 768

- Other staff costs 4 519 038 5 472 295 4 519 038 5 472 295

149 047 573 154 759 403 149 047 573 154 759 403

Other operating expenses which includes the following:

13 227 645 13 564 604 12 719 943 13 068 394

Audit fees

External auditor fees - audit 636 065 608 094 553 160 529 329

External auditor fees - other audit services - - - -

636 065 608 094 553 160 529 329

Profit on disposal of equipment & intangibles (11 357) (35 454) (11 357) (35 454)


5. SURPLUS/ (DEFECIT) FOR THE YEAR BEFORE TAXATIONSurplus/ (Defecit) for the year is derived after taking into account the following items:



5. SURPLUS/ (DEFECIT) FOR THE YEAR BEFORE TAXATION (CONTINUED)Surplus/ (Defecit) for the year is derived after taking into account the following items:

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Board member’s emoluments – for services as Board members:

Gersom Katjimune - Chairperson 180 267 145 203 180 267 145 203

Jauque Jansen 141 911 102 985 141 911 102 985

Leonie Dunn 151 938 104 256 151 938 104 256

Hettie Garbers-Kirsten 135 082 119 242 135 082 119 242

Simeon Amunkete 135 928 101 956 135 928 101 956

745 126 573 642 745 126 573 642

Movement in allowance for expected credit losses (1 312 366) (480 878) (1 327 991) (480 878)

Information and communication technology 5 674 606 5 952 681 5 674 606 5 952 681

Stakeholder engagement 1 357 438 1 792 258 1 357 438 1 792 258

Regulatory seminars 3 529 723 2 025 220 3 529 723 2 025 220

Social responsibility 200 455 (991 360) 200 455 (991 360)

Subscriptions and membership fees 1 516 995 1 725 430 1 516 995 1 725 430

Namibian Normal taxation 2019 (N$) 2018 (N$)

Current tax – current year - -

Deferred tax – current year - -

- -

Income tax expense

Income tax - current year - -

Deferred income tax - current year - -

- -

Reconciliation of the tax expense

Loss before tax (512 878) (395 593)

Tax at applicable tax rate of 32percent (2018: 32percent) (164 121) (126 590)

Tax effect of adjustments on taxable income

Allowance for Expected Credit Losses 5 000 -

Deferred tax asset not recognized 159 121 126 590

- -


6. TAXATION

6.1. AuthorityThe Authority is exempted from income taxes in terms of section 16(1) (e) of the Income Tax Act, No 24 of 1981.

6.2. Group

The current tax expense is N$ Nil (2018: N$ Nil) and the Group does not have any current tax.

Deferred tax assets are not brought to account as the generation of sufficient future taxable income to utilise such asset is not probable.


CostLand and Buildings

Motor vehicles

Furniture and fittings

Office equipment

Computer equipment

Total

(N$) (N$) (N$) (N$) (N$) (N$)

Cost

At 1 April 2017 76 234 759 982 641 4 614 091 1 372 709 8 447 586 91 651 786

Additions - - 14 217 29 283 488 978 532 478

Net gain from fair value adjustment

5 400 000 - - - - 5 400 000

Disposals - - (29 409) (53 507) (712 710) (795 626)

At 31 March 2018 81 634 759 982 641 4 598 899 1 348 485 8 223 854 96 788 638

Additions - - 16 815 50 279 560 306 627 400

Disposals - - (1 090) (109 973) (100 826) (211 889)

At 31 March 2019 81 634 759 982 641 4 614 624 1 288 791 8 683 334 97 204 149

Accumulated depreciation

At 1 April 2017 - 846 856 2 277 655 1 112 267 5 206 034 9 442 812

Depreciation for the year

- 33 946 322 953 67 212 1 359 203 1 783 314

Disposals - - (16 605) (52 362) (706 289) (775 256)

At 31 March 2018 - 880 802 2 584 003 1 127 117 5 858 948 10 450 870

Depreciation for the year

- 33 946 390 981 117 975 1 282 336 1 825 238

Disposals - - (599) (106 798) (95 999) (203 394)

At 31 March 2019 - 914 748 2 974 385 1 138 294 (95 999) 12 072 713

Carrying amount

At 31 March 2018 81 634 759 101 839 2 014 896 221 368 2 364 906 86 337 768

At 31 March 2019 81 634 759 67 893 1 640 239 150 497 1 638 049 85 131 437


7. PROPERTY, PLANT AND EQUIPMENT

7.1. Group

Cost Motor vehicles

Furniture and fittings

Office equipment

Computer equipment Total

(N$) (N$) (N$) (N$) (N$)

Cost

At 1 April 2017 982 641 4 614 091 1 372 709 8 447 586 15 417 027

Additions - 14 217 29 283 488 976 532 478

Disposals - (29 409) (53 507) (712 710) (795 626)

