NAMFISANAMIBIA FINANCIAL INSTITUTIONS SUPERVISORY AUTHORITY

2015ANNUAL REPORT

1 There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder. Ronald Reagan

2 3 NAMFISA’s ABOUT US NAMFISA Board 06 NAMFISA CEO’s 07 DRIVING Our Core Functions 08 Our Mission 08 Our Vision 08 Our Values 06 Our Leadership Creed 09

4 FORCE 5 Estelle Tjipuka Board Chairperson

Gersom Katjimune Vice Chairperson

Simeon Amunkete Malverene Theron Mr Bonifatius Konjore Board Member Board member Board member NAMFISA NAMFISA BOARD CEOs

6 7 OUR CORE OUR LEADERSHIP FUNCTION CREED The Namibia Financial Institutions Supervisory Authority (NAMFISA) exists to supervise financial institutions and financial services We are committed We are exemplary We care and to advise the Minister of Finance on matters relating to financial institutions and financial services in terms of the Namibia We take ownership of our mandate We set the leadership benchmark We care about the well-being of our Financial Institutions Supervisory Authority Act, 2001 (No. 3 of 2001). We have a sense of urgency to execute employees our strategy We are approachable and fair We care about the protection of Core Function 1: Core Function 2: Additional Function We take mutual accountability to We encourage innovation and financial services consumers Supervision Advice AML/CFT Supervision embed our vision and values creativity We care about the safety and soundness of the financial services To supervise the business of financial To advise the Minister of Finance on To supervise, monitor and enforce We are united We are decisive and firm sector institutions and financial services matters related to financial institutions compliance with the Financial We have as a shared vision being We are consistent in our decisions and financial services Intelligence Act, 2012 (No. 13 of 2012) in a respected regulator of financial We make timely decisions respect of all accountable and reporting institutions We execute decisions firmly institutions supervised by NAMFISA in We stand together terms of the NAMFISA Act. We support team decisions We are passionate and inspired We are driven to achieve our vision OUR MISSION OUR VISION OUR VALUES We defend what we stand for We celebrate our achievements NAMFISA’s mission is to effectively NAMFISA’s vision is to be a respected We value integrity regulate and supervise financial regulator of the financial sector that We are committed to teamwork institutions and to give sound advice fosters a stable and safe financial We drive performance excellence to the Minister of Finance. system contributing to Namibia’s We passionately serve economic development.

8 9 Hi Phillip,

Just wanted to say thanks for the copy of the Annual Report. CONGRATULATORY I went through it and just wanted to say that it is an excellent piece of work. Very impressive.

MESSAGES Kind regards, Heinrich Dear Mr Shiimi, On NAMFISA’s International Dear Mr Iitembu, Mr Heinrich Nashenda, Quality Trophy Award Former NAMFISA Board Member It is with contentment and humility that Trust your Easter weekend was a blessed 11 September 2014 – NAMFISA Annual the State Owned Enterprises Governance “I thank Namfisa for the stern efforts to one and that today started well. Report 2014 Council Secretariat acknowledges, with improve supervision and compliance in thanks, receipt of your letter…. the non-banking financial sector” I just would like to thank you for the time Hi Phillip and overtime spending in the preparation

We congratulate NAMFISA for the job Excerpt from the Budget Speech by the of our Licences to operate. I agree with Heinrich. well done, I have no doubt that more Minister of Finance We appreciate your hardworking and

greater things are lined up for NAMFISA, Delivered in Parliament on 31 March 2015 personal assistance received in this regard, It’s excellent piece of artwork. Well done if the pace of operation remains the same. thank you very much. Phillip and team.

I would like to take this opportunity to Kind regards. Greetings thank you and once again congratulations. Conraad Beukes Estelle Principal Officer Ms Estelle Tjipuka: Chairperson of the Mr Frans Tsheehama Millennium Insurance Brokers NAMFISA Board Permanent Secretary: 7 April 2015 11 September 2014 – NAMFISA Annual SOEG Council Secretariat Upon receipt of brokers’ licences Report 2014 07 April 2015 Dear Tate Phillip Dear Phillip:

I wanted to inform you that your As the end of NAMFISA’s financial year colleagues, Evangelina and Rachelle, approaches, I am writing to congratulate presented very well at the recently held you on the excellent job Erna Motinga Financial Inclusion Council. They made a has done in shepherding the first batch of very good impression on all of us including standards and regulations under the FIM the PM. Thanks a lot for making them Bill to the point they have reached, in the available and keep up the good work. very short time available. There are other countries that have taken years to achieve Iipumbu Shiimi what Erna and the RPS Group have Governor: Bank of Namibia managed to do in the last few months. 06 March 2015 This is particularly so because getting these documents right is a full time job, and Erna has had to deal with many other things in her capacity as General Manager of the RPS Group. I am very impressed, as are the three Canadian consultants. ACEO Assistant Chief Executive Officer NAMAF Namibia Association of Medical Aid Funds LIST OF AML Anti-Money Laundering NAMFISA Namibia Financial Institutions Supervisory CEO Chief Executive Officer Authority Best personal regards, Louise ABBREVIATIONS CFT Combating the Financing of Terrorism NSX Namibia Stock Exchange Louise S. Pelly, Q.C. FSA Financial Services Adjudicator RMC Risk Management Committee Barrister & Solicitor GDP Gross Domestic Product ICT of the Bars of Ontario & Quebec Information and Communications Technology 31 March 2015 – On completion of critical IT Information Technology Standards and Regulations 10 11 05 11 14 55 65 69 About Us List of Abbreviations Foreword by the NAMFISA Support Function Highlights Consumer education Regulatory reform update Board Chairperson 18 21 31 75 87 113 Review by the Governance Risk Management Supervisory developments Industry review Statistics Chief Executive Officer 34 37 45 131 171 Key Milestones Management Strategy and Performance Annual Financial Glossary Statements as at 31 March 2015

TABLE OF CONTENTS 12 13 FOREWORD BY THE NAMFISA BOARD CHAIRPERSON In 2014/15, NAMFISA continued on been executing its mandate effectively an immediate threat to stability in the In addition, we will further enhance NAMFISA is a public entity created In the same vein, we welcome back its growth trajectory by its on-going as regards its supervisory and consumer financial sector. our capacity and readiness in respect with a specific mandate guided by law. Hon. Calle Schlettwein following his implementation of a Three-year Rolling education functions. The surveys also of implementing the various laws Thus, our regulatory capacity will be appointment as Minister of Finance. Strategic Plan approved in 2013. Among showed that, overall, the Authority was Hence, our key strategic objectives for the envisaged, including drafting the enhanced and we will continue with the We also welcome Hon. Natangwe Ithete other things, the Strategic Plan, which at the forefront of attaining its vision 2015/16 financial year include regulatory regulations and standards relating to effectiveness drive implemented during following his appointment as Deputy supports our vision to become a respected of becoming a respected regulator. In reform, regulation and risk-based the Financial Institutions and Markets the previous financial year. Minister of Finance. We trust that we regulator, fosters the maintenance of particular, the resolution of complaints supervision, and greater operational Bill and the Microlending Bill. In this will continue our excellent working confidence in the financial system. and the introduction of measures to efficiency – as briefly outlined below: respect, both regulations and standards I am proud to mention that all the relationship with the Ministry as we address malpractice in the industry had are necessary to implement the latter aforementioned wisdom has been implement and advise on the key national The leadership of the NAMFISA Board seen consumers asserting their rights and 1. Regulatory reform: two pieces of draft legislation once they nurtured under the leadership of the strategic goals within our mandate. has been pivotal in this respect. The the industry reforming. The Board will continue to drive have been promulgated. Ministry of Finance. Accordingly, the Board premises its leadership on ethical the regulatory reform programme, entire Board of NAMFISA is eternally On my behalf, and on behalf of the Board, principles as well as a passion for We also conducted an assessment of the including rendering assistance to the 2. Regulation and risk-based supervision: thankful to our newly appointed Prime I would like to express my gratitude to the rendering an excellent service aimed at 2014/15 financial year’s performance and Ministries of Finance and Justice in Initiatives will be rolled out to ensure Minister, the Rt Hon. Saara Kuugongelwa- management and staff of NAMFISA for serving the best interest of all stakeholders are pleased with the results that reaffirm tabling in Parliament the Financial that inherent systemic risks are Amadhila, for the trust she bestowed on us their dedication to excellence and hard – particularly consumers of financial that the Authority should remain focused Institutions and Markets Bill, the managed across all regulated financial during her tenure as Minister of Finance, work throughout the reporting year. To services and policymakers. on the intended frontier. To this end we Financial Services Adjudicator Bill, the entities. We will also continue to and for the leadership and guidance she my fellow Board members, thank you have reviewed our Strategy, and will Microlending Bill and the NAMFISA develop a policy framework that fosters provided during her extremely successful for your supportive guidance and the As a Board, we are pleased to report continue focusing on defined key areas in Bill during the 2015/16 financial a culture of treating all consumers fairly. management of that portfolio. Her leadership you demonstrated throughout that our objective of improving the the 2015/16 financial year. year. These initiatives are aligned to passion to see NAMFISA succeed and the year under review as regards to the regulatory framework in order to enhance the implementation of the Namibian 3. Operational efficiency: attain its strategic goals was central to the pertinent matters in our focus areas. supervisory capacity and consumer The consolidated statistics for the Government’s Financial Sector The Board has focused on good results we see today. The Board as well as education continued to yield the desired industry are another indicator of positive Strategy, which aims at ensuring an governance and operational efficiency NAMFISA’s staff and management thank Estelle Tjipuka (Ms) positive results. This outcome was performance during the reporting period. effective regulatory regime exists whose as key strategic objectives. This focus her wholeheartedly for her support, and NAMFISA Board Chairperson confirmed by an independent survey of These depict that regulated entities are implementation in turn ensures the is premised on the understanding that we wish her well in her new role. the financial services industry, which financially stable. Moreover, no major maintenance of a stable financial sector. acknowledged that the Authority had risk factors were identified as posing

14 15 The Namibia Financial Institutions Supervisory Authority (NAMFISA) regulates a sector that is significant, both in terms of assets NAMFISA has achieved outstanding international recognition not only for the quality of the reporting of its and number of financial institutions and intermediaries. As at 31 December 2014, the Authority supervised the following entities: activities, but also for its supervision and regulation of financial institutions and intermediaries. Testifying to these accolades are its PMR Africa awards for “Best Annual Report for 2013”, “Best Annual Report for Regulated financial institution, by subsector Number of entities in the subsector 2014”, and “Demonstrating Exceptional Managerial and Corporate Governance Qualities 2014”, as well as the Long-term insurance companies (Intermediaries) 17 (2 636) Global Trade Leaders’ Club “International Quality Award”. Short-term insurance companies (Intermediaries) 13 (723) Medical aid funds (Active) 9 Pension funds (Active) 109 Friendly societies 2 Special purpose vehicles 6 Collective investment schemes 13 Investment managers 24 Unlisted investment managers 7 Microlenders 289 Stock exchanges 1 Stockbrokers (excluding sponsors) 4 TOTAL 3 853