At 31 March 2018 982 641 4 598 899 1 348 485 8 223 854 15 153 879

Additions - 16 815 50 279 560 306 627 400

Disposals - (1 090) (109 973) (100 826) (211 889)

At 31 March 2019 982 641 4 614 624 1 288 791 8 683 334 15 569 390

Accumulated depreciation

At 1 April 2017 846 856 2 277 655 1 112 267 5 206 034 9 442 812

Depreciation for the year 33 946 322 953 67 212 1 359 203 1 783 314

Disposals - (16 605) (52 362) (706 289) (775 256)

At 31 March 2018 880 802 2 584 003 1 127 117 5 858 948 10 450 870

Depreciation for the year 33 946 390 981 117 975 1 282 336 1 825 238

Disposals - (599) (106 798) (95 999) (203 394)

At 31 March 2019 914 748 2 974 385 1 138 294 7 045 285 12 072 713

Carrying amount

At 31 March 2018 101 839 2 014 896 221 368 2 364 906 4 703 009

At 31 March 2019 67 893 1 640 239 150 497 1 638 049 3 496 678

The Group reviewed the useful lives of all items used for the purposes of depreciation calculations during the period. The impact of the review is reflected in note 25. The carrying value of equipment is assessed on an annual basis.

During the 2015 financial year the Authority acquired 100 percent of the shareholding in the property owning company, Metropol (Pty) Ltd. At the acquisition date Land and Buildings was valued by two independent professionally qualified valuators who hold recognised relevant professional qualifications and have experience in the locations and segments


7. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

7.2. Authority


7. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

7.2. Authority (continued)of the property valued. The valuators, Pierewiet Wilders Valuations and FA Frank-Schultz Property Valuer/Town Planner, valued the Land and Buildings at N$39 295 000 and N$45 700 000 respectively. NAMFISA and theseller reached agreement that N$42 000 000 represented the fair market value of the Land and Buildings.

During the period ended 31 March 2016, Land and Buildings consisted of shops erected on Erf 1503, Independence Avenue, Windhoek.

Old buildings previously standing on the property have

been demolished during previous periods in line with the Authority’s project plan to construct its office building on the property.

Additions to land and buildings is work in progress relating mainly to architect’s, engineers’, project manager’s and quantity surveyor’s fees in connection construction of the new building for NAMFISA. Demolition costs of the old building is also included in this balance.

As at 31 March 2019 the property's fair value equates to the highest and best use of approximately N$47 400 000 (2018: N$47 400 000). An independent professional valuator on a triennial basis revalues Land and buildings with the next valuation being due during the 2021 financial year.



GROUP & AUTHORITY (N$)

Computer Software Cost

At 1 April 2017 7 718 072

Additions 732 659

Disposals (175 123)

At 31 March 2018 8 275 608

Additions -

Disposals -

At 31 March 2019 8 275 608

Amortisation

At 1 April 2017 4 346 434

Charge for the year 1 024 517

Eliminated on disposal (175 122)

At 31 March 2018 5 195 829

Charge for the year 1 219 546

Eliminated on disposal -

At 31 March 2019 6 415 375

Carrying amount

At 31 March 2018 3 079 779

At 31 March 2019 1 860 233

8. INTANGIBLE ASSETS

The Group annually assesses intangible assets for impairment. The recoverable amount of the assets is determined as the greater of market value less costs to sell or value in use. The key assumptions for the market value are those regarding current prices of computer

software, obsolescence, demand for second hand assets and general availability of these particular assets. The assessment did not indicate a requirement for an adjustment to the carrying values used in the current or prior year.


9. INVESTMENT IN SUBSIDIARYDuring the 2015 financial year the Authority acquired 100 percent of the shareholding in Metropol (Pty) Ltd. As at 31 March 2019 the carrying value of this investment was N$42 000 000 (2018: N$42 000 000).

Metropol (Pty) Ltd is a property owning company incorporated in Namibia. Refer to note 7.2.

GROUP & AUTHORITY CURRENT

2019 (N$) 2018 (N$)

Available-for-sale investments carried at fair value through profit and loss

Unit trusts - Opening balance 14 105 591 18 397 426

- Re-classification (1 April 2018) (14 105 591) -

- Invested - 10 000 000

- Withdrawal - (16 000 300)

- Dividends received - 1 708 465

- Fair value - 14 105 591

Investments carried at fair value through profit and loss (FVTPL)

Unit trusts - Opening balance - -

- Re-classification (1 April 2018) 14 105 591 -

- Invested 42 985 836 -

- Withdrawal (985 836) -

- Dividends received 2 249 388 -

- Fair value 58 354 979 -

Unit trusts are classified as current financial assets as it is the intention of the Authority to utilise the funds within a period not extending more than 1 year. The directors consider that the carrying amount of these financial assets approximate their fair value.