As at 31 December 2014, the table below sets out the total value of assets of supervised financial institutions by subsector, including the size of assets relative to real gross domestic product (GDP):

Regulated financial institution, by subsector Total value of assets for regulated financial institutions as at 31 December 2014 N$ millions % of GDP Long-term insurance companies 40 224 40.12 Short-term Insurance companies 4 749 4.74 Medical aid funds 1 162 1.16 Pension funds 119 569 119.27 Collective investment schemes 42 083 41.98 Investment managers 136 186 135.85 Microlenders 3 382 3.37 Financial market Local market capitalisation 22 322 22.27 Local debt issued 21 806 21.75 TOTAL 391 483 CONSTANT GDP 100 249

Note: The total value of assets in the financial sector supervised by the Authority amounts to N$192 579 million. The figure of N$391 483 million above includes significant overlap where, for instance, investment managers manage assets of pension funds.

16 17 REVIEW BY THE CHIEF EXECUTIVE OFFICER I am pleased to present this review of feedback we have received from consumers a different complexion to more effectively NAMFISA’s progress in the 2014/15 financial of financial services and products is address the needs of present-day Namibia. year, with a consistent quest for supervisory positive. This has encouraged us to In addition, these modern laws will also excellence and operational efficiency. continue the campaign, focusing this time give impetus to the implementation of the on malpractices in the investment and Namibia Financial Sector Strategy – the We have seen another year of strong provident institutions. national long-term development strategy improvement in our regulatory and for the financial sector. supervisory work, in support of our Three- Supervision of regulated entities was year Rolling Strategy, which has now strengthened through the issuance of NAMFISA operates in a risk-prone We also nurture strong relationships with Whilst we made considerable progress in support, hard work and selfless dedication. completed its second year. directives to correct anomalies in the environment. To this end, an Enterprise Risk international regulatory and supervisory the 2014/15 reporting period, there is still Without them, attaining our strategic market, and by continuing the gradual Management Framework was developed to organisations in the industry that share much to be done to deliver on NAMFISA’s objectives would remain but a pipe dream. It was fascinating to have experienced transition from rule-based to risk-based mitigate against any identified risks that common values, and work together with mandate and strategic objectives. We are growth at the pace that the Authority has supervision. The Authority continued may adversely affect the Authority, the them to share experiences. In this way confident that we will continue on our We echo the sentiment of the Board recorded in various respects, denoting its zero tolerance for non-compliance, financial services sector and, consequently, we have been able to learn from, adopt growth trajectory during 2015/16, enabling Chairperson in thanking the Rt Hon. Prime nothing else but progress. It is, therefore, supported by the implementation of the national economy. and adapt good practices from elsewhere us to get a step closer to full transformation. Minister wholeheartedly for her support, an honour and pleasure to report, on behalf its Ladder of Supervisory Intervention. while avoiding potential challenges and the and we wish her well in her new role. We of the management team and staff, on the Operational efficiency was enhanced The Authority continually strives to develop mistakes others have made. As we pursue our mission and vision in also welcome back Hon. Calle Schlettwein, activities of the previous year. through the improved utilisation of the a strong ethical base and organisational the coming financial year, we are confident following his appointment as Minister of Electronic Regulatory System (ERS). culture which is founded on employees Regulatory and supervisory activities that the strategic direction we have Finance, as well as Hon. Natangwe Ithete Consumers of financial services remain conducting themselves with integrity, require sufficient funding – particularly chosen is sound and that we will make following his appointment as Deputy one of our highest priorities. Throughout One of NAMFISA’s main strategic pre- being responsive and respectful, taking when such activities are expected to further progress in terms of accelerating Minister of Finance. We trust that we will the year, and right across the Authority, occupations is the current drafting of pride in our achievements, being open and increase in the next year. In this regard, transformation, effective regulation and continue our excellent working relationship we worked to find ways to build advocacy regulations and standards to support the friendly, encouraging diversity, building NAMFISA will review available options supervision in the financial industry. with the Ministry as we implement and by improving how we educate and transfer implementation of the Financial Institutions relationships based on trust, and fostering to provide an adequate funding structure, advise on the key national strategic goals knowledge to consumers and, by so doing, and Markets Bill, Microlending Bill, great teams. including the review of the current Facing the future, we remain committed to within our mandate. have a positive impact on their lives. NAMFISA Bill and the Financial Services funding model. It is important to note improving the services that we provide to Adjudicator Bill, upon promulgation by Deliberate and focused opportunities that NAMFISA’s increased activity our stakeholders. We will also continue to On behalf of my colleagues, I also wish In this regard, the Authority, in addition Parliament. This explains the significant have also been created through external over the past five years and its focus strengthen our internal business processes to thank the former Minister of Finance, to other interventions, launched a “Know number of Regulations and Standards providers to equip and train staff on certain in carrying out its mandate has also to streamline and remove internal barriers Hon. Saara Kuugongelwa-Amadhila, and Your Rights” campaign against malpractices produced during the reporting year. agreed key performance areas. increased the costs it carries. However, that impede productivity, innovation and the NAMFISA Board for their direction in the insurance industry. This campaign levies have remained static. Indeed, collaboration with local and international and leadership. I look forward to continue follows a careful analysis of numerous This second year of the Three-year Rolling The staff complement of the Authority the level of NAMFISA’s operations has stakeholders. Furthermore, we intend to working with all our stakeholders to complaints against some regulated entities Strategy also saw the acceleration of the has grown considerably over the past two reached a point where its cost exceeds improve staff capacity through continuous building on the exciting growth foundation regarding the manner in which they treat process related to the drafting and ultimate financial years, exerting pressure on the its funding, which necessitates a review hiring and training of specialised and laid over the past years. their customers. promulgation of the Financial Institutions available office space. To mitigate this risk, we of its levy structures. This review will be skilled staff. and Markets Bill, the NAMFISA Bill and the have started the process of acquiring our own done in line with a Funding Model and Phillip N Shiimi The campaign was a resounding success Financial Services Adjudicator Bill, as well as premises. Construction work is scheduled to Reserves Policy to be formalised during I avail myself of this opportunity to express a Chief Executive Officer and resulted in positive reinforcement accompanying subordinate legislation. This start during the next financial year. the 2015/16 financial year. Stakeholders heart-felt word of gratitude to the NAMFISA of our consumer protection agenda. The is vital in giving the financial environment will be consulted in this process. Board, management and staff for their

18 19 The Authority, established in terms of section 10 of the Namibia Financial Institutions Supervisory Authority Act, 2001 (No. 3 of 2001), is governed by a Board appointed by the Minister of Finance in terms of the Act. The Act confers on the Board an overall responsibility for the management and control of the Authority’s affairs, the exercise of such powers as conferred, and the performance of such duties as imposed on the Authority by the NAMFISA Act or by any other relevant law, such as the State-owned Enterprises Governance Act, 2006 (No. 2 of 2006).

The Board, therefore, is the custodian of the Authority’s corporate governance. It has established committees and agreed with the CEO on GOVERNANCE the delegation of specific realms of authority, whilst reserving certain duties for itself.

The following section outlines the Board’s corporate governance activities for the year under review. It offers some detail on how the Board executed its fiduciary duties in pursuit of NAMFISA’s legal mandate and objectives, the principles of good corporate governance required by the NAMFISA Act, and internationally accepted best practices.

20 21 Ms Estelle Tjipuka Chairperson of the Board NAMFISA ASSESSING

Ms Malverene Theron Chairperson of the Mr Bonifatius Konjore Legal and Compliance Committee; Member of Member of the Audit the Appointment and and Risk Committee BOARD PERFORMANCE Remuneration Committee The Board conducted an appraisal of the said period, and reviewed and approved performance assessment system, the Authority’s performance during the year the CEO’s performance contract for quality of Board Committee reports, and under review. Accordingly, the Board 2015/16. The Board also dealt with other certain NAMFISA policies. reviewed the CEO’s performance relative pertinent matters, including considering to NAMFISA’s Balanced Scorecard for the the effectiveness of the organisation’s

Mr Gersom Katjimune Deputy Chairperson of the Mr Simeon Amunkete Board: Chairperson of the Member of the Appointment Audit and Risk Committee; and Remuneration Member of the Legal and Committee Compliance Committee MANAGEMENT AND CONTROL DETERMINING The Authority is governed by a Board control of the Authority’s affairs. the State-owned Enterprises Governance appointed by the Minister of Finance Act and best governance practices as as provided in the NAMFISA Act. The The Board upholds good corporate enshrined in the Corporate Governance Act also confers on the Board overall governance principles as required not Code for Namibia (NamCode). STRATEGIC DIRECTION responsibility for the management and only by the NAMFISA Act, but also by The Authority recognises that good in question indicates that the Board • The Board provided regular reports corporate governance is one of the continued achieving the following to the Minister of Finance and other Diagram 2: Governance framework cornerstones enabling it to regulate strategic objectives, among others: stakeholders; and Ministry of and supervise financial institutions • The Board ensured that the Authority • As illustrated in the Annual Financial Board Finance governance and intermediaries, in order to foster executed its mandate of exercising Statements for the period under review, and other structure consumer protection and financial supervision for regulated entities and the level of reserves for the Authority stakeholders stability within the financial sector. The individuals, and provided supervisory remains financially sound. Authority believes that maintaining oversight as per the Financial good governance practices enhances its Intelligence Act, 2012 (No. 13 of 2012). In addition to the strategic objectives, the reputation and enables it to carry out The Authority also provided advice to Board agreed certain strategic initiatives Board Board its legal mandate as conferred by the the Minister on matters as per their for the coming financial year, premised Secretary NAMFISA Act. mandate prescribed in the NAMFISA on the assumption that the regulatory Act; and governance environment would To this end, the Board is responsible • The Board implemented the second change with the promulgation of the for steering a strategic direction for phase of its Three-year Rolling Strategy Financial Institutions and Markets Bill,

controlling the Authority by ensuring devised in the 2013/14 financial year, the Microlending Bill, the NAMFISA Bill Board that decisions and actions taken are based making some minor adjustments and the Financial Services Adjudicator Committees on values underpinning good corporate identified after its annual review. To this Bill currently under various stages of governance. end, a risk appetite was agreed to ensure review. Since the role of the Board would that the risks and opportunities that the also change as per the duties set out in The Board agreed to certain strategic Strategy presents are managed; these legislative instruments, proposals objectives for the year under review, • NAMFISA drafted a number of bills, on a revision of the Funding Model would Audit and Risk Legal and Appointment and Compliance Remuneration aligned with the Three-year Rolling amended regulations and circulars, also be made to the Minister and other Strategy. In this respect, an assessment which were presented for adoption by stakeholders. of performance during the period relevant organs of the State;