10. OTHER FINANCIAL ASSETS

PERCENTAGE HELD AUTHORITY

2019 (%) 2018 (%) 2019 (N$) 2018 (N$)

32 970 ordinary shares of N$2 each 100% 100% 42 000 000 42 000 000

Loss: N$512 878 (2018 Profit: N$5 004 407)

Total shares at cost 42 000 000 42 000 000



GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Gross levies receivable 35 419 867 41 359 170 35 419 867 41 359 170

Provision for doubtful debts - (20 576 229) - (20 576 229)

Allowance for expected credit losses (17 596 117) - (17 596 117) -

Net levies receivable 17 823 750 20 782 941 17 823 750 20 782 941

Prepaid expenses and accrued income 5 907 109 2 620 714 5 907 109 2 620 714

Staff advances – study loans 778 987 800 895 778 987 800 895

Debtors in subsidiary – VAT receivable 38 151 1 266 - -

– other - 40 625 - -

24 547 997 24 246 441 24 509 846 24 204 550

GROUP AND AUTHORITY

Movement in allowance for doubtful debts

Capital Markets

Life Insurance

Short term

Insurance

MicroLenders

Pension Funds

Medical Aid

Funds

Carrying Amount

Balance at 1 April 2017 242 103 14 720 203 3 297 227 796 987 2 289 107 - 21 345 627

Impairment losses recognised 6 247 86 532 72 303 153 716 (963 346) 2 035 (642 513)

Amounts written off as uncollectable - - - (126 885) - - (126 885)

Balance at 31 March 2018 248 350 14 806 735 3 369 530 823 818 1 325 761 2 035 20 576 229

Movement in allowance for ECL

Impairment losses recognised 246 404 (822 662) (21 583) 51 585 (3 036) 6 762 (542 530)

Amounts written off as uncollectable (248 349) (275 193) (686 703) (210 808) (1 014 494) (2 035) (2 437 582)

Balance at 31 March 2019 246 405 13 708 880 2 661 244 664 595 308 231 6 762 17 596 117

The impairment of trade receivables has been disclosed under note 23.6.

11. ACCOUNTS RECEIVABLE


12. CASH AND CASH EQUIVALENTS

2019 (N$) 2018 (N$)

Prepaid levies 4 921 702 -

4 921 702 -

13. ACCOUNTS PAYABLE

14. DEFERRED INCOME

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Cash and bank balances 74 779 982 32 279 615 74 687 401 31 755 635

74 779 982 32 279 615 74 687 401 31 755 635

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Accrued staff costs 13 410 728 12 470 991 13 410 728 12 470 991

Payables and other accruals 3 384 975 2 522 529 3 348 806 2 522 528

Levy creditors 2 456 399 - 2 456 399 -

Audit fees 541 935 608 096 471 427 529 330

Staff benefits - Leave 8 285 399 7 893 683 8 285 399 7 893 683

28 079 436 23 495 299 27 972 759 23 416 532

The directors consider the carrying amount of trade and other payables to approximate its fair value.



15. OPERATING LEASE COMMITMENTSOperating leases relate to office facilities with a lease term of three to four years.

The fair value of the operating lease (assets)/liabilities is approximately equal to their carrying amount.

IFRS 16: Leases is effective for annual periods beginning on or after 1 January 2019. Had the Group early adopted IFRS 16, it would have recognised Finance Lease Liabilities and Right-of-Use Assets amounting to N$2

221 968 and N$4 811 057 respectively at 31 March 2019. Operating lease expenses would have decreased by N$12 256 436 whereas Depreciation of Right-of Use Assets and Finance Charges on Lease Liabilities would have amounted to N$10 421 527 and N$991 398 respectively.

2019 (N$) 2018 (N$)

Office buildings:

Within one year 3 377 806 11 849 273

In the second to fifth years - 2 931 827

3 377 806 14 781 100

Office equipment:

Within one year - 13 569

In the second to fifth years - -

- 13 569

3 377 806 14 794 669

(Assets)/ liabilities have been raised - non-cancellable operating leases:

Current (554 298) 440 118

Non-Current - 270 362

(554 298) 710 480


16. RETIREMENT BENEFIT PLANS

16.1. Defined contribution provident benefitsThe Authority established the NAMFISA Provident Fund on 1 April 2007. The Fund is a defined contribution fund for all qualifying employees. The total expense recognised in the statement of surplus or deficit and other

comprehensive income represents the contributions payable to the Fund at the rate of 16 percent of pensionable remuneration. Employees contribute to the Fund at a rate of 7 percent of pensionable remuneration. The fund was last valued as at 31 March 2018 and was found to be sound.

Post-retirement medical aid benefits NAMFISA provides post-retirement medical benefits to all qualifying employees who are entitled to the benefit in accordance with their employment agreements. An actuarial valuation has been performed at 31 March 2019 to determine the present value of the employer’s subsidy towards the post-employment medical scheme of current and future pensioners of NAMFISA. A provision for the

liability has been created which covers the total liability, i.e. the accumulated post-retirement medical benefits at present value. The present value of the obligation and the related current service cost and past service cost was measured using the projected unit credit method. For the period under review, the current service cost and interest is accounted for as reflected in the actuarial valuation report as at 31 March 2019.