22 23 Diagram 2.1: Management Governance Structure

Management Executive governance Committee structure COMPOSITION

Information Risk Licensing and Procurement OF THE BOARD Technology Committee Litigation Committee Steering (incl. Ethics) Committee As detailed below, the Board has five Non- Mr Gersom Katjimune is the current Mr Bonifatius Konjore was appointed Committee executive Members with full voting rights. Deputy Chairperson of the Board, as a Board member in November 2013, The Board exercises its oversight function Chairperson of the Audit and Risk and serves on the Board’s Audit and through three principal Committees, Committee, and a member of the Legal Risk Committee. He is a professional The governance framework is premised on the following key principles: namely: and Compliance Committee. All of these in information and communications • Performance management; • Audit and Risk; appointments took effect in November technology (ICT) and data management, • Ethical and values-based leadership; • Appointment and Remuneration; and 2013. Mr Katjimune has extensive and is currently employed as an ICT • Embedded risk management; and • Legal and Compliance. knowledge in the insurance industry, Manager at the National Petroleum • Effective stakeholder engagement. which he gained serving in several Corporation of Namibia (Namcor). Mr NAMFISA’s Chief Executive Officer positions within the Mutual and Federal Konjore has extensive experience in Governance activities in respect of each of these principles are outlined below. (CEO) attends Board meetings, but has Group. There, he progressed through ICT, project management and business no voting rights. the ranks to the position of Managing systems. Mr Konjore holds a Bachelor of Performance management in the Code of Ethics for NAMFISA and regards specific programmes, the Board Director before he retired in 2011. Mr Science degree. embedded in the values rolled out across the continued to roll out its Enterprise The composition of the Board has Katjimune holds a Master’s degree in In terms of the culture of performance organisation during the period under review, Risk Management and Regulatory Risk remained the same since 3 November Economics and Social Studies. Mr Simeon Amunkete is the current management established by the Board, it namely: Integrity, Teamwork, Performance Management Programmes (for more on 2013 and constituted the following Chairperson of the Appointment and has entered into appropriate performance Excellence, and Passion for Service. these programmes, see page 31). Members during the year under review: Ms Malverene Theron is the current Remuneration Committee. He became a agreements with the Minister of Finance Chairperson of the Legal and Board member with effect from November and with the NAMFISA CEO. These Among other things, in 2015/16 the Effective stakeholder engagement Ms Estelle Tjipuka is the current Board Compliance Committee and a member 2013. He is a human resources professional agreements set out the expected key Board aims to enhance NAMFISA’s Chairperson. Ms Tjipuka was first appointed of the Appointment and Remuneration with specialised training in industrial performance areas for the Board and CEO, Ethics Programme by introducing a Transparency and accountability form as a Board Member in November 2010. She Committee. She was first appointed psychology. He holds a Master’s Degree respectively. Under these agreements, the whistleblowing hotline, stepping up the cornerstones of the Board’s approved was reappointed as Board Chairperson in to the Board in November 2010, and in Project Management. Mr Amunkete is Minister of Finance assesses the Board’s training on ethics, and reviewing the Strategy for NAMFISA. In keeping with November 2013, and her term runs until was reappointed in 2013. Ms Theron employed as a Senior Manager in Human performance each year, and the Board Code of Ethics. This is to further embed these guidelines, the Authority adopted November 2016. She is a certified professional not only has extensive experience in Resources at NamPower. assesses the CEO’s. The Board recognises professional ethics and corporate values a Stakeholder Engagement Policy and in forensic investigation and anti-money procurement and transformation, she is NAMFISA’s key performance areas as well in the Authority, and to manage the risks Implementation Plan that defines key laundering as well as being a specialist also an admitted legal practitioner and as the risks and opportunities associated and opportunities associated with them. stakeholders and ensures all NAMFISA in internal auditing. She has extensive currently the Procurement Manager at De with NAMFISA’s Strategy (for the CEO’s Divisions have identical focus on experience in auditing and investigation. Beers Marine Namibia. She has worked in report on strategy and performance, see Embedded risk management such engagement. The Authority also Ms Tjipuka was previously employed by various leadership positions with Rössing page 45). emphasises the need to hold regular PricewaterhouseCoopers as their Head of Uranium (Pty) Ltd and Decti Namibia The Board adopted a new Enterprise industry meetings, consultations and/ Forensic Services, and has served in several (Pty) Ltd. She holds a Bachelor of Laws Ethical and values-based leadership Risk Management Framework during or briefing sessions to keep stakeholders positions at the Bank of Namibia where she degree. the year under review. NAMFISA’s informed and seek their input on a wide gained vast knowledge on the supervision of The leadership that the Board provides is risk appetite was also defined in terms range of strategic matters. banks and other financial institutions. premised on the ethical foundation set out of its Three-year Rolling Strategy. As