16.2. Employee benefit obligations

2019 (N$) 2018 (N$)

The total value of the contributions to the pension fund during the year amounted to:

Employer contributions 14 825 980 13 844 310

Employee contributions 6 486 366 6 056 886

Total contributions for the period 21 312 346 19 901 196

2019 (N$) 2018 (N$)

Post-retirement medical aid benefits 28 844 149 30 664 149

Severance pay 10 822 000 9 644 000

39 666 149 40 308 149



Sensitivity Analysis:

The effect of 1 percent movement in the assumed health cost rate is as follows:

2019 (N$) 2018 (N$)

The amounts recognised in the statement of financial position are as follows:

Net liability at beginning of the year 30 664 149 19 294 149

Service cost - current 4 140 000 2 713 000

Service cost - past - 12 287 000

Interest cost 3 223 000 2 075 000

Actuarial gain (9 009 554) (5 544 008)

Subsidies paid (173 446) (160 992)

Net liability recognised in the statement of financial position 28 844 149 30 664 149

The amounts recognised in the statement of surplus or deficit comprehensive income are as follows:

Current service cost 4 140 000 2 713 000

Past service cost - 12 287 000

Subsidies paid (173 446) (160 992)

3 966 554 14 839 008

Interest on obligation 3 223 000 2 075 000

Actuarial gain recognised in the year (9 009 554) (5 544 008)

Total (1 820 000) 11 370 000

-1% Medical inflation

Valuation assumption

+1% Medical inflation

At 31 March 2019

-Effect on defined benefit obligation 23 249 000 28 844 000 36 198 000

-Effect on current service cost and Interest cost 5 407 000 6 883 000 8 856 000

At 31 March 2018


-Effect on current service cost and Interest cost 5 703 000 7 363 000 9 611 000

16. RETIREMENT BENEFIT PLANS (CONTINUED)

16.2. Employee benefit obligations (continued)


Key assumptions:

Discount rate 10.34% 9.75%

Medical inflation rates 8.40% 8.75%

Valuation date 31/03/2019 31/03/2018

Severance pay

In accordance with the Namibian Labour Act of 2007, NAMFISA has an obligation to provide for severance pay benefits to all staff members. An actuarial valuation has been performed at 31 March 2019 to determine the present value of the employer’s obligation in terms of severance benefits towards current employees of

NAMFISA. A provision for the liability has been created which covers the total liability, i.e. accrued severance pay obligation at fair value. The present value of the obligation and the related current service cost and past service cost was measured using the projected unit credit method. For the period under review, the current service cost and interest is accounted for as reflected in the actuarial valuation done at 31 March 2019.

Present value of obligation:

2019 28 844 000

2018 30 664 149

2017 19 294 149

2016 16 308 149

2019 (N$) 2018(N$)

The amounts recognised in the statement of financial position are as follows:

Net liability at beginning of the year 9 644 000 7 926 000

Current Service cost 1 771 000 1 710 000

Interest cost 956 000 1 183 000

Actuarial gain (1 489 520) (1 135 843)

Benefits paid (Valuation report rounded up) (59 480) (39 157)

Net liability recognised in the statement of financial position 10 822 000 9 644 000



Current service and interest cost in the analysis are based on the valuation assumption for the year following the valuation date.



Sensitivity Analyses: The effect of 1 percent movement in the assumed salary inflation rate is as follows:

The effect of 20 percent movement in the assumed employee mortality rate is as follows:

Current service and interest cost in the analysis are based on the valuation assumption for the year following the valuation date.

2019 (N$) 2018(N$)

The amounts recognised in the statement of surplus or deficit and other comprehensive income are as follows:

Current service cost 1 771 000 1 710 000

Interest on obligation 956 000 1 183 000

Actuarial loss recognised in the year (1 489 520) (1 135 843)

Benefits paid (59 480) (39 157)

Total 1 178 000 1 718 000

-1% Salary inflation


+1% Salary inflation

At 31 March 2019


At 31 March 2018


-20% Mortality Rate


+20% Mortality Rate

At 31 March 2019


At 31 March 2018


Key assumptions:

Discount rate 9.7% 9.10%

Salary inflation rate 7.39% 7.64%

Valuation date 31/03/2019 31/03/2018

Present value of obligation:

2019 10 822 000

2018 9 644 000

2017 6 083 000

2016 319 000




17. GENERAL RESERVEIn terms of the reserves policy, the Authority is required to hold sufficient reserves to fund unforeseen expenses, significant once-off expenditures and income shortfalls. The amount to be held in the general reserve is determined at the beginning of the Authority’s strategic cycle and represents the desired general reserve balance as at the end of the specific strategic cycle.

The Authority aims to hold a general reserve of N$ 20 million as at the end of its current 5 year strategic cycle which commenced on 1 April 2017. Supported by strong financial results during the financial year ending 31 March 2019 the Authority committed N$ 12 million to the general reserve during the current year.

18. CAPITAL COMMITMENTSAs at the end of the financial year, the Group had no contracted capital expenditures, which were not recognised in the financial statements.

19. RELATED PARTY TRANSACTIONS

19.1. Government of NamibiaNAMFISA regards the Ministry of Finance and other state owned enterprises falling under the same ministry as related parties as well as board members and key management who can exercise control and influence over the affairs of the Authority. During the year, the Authority did not enter into any material transactions with the Government of Namibia and/or any state owned enterprises.

19.2. SubsidiaryRefer to note 9 regarding the investment in subsidiary

19.3. Related party balances

The loan to the subsidiary is unsecured, interest free and repayable on demand. Management performed an assessment of the impairment of the loan and considered the effect thereof to be immaterial at 31 March 2019.

Loan to subsidiary 2019 (N$) 2018 (N$)

Metropol (Pty) Ltd 36 250 124 36 200 295



19. RELATED PARTY TRANSACTIONS (CONTINUED)

19.4. Compensation of board members and key management personnel

In July 2011, NAMFISA obtained exemption from certain provisions of the State Owned Enterprises Act 2 of 2006.

In August 2011 the Minister of Finance approved the remuneration of NAMFISA board members to be aligned at the upper quartile of the gazetted State Owned Enterprises remuneration framework.

19.5. Loans to key management personnelThe loans granted to key management constitutes study loans granted in terms of the Authority's study loan policy. The loans are repayable over a maximum period of 60 months. On successful completion of studies, the balance remaining is fully written off and 80percent of the amount repaid is reimbursed to the staff member.

Short Term benefits (N$)

Post Retirement benefits (N$)

Total(N$)

At 31 March 2019

Board member's fees 745 125 - 745 125

Other key management 22 633 713 2 080 629 24 714 342

23 378 838 2 080 629 25 459 467

At 31 March 2018

Board member's fees 573 642 - 573 642

Other key management 20 977 711 1 915 137 22 892 848

21 551 353 1 915 137 23 466 490

2019 (N$) 2018 (N$)

Opening balance 9 299 212 115

Loans granted - 91 383

Loans written off as per policy - (223 535)

Repayments (9 299) (70 664)

Closing balance - 9 299


20. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

20.1. Calculation of expected credit loss allowanceWhen measuring Expected Credit Losses, the Group uses reasonable and supportable forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements. Probability of default constitutes a key input in measuring Expected Credit Losses. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions. A total expected credit loss allowance of N$17 596 117 (2018: N$20 576 229) exists at the end of the current year. Refer to note 11.

20.2. Levy estimatesNAMFISA has included in income, an estimate of levies amounting to N$4 211 811 (2018: N$3 962 970). The estimates are as a result of late submission of returns by the institutions and the calculation was based on the previous monthly, quarterly or half-yearly returns submitted during the year. Refer to note 2.

20.3. Post-retirement benefitsPost-retirement medical benefits are provided to all qualifying employees who are entitled to the benefit in accordance with their employment agreements. Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, healthcare inflation cost and rates or increase in compensation costs. Provisions were raised and management determined an estimate based on the information available. Additional disclosures of these estimates are included in note 16 – Employee benefit obligations.



21. RECONCILIATION OF DEFICIT TO CASH GENERATED BY OPERATIONS

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Surplus / (deficit) for the year before taxation 65 262 521 (52 335 935) 65 775 398 (51 940 342)

Adjusted for:

Depreciation and amortization 3 044 784 2 807 831 3 044 784 2 807 831

Interest received (3 689 669) (1 982 937) (3 689 669) (1 982 937)

Profit on disposal of equipment and intangibles (11 357) (35 454) (11 357) (35 454)

(Decrease)/ increase in bad debts impairment net of write off

(526 906) (642 514) (542 531) (642 514)

Increase in employee benefit obligations 9 857 072 19 767 851 9 857 072 19 767 851

Dividends received (2 249 388) (1 708 165) (2 249 388) (1 708 165)

Operating surplus / (deficit) before working capital changes 71 687 057 (34 129 323) 72 184 309 (33 733 730)

Working capital changes 9 731 190 30 067 750 9 715 166 28 316 655

Decrease in accounts receivable 225 351 33 273 939 237 236 28 095 013

Increase / (decrease) in accounts payable 4 584 136 (3 187 169) 4 556 227 240 662

Decrease / (increase) in deferred income 4 921 703 (19 020) 4 921 703 (19 020)

Cash generated / (utilized) by operations 81 418 247 (4 061 573) 81 899 475 (5 417 075)

22. CREDIT FACILITIESThe Authority maintains current accounts at First National Bank of Namibia Ltd and Standard Bank of Namibia Ltd as well as credit card and fleet management facilities at Standard Bank of Namibia Ltd.