24 25 of the Authority’s financial position and Internal Audit Plan. These developments and that challenges in this regard were performance, and that it complied with allowed the Committee to conclude that the being addressed. relevant regulatory requirements. internal auditing function had been executed effectively during the reporting period. Meetings and attendance ATTENDANCE OF Internal auditing The Committee held six meetings The Committee reported that the Authority Risk management during the year. Two of these were now has an independent, objective, skilled According to the reported findings, no special meetings to deliberate on the and experienced Manager of Risk and major events posed an imminent risk to above matters. Attendance at the various Internal Audit. As part of its oversight NAMFISA’s long-term sustainability. The meetings is given in Table 2. BOARD MEETINGS function, the Committee monitored the Committee was confident, therefore, that The Board held six meetings during the year under review. Table 1 sets out the Members’ attendance of the various Board and Board implementation of the approved Annual the risk management process was effective Committee meetings during this period. Table 2: Audit and Risk Committee meeting attendance (Yes/No) Table 1: Membership and attendance of Board and Board Committee meetings Date Mr G Katjimune Mr B Konjore Member Board Audit and Risk Appointment and Legal and Compliance (Chairperson) (6 meetings) Committee (6 meetings) Remuneration Committee (5 meetings) 18 June 2014 Yes Yes Committee (6 meetings) 18 July 2014 Yes Yes Mr Amunkete, S 6 of 6 n/a 6 of 6 (Chairperson) n/a 5 September 2014 Yes Yes Mr Katjimune, G 5 of 6 6 of 6 (Chairperson) 1 of 6 (As Alternate) 5 of 5 11 November 2014 Yes Yes Mr Konjore, B 6 of 6 6 of 6 n/a 1 of 5 (As Alternate) 2 March 2015 Yes Yes Ms Theron, M 5 of 6 n/a 5 of 6 5 of 5 (Chairperson) 31 March 2015 Yes Yes Ms Tjipuka, E 6 of 6 (Chairperson) n/a n/a n/a ATTENDANCE AND APPOINTMENT AND ACTIVITIES OF BOARD REMUNERATION COMMITTEE COMMITTEES During the year, the Appointment and Remuneration Committee consisted of Mr S Amunkete (Chairperson) and Ms M Theron (Member). The Board carried out its responsibilities and exercised the duties and powers conferred upon it through the three principal Committees. Members of senior management attended all meetings. Table 3: Appointment and Remuneration Committee meeting attendance (Yes/No) Audit and Risk Committee Date Mr S Amunkete Ms M Theron Mr G Katjimune (Chairperson) During the year, the Audit and Risk 2014/15 financial year: reviewed and • Progress reports on the debt collection Committee consisted of Mr G Katjimune recommended for Board approval; process in respect of long-outstanding 9 May 2014 Yes Yes No (Chairperson) and Mr B Konjore (Member). • Annual Internal Audit Plan, levies: reviewed for consideration and 6 June 2014 Yes Yes No Members of NAMFISA’s management team, 2014/15 financial year: reviewed and noting; and 18 July 2014 Yes No Yes (As Alternate) external auditors and internal auditors also recommended for Board approval; • Proposal to acquire land for the 11 November 2014 Yes Yes No attended the six meetings held during the • Risk Appetite Report: reviewed; NAMFISA property: reviewed and 14 November 2014 Yes Yes No reporting period. The Committee dealt with • Risk Management Reports, audit reviews recommended for Board approval. 2 March 2015 Yes Yes No the following issues during the year: and ad hoc internal audit investigations: • The NAMFISA Budget, 2014/15 reviewed for consideration; Annual Report financial year: reviewed and • Progress reports on the The Committee’s review of the Annual recommended for Board approval; implementation of ICT projects: Financial Statements enabled it to • Annual financial statements, reviewed for consideration and noting; confirm that it was a fair representation