2019 (N$) 2018 (N$)

The following is a summary of facilities maintained: 10 000 10 000

Fleet management 200 000 200 000

Credit cards 210 000 210 000


23. FINANCIAL INSTRUMENTS

23.1. Categories of financial instruments

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Financial assets

Loans and receivables 24 547 997 24 246 441 24 509 846 24 204 550

Cash and cash equivalents 74 779 982 32 279 615 74 687 401 31 755 635

Available-for-sale financial assets - 14 105 591 - 14 105 591

Financial assets at FVTPL 58 354 979 - 58 354 979 -

Financial liabilities

Amortised cost 24 715 739 15 601 616 24 609 064 15 522 849

23.2. Market riskThe Authority’s exposure to market risk is principally with regard to interest rates on cash placed with banks and investment houses.

23.3. Significant accounting policiesDetails of the accounting policies and methods adopted (including the criteria for recognition, the basis of measurement, and the basis of recognition of income and expenses) for each class of financial asset and financial liability are disclosed in note 1.13

23.4. Capital risk managementThe Authority’s objective in managing its capital is to safeguard the Authority’s ability to continue as a going concern by ensuring a sufficient cushion against unexpected deficits. There is no statutory capital adequacy requirements imposed upon the Authority and capital comprises of accumulated income.

23.5. Interest rate risk managementAs part of the process of managing the Authority’s interest rate risk, interest rate characteristics of new investments and the refinancing of existing investments are positioned according to expected movements in interest rates.

The sensitivity analysis below has been determined based on the exposure to interest rates for both variable and fixed interest rate instruments at the reporting date. A 50 basis point increase or decrease is used to compute interest rate sensitivity and represents the Authority’s assessment of reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables held constant, the Authority’s income for the year ended 31 March 2019 would increase/ decrease by N$447 527 (2018: N$481 594). This is mainly attributable to the Authority’s exposure to interest rates on variable rate financial assets and financial assets held.



Maximum credit risk

2019 (N$) 2018 (N$)

Exposure per industry segment: 35 419 867 41 359 170

Capital Markets 4 420 238 1 992 921

Collective Investments (30 571) 116 207

Life Insurance 18 094 715 22 363 754

Short term insurance 12 006 408 14 127 102

Microlenders (432 380) (26 727)

Pension Funds 937 195 2 546 261

Medical Aid Funds and Friendly Societies 424 262 239 652

35 419 867 41 359 170

Age analysis:

Older than 180 days 17 101 491 19 208 276

60 to 180 days (2 767 562) (163 648)

Less than 60 days 21 085 938 22 314 542

35 419 867 41 359 170

Allowance for Expected Credit Losses (17 596 117) (20 576 229)

Net exposure 17 823 750 20 782 941

23. FINANCIAL INSTRUMENTS (CONTINUED)

23.6. Credit risk managementThe Authority is exposed to credit risk through its cash surpluses that it places with banks and investment houses as well as the defaulting of levy payments by the regulated industry players. The Authority only invests with banks and investment houses of high quality credit standing. Exposure to banks and investment houses are monitored on a regular basis and surplus funds are spread across approved financial institutions in accordance with the Investment Policy which limits the exposure to 25

percent for any given institution. Levy receivables are spread across industry segments. The Authority does not have any significant credit risk exposure to any single counterparty. Concentration of credit risk did not exceed 5 percent of gross monetary assets at any time during the year. Exposure to credit risk related to levy receivables is mitigated by fully providing for impaired receivables.

The table below shows the maximum exposure to credit risk relating to receivables, before and after taking allowance for doubtful debts into account:

At year-end the Authority did not consider there to be any significant concentration of credit risk which has not been adequately provided for.



23.6. Credit risk management (Continued)

Impairment of financial assetsThe group applies the expected credit loss model on the following financial assets:

Cash and cash equivalentsThe identified impairment loss was immaterial.

Intercompany loanImpairment loss on the intercompany loan was determined to be immaterial.

Trade receivablesThe group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

The expected loss rates are based on the payment profiles of trade receivables over a period of 24 months before 31 March 2019 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The group has identified the economic indicators in the Financial Stability Report by Bank of Namibia and NAMFISA to be the most relevant factors, and accordingly adjusts the historical loss rates based on those economic indicators.

The Group writes off receivables when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.

The following table details the risk profile of receivables based on the Group’s provision matrix and the loss allowance as at 31 March 2019.

Current 60 to 90 days > 120 days Total

Gross levies receivable excluding credit balances 18 918 687 141 890 18 815 689 37 876 266

Expected credit loss rate 1% 20% 93%

Expected credit losses - 2019 144 579 28 811 17 422 727 17 596 117

The Group has elected to use the cumulative catch-up transition method of IFRS 9 and therefore, the comparative information was not restated. The impact of the adoption of IFRS 9 on the previous accounting period amounted to N$594 182 reduction in allowance for credit losses and was not adjusted in opening retained income as it was assessed to be immaterial.



23.7. Liquidity risk managementThe Authority has minimized its liquidity risk by ensuring adequate cash balances and maintaining adequate reserves.

Summary of exposure to interest rate risk:

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Financial liabilities

Non-interest bearing - 1 to 3 months 3 820 233 3 051 860 3 820 233 3 051 860

- 3 months to 1 year 20 895 506 12 549 756 20 788 831 12 470 989

24 715 739 15 601 616 24 609 064 15 522 849

Institution Unit trusts (N$) Total (N$)

Bank Windhoek 28 847 463 28 847 463

Old Mutual 21 076 661 21 076 661

Simonis Storm Securities 8 430 855 8 430 855

Balance as at 31 March 2019: 58 354 979 58 354 979

Bank Windhoek 6 747 702 6 747 702

Old Mutual 6 151 782 6 151 782

Simonis Storm Securities 1 206 107 1 206 107

Balance as at 31 March 2018: 14 105 591 14 105 591


23.6. Credit risk management (continued)The table below indicates the exposure in other financial assets spread among banks and other investment houses:


23.8. Foreign currency risk managementAs required, the Group may undertake transactions denominated in foreign currencies and consequently exposures to exchange rate fluctuations arise. As at the balance sheet date, the Group had foreign currency denominated current financial liabilities amounting to GBP 2 290 (31 March 2018: USD 32 918)

23.9. Fair value measurements

23.9.1. ValuationIn terms of IFRS, the Group is required to measure certain assets and liabilities at fair value. The Group has established control frameworks and processes to independently validate its valuation techniques and inputs used to determine its fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date i.e. an exit price. Fair value is therefore a market based measurement and when measuring fair value the Group uses the assumptions that market participants would use when pricing an asset or liability under current market conditions, including assumptions about risk. When determining fair value it is presumed that the entity is a going concern and the fair value is therefore not an amount that represents a forced transaction, involuntary liquidation or a distressed sale.Fair value measurements are determined by the group on both a recurring and non-recurring basis.

GROUP AUTHORITY

2019 (N$) 2018 (N$) 2019 (N$) 2018 (N$)

Variable interest rate instruments:

Less than 1 month 74 779 982 32 279 615 74 687 401 31 755 635

74 779 982 32 279 615 74 687 401 31 755 635

Fixed interest rate instruments: - - - -

Weighted average return 6.64% 7.87% 6.64% 7.87%

Non-interest bearing instruments:

1 to 3 months 3 450 710 2 620 714 3 450 710 2 620 714

3 months to 1 year 21 097 287 21 625 727 21 059 136 21 583 836

24 547 997 24 246 441 24 509 846 24 204 550


23.7. Liquidity risk management (continued)

Financial assetsThe following table shows expected maturity for financial assets. The table has been drawn up based on the

undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where cashflow may occur in a different period.



Recurring fair value measurementsRecurring fair value measurements are those for assets and liabilities that IFRS requires or permits to be recognised at fair value and are recognised in the statement of financial position at reporting date. This includes financial assets, financial liabilities and non-financial assets that the Group measures at fair value at the end of each reporting period.

Financial instrumentsWhen determining the fair value of a financial instrument, where the financial instrument has a bid or ask price (for example in a dealer market), the Group uses the price within the bid-ask spread that is most representative of fair value in the circumstances. Although not a requirement, the group uses the bid price for financial assets or the ask/offer price for financial liabilities where this best represents fair value.

When determining the fair value of a financial liability or the Group own equity instruments the quoted price for the transfer of an identical or similar liability or own equity instrument is used. Where this is not available, and an identical item is held by another party as an asset, the fair value of the liability or own equity instrument is measured using the quoted price in an active market of the identical item, if that price is available, or using observable inputs (such as the quoted price in an inactive market for the identical item) or using another valuation technique.

Where the group has any financial liability with a demand feature the fair value is not less than the amount payable on demand, discounted from the first date that the amount could be required to be paid where the time value of money is significant.

Non-financial assetsWhen determining the fair value of a non-financial asset, a market participant's ability to generate economic benefits by using the assets in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use, is taken into account. This includes the use of the asset that is

physically possible, legally permissible and financially feasible.

Non-recurring fair value measurementsNon-recurring fair value measurements are those triggered by particular circumstances and include the classification of assets and liabilities as non-current assets or disposal groups held for sale under IFRS 5 where fair value less costs to sell is the recoverable amount, IFRS 3 business combinations where assets and liabilities are measured at fair value at acquisition date, and IAS 36 impairments where fair value less costs to sell is the recoverable amount. These fair value measurements are determined on a case by case basis as they occur.

Other fair value measurementsOther fair value measurements include assets and liabilities not measured at fair value but for which fair value disclosures are required under another IFRS e.g. financial instruments at amortised cost. The fair value for these items is determined by using observable quoted market prices where these are available or in accordance with generally acceptable pricing models such as a discounted cash flow analysis. For all other financial instruments at amortised cost the carrying value is equal to or a reasonable approximation of the fair value.