26 27 APPOINTMENT AND REMUNERATION COMMITTEE CONTINUED

The Committee considered the following NAMFISA’s philosophy as regards Board fees issues during the year: remuneration provides for a mix of The remuneration of the Board is set in terms • Salary increases and performance variables and guaranteed pay packages. of State-owned Enterprises Governance POWERS RESERVED incentives for all staff, and job grading Its Remuneration Model is linked to the Council regulations. The Minister of Finance for new General Manager positions: Authority’s Performance Management may review Board fees each year, following reviewed and recommended for Board System, while bonus payments on a a review of the Board’s performance. The approval; and sliding scale are offered to above-average Board fee comprises a retainer fee and a AND DELEGATED • Adjustments to NAMFISA’s performers. sitting fee; the latter is only paid for each The Board has reserved the following termination of his/her contract; and the Authority. The Chairperson organisational structure: reviewed and meeting that a Board Member attends. powers for itself: • Remuneration of the CEO; and provides overall leadership, oversees the recommended for Board approval. • Authority to approve the NAMFISA • Institution of disciplinary procedures development of the Board’s Business Plan Table 4 sets out the NAMFISA Board fees. Budget and Strategy; against the CEO. and presides over Board meetings. Table 4: Board fees, 2014/15 • Approval of expenditure above N$10 million; As regards the Board’s delegated powers, The CEO, in this case the current Recipient and type of fee Amount per type of fee Total fee paid to Member • Approval of the Annual Report and certain matters are dealt with by Board incumbent Mr Phillip Shiimi, is Mr Simeon Amunkete Annual Financial Statements; Committees. Details of these matters have responsible for directing and leading the Retainer fee 62 613.00 • Approval of key policies, including been set out in these Committees’ terms Authority’s operations. The CEO’s duties Sitting fee 130 758.96 193 371.96 remuneration and investment; of reference. include ensuring operational efficiency, Mr Gersom Katjimune • Amendment of NAMFISA’s strategic planning, executing agreed Retainer fee 62 613.00 organisational structure, including the The Chairperson of the Board, currently strategic initiatives, and implementing Sitting fee 122 785.21 185 398.21 creation of new positions; Ms Estelle Tjipuka, is responsible for Board-approved policies and resolutions. Mr Bonifatius Konjore • Employment of the CEO and setting the ethical tone of the Board Retainer fee 62 613.00 Sitting fee 65 229.96 127 842.96 Ms Malverene Theron Retainer fee 62 613.00 Sitting fee 74 840.75 137 453.75 BOARD TRAINING AND Ms Estelle Tjipuka Retainer fee 76 649.04 Sitting fee 73 782.02 150 431.06 DEVELOPMENT Legal and Compliance Committee Suitable training is arranged for Board During the year, Board Members attended Members as part of the Authority’s training on governance, risk management, continuous education, training and integrated reporting and regulatory During the reporting year, the Legal and Compliance Committee consisted of Ms M Theron (Chairperson) and Mr G Katjimune. Their development programme. Such training requirements to which the Authority is attendance at various Committee meetings is detailed in Table 5. Members of senior management attended these meetings as well. relates to matters relevant to the Authority subject. Table 5: Legal and Compliance Committee meeting attendance (Yes/No) and addresses any identified skills gaps. Date Ms M Theron Mr G Katjimune (Chairperson) 16 July 2014 Yes Yes 10 November 2014 Yes Yes 29 January 2015 Yes Yes BOARD SECRETARY 12 February 2015 Yes Yes Board Members have access to the advice set out in the NAMFISA Act and other 12 March 2015 Yes Yes and services of the Board Secretary – in relevant legislation and best practices, 31 March 2015 Yes Yes this case, current incumbent Ms Yamillah including the Corporate Governance Katjirua. The Secretary is responsible for Code for Namibia (NamCode). The Committee reviewed the following during the reporting period: advising the Board on good governance • Legal matters against NAMFISA; and for guiding the Board in its duties as • An Implementation Plan for the NAMFISA Bill and the Financial Institutions and Markets Bill upon their eventual promulgation; • A review of subordinate legislation; and • Progress in cases the Authority is engaged in litigating.

28 29 NAMFISA has adopted an Enterprise Risk Management Framework as a formal aspect of good corporate governance. The Framework is intended to assist the Authority in actively managing a wide variety of risks to which its operations are exposed to in pursuit of its objectives, and in order to create value for its stakeholders. In view of the role that NAMFISA plays in the financial services industry, RISK if strategic risks materialise they will have a significant impact on the Authority’s key objectives and, ultimately, its stakeholders. Since NAMFISA regards risk management as a vital element of good corporate governance, it has fully integrated risk management into its Strategy and operations to ensure that its mandate is carried out as required. MANAGEMENT 30 31 GOVERNANCE OF RISK MANAGEMENT RISK MANAGEMENT PROCESSES The NAMFISA Board is ultimately assessment workshops at least once a year, Diagram 3: Enterprise Risk Management During the year under review, NAMFISA were developed. The risk profile has five responsible for risk management within ensuring that risk registers are prepared Framework reviewed its Enterprise Risk Management risk categories and a risk appetite statement the Authority. This responsibility has and maintained, ensuring compliance with Framework. In this respect, a Risk Appetite reflective of its priorities and mandate. been delegated to the Board’s Audit and internationally accepted risk management Framework and an associated risk profile These risk categories and their correlated Risk Committee. The Audit and Risk standards, and continuous monitoring and Organisational aligned with the Three-year Rolling Strategy statements are presented in Table 6. structure NAMFISA Board Committee is responsible for reviewing reporting on risk management activities. Table 6: Risk Appetite Framework NAMFISA’s Risk Management Policy and Framework, determining the Authority’s Diagram 3 presents NAMFISA’s Enterprise Risk category Risk appetite statements Report/ risk appetite and tolerance levels, the Risk Management Framework, in terms of information Regulatory capacity Prudential regulation: Systematically flow effectiveness of its risk management which the Authority is structured to effect important financial institutions cannot activities, the key risks facing NAMFISA, its risk management arrangements. Policy and progress be allowed to fail. against plan and the adequacy of the responses to Material risk profile Regulation of market conduct: All Risk management consumers have to be treated fairly. address these key risks. effectiveness Supervisory capacity All financial institutions have to comply Nonetheless, the risk management fully with Acts and regulations. function is integrated into management Policy advisory capacity Sound advice has to be delivered to responsibilities as well. Thus, the principal inform national policy. onus of risk management rests with the Risk Risk management effectiveness Audit and Governance capacity NAMFISA has to implement best Management Committee (RMC); while Internal control Risk Committee practice governance principles and effectiveness the Risk and Internal Audit Department behaviours. coordinates all risk management activities. Resource capacity NAMFISA has to be adequately resourced to execute its mandate. The RMC is an executive and senior management body responsible for ensuring Progress against plan In terms of NAMFISA’s Risk Management Overall, NAMFISA made good progress that the Board-approved Risk Management Material and emerging Policy and Framework, management during the year under review in respect Policy and Framework are implemented. The risk register Record of incidents and losses are to ensure that all significant business of drafting action plans and implementing Chairperson of the RMC is the CEO, with other risks facing NAMFISA are identified, mitigating actions to address strategic risks members being Assistant CEOs (ACEOs), assessed, documented, treated, monitored that have been identified in the Strategic General Managers and Heads of Divisions, and Internal audit and other and reported. The risk management tool Risk Register. Managers of Departments. The RMC meets at assurance being used to record these is the Strategic the end of every quarter and reports to the providers Risk Risk Register. The Register is updated Although challenges such as the Board’s Audit and Risk Committee. Detailed risk Management Detailed risk submission for Committee submission continuously when new risks are identified inappropriate regulatory framework are still each support for each core and communicated to the Audit and Risk being faced, significant risk management The RMC is assisted in carrying out its function operation Committee and, hence, to the Board. strategies have already been implemented responsibilities by the Risk Section, which with the drafting of the NAMFISA Bill is supervised by the Manager of Risk and The RMC met during the year under and the Financial Institutions and Markets Internal Audit. This Manager’s main role Support Core review to discuss the quarterly Divisional Bill, as well as the completion of critical is to assist all NAMFISA business units operations operations risk management reports from the Heads standards and regulations. In addition, with identifying and managing their risk of Divisions or Departments. During these NAMFISA remains alert to key risk environment within the agreed Enterprise discussions, the RMC takes into account indicators of major strategic importance to Risk Management Framework. Among the NAMFISA’s strategic objectives, entries the organisation. Manager’s responsibilities are coordinating Control effectiveness in the Strategic Risk Register, progress risk activities, ensuring uniformity by for process risks and Enterprise Risk standards Management on agreed action plans to address risks providing a standardised risk management Infrastructure and identified, and other relevant information. methodology and process, conducting risk Processes