23.9.2. Fair value hierarchy and measurementsThe Group classifies assets and liabilities measured at fair value using a fair value hierarchy that reflects whether observable or unobservable inputs are used in determining the fair value of the item. If this information is not available, fair value is measured using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs. The valuation techniques employed by the Group include, inter alia, quoted prices for similar assets or liabilities in an active market, quoted prices for the same asset or liability in an inactive market, adjusted prices from recent arm's length transactions, option-pricing models, and discounted cash flow techniques.



23.9. Fair value measurements (continued)

23.9.2. Fair value hierarchy and measurements (continued)

Level 1Fair value is determined using unadjusted quoted prices in active markets for identical assets or liabilities where this is readily available and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis.

Level 2Fair value is determined using inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly such as quoted prices for similar items in an active market or for an identical item in an inactive market, or valuation models using observable inputs or inputs derived from observable market data.

Level 3Fair value is determined using a valuation technique and significant inputs that are not based on observable market data (i.e. unobservable inputs) such as an entity's own assumptions about what market participants would assume in pricing assets and liabilities.

During the year there were no changes in the valuation techniques used by the Group or changes in the Level 1- 2 classifications.

24. CONTINGENT LIABILITY

24.1 Litigation casesAs is public record, NAMFISA is a co-defendant in a case brought against the Authority by Alwyn Petrus van Straten N.O. and others on 12 March 2012 claiming a total amount of N$105 million. Following the successful appeal by the plaintiffs in the Supreme Court against the judgment of the High Court, which upheld the exceptions

filed by NAMFISA, the matter was referred back to the High Court to continue through the normal process.

The latest status hearing was held on 18 January 2019 where the plaintiffs were instructed to file their outstanding witness statements on or before 29 March 2019. NAMFISA filed its witness statements on 10 June 2019 with the expert’s witnesses filing a joint report by 21 June 2019.

A joint pre-trial report shall be filed on or before 5 July 2019 with a pre-trial conference set down for 15 July 2019.

24.2 Post-retirement medical benefitsIn terms of NAMFISA’s staff rules it is a condition for staff to be members of a medical aid fund approved by NAMFISA in order to qualify for the Post-Retirement Medical Aid benefit. As at 31 March 2019, there are some employees who do qualify for Post-Retirement Medical Aid benefit but are not currently on a qualifying medical aid scheme. The contingent liability for these employees amount to N$5 219 000 at 31 March 2019 (2018: N$4 576 000).



Instrument Fair value hierarchy level

Valuation technique

Description of valuation technique and main assumptions

Observable inputs

Significant unobservable inputs of Level 3 items

Fixed Deposits Level 1 Market price The listed market price in an

active market is used. Market price Not applicable

Unit Trusts Level 2 Discounted cash flows

The future cash flows are discounted using a market related interest rate. Inputs to these models include information that is consistent with similar market quoted instruments, where available.

Market interest rates and curves Not applicable

The table below sets out the valuation techniques applied by the Group for recurring fair value measurements of assets and liabilities categorised as Level 1 and Level 2 in the fair value hierarchy:

25. CHANGE IN ACCOUNTING ESTIMATEDuring the year, the Authority revised the useful life of property, plant, equipment and intangible assets by increasing their useful lives. The revision of the useful life was treated as a change in accounting estimates and

therefore accounted for prospectively in the financial statements, i.e. the effect of the change was incorporated in the current financial year. The effect of the change in the accounting estimate in the current accounting financial year is reflected below:

FINANCIAL STATEMENT ITEM GROUP AND AUTHORITY (N$)

Decrease in depreciation and amortization 1 082 649

Increase in carrying amount of property, plant equipment 991 012

Increase in carrying amount of intangible assets 91 637


26. CHANGE IN ACCOUNTING POLICY DUE TO ADOPTION OF NEW IFRSIn the current year, the Group has adopted IFRS 9: Financial Instruments and IFRS 15: Revenue from

Contracts with Customers. The table below summarises the impact of these changes on the financial statements at the date of initial application (1 April 2018).

The Group has elected to use the cumulative catch-up transition method of IFRS 9 and IFRS 15 and therefore, the comparative information were not restated.

The impact of the adoption of IFRS 9 and IFRS 15 is determined to be immaterial on the financial statements and therefore opening retained income was not adjusted.

31 March 2018(N$)

Impact (N$)

1 April 2018(N$)

FRS 9 Impact

Available-for sale financial assets 14 105 591 (14 105 591) -

Financial asset at FVTPL - 14 105 591 14 105 591

Cash and bank deposits 32 279 615 (3 228) 32 276 387

Loan to subsidiary 36 200 295 (3 620) 36 196 675

Provision for doubtful debts (20 576 229) 594 182 (19 820 047)

587 334

IFRS 15 Impact

Registration and license fees 608 230 - 608 230

587 334

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