32 33 2014: Development of subordinate 2001: NAMFISA was established legislation to support NAMFISA and by an Act of Parliament (Act no. FIM bills upon promulgation. The 3 of 2001) in an effort to exercise Authority engaged in a deliberate supervision over the business of process to enhance its ability to fulfill non-banking financial institutions its mandate of supervising financial and over financial services as well as institutions and financial services to advise the Minister of Finance on totaling across 3500 entities. The matters related to financial services. drafting of the Microlending Bill. The Namibian Stock Exchange (“NSX”) was incorporated with one listed security and one broker.

2012: Drafting of the FIM Bill, 2002: Actively participated Financial Service Adjudicator in all relevant activities of (FSA) Bill and the NAMFISA SADC (through CISNA) Bill to incorporate the 1 and COMESA. Participated international principles and 8 in high-level technical standards of financial regulation. 2014 2001 negotiations to harmonize Implementation of Regulation 29 2 the regulatory regime in the that requires Pension Funds to region. invest at least 1.75 % in unlisted 7 2012 2002 securities. The commencement of FIA, PACOTA and AML.

2010 2004 3

6 2010: Amendment of Acts and 2004: NAMFISA endorsed King II Regulations such as Pension Fund 2008 2006 report on Corporate Governance Act and Long Term Insurance Act; 4 in which the Board could recognise Inspection of Financial Institutions 5 the need to develop practices that Act, Unit Trust Control Act etc. make and keep the Authority accountable to the broader society in which it operates.

2008: The Consumer Education 2006: Introduction of the Programme was launched in March NAMFISA Amendment Bill 2008 to empower Namibians with the drafting process, which aimed at knowledge of their financial rights enhancing NAMFISA’s supervisory and responsibilities. The adoption of capacity and bringing up-to- a risk-based supervisory approach. date certain outdated provisions Birth of the Financial Institutions and contained in various financial Markets (FIM) Bill. services laws that NAMFISA administers. A recommendation for NAMFISA to move from KEY compliance-based supervision to risk-based supervision, in accordance with international MILESTONES solvency frameworks. 34 35 MANAGEMENT

36 37 Office of the Board Secretary and Head of Charter approved by the Board’s Audit Governance and Compliance and Risk Committee, which provides for This Office provides secretarial services and the establishment and maintenance of governance advice to the Board and Executive a system of internal audit. The Office is EXECUTIVE Management, and reports to the Board required to carry out various audits, free Chairperson and the Board’s Appointment of any restrictions in accordance with the and Remuneration Committee. The Office standards set by the Institute of Internal is also accountable for the management Auditors for Namibia. of regulatory risk, on which it provides MANAGEMENT advice to the Board through its Legal and The Internal Audit Office reports The Executive Management team consists Authority administers. Furthermore, the decisions are unassailable and taken Compliance Committee. The Office further administratively to the CEO and of the CEO, the two ACEOs, seven General Executive Management team ensures that timeously; and provides advice to the Supervisory Division functionally to the Board’s Audit and Risk Managers, and the Head of Legal Services. the Authority performs its role, namely to: • Establish institutional capacity to on Governance and Compliance. Committee. The Manager of Risk and The CEO manages NAMFISA on a day- • Provide timeous and accurate advice to enable it to carry out its functions Internal Audit reports periodically to the to-day basis. The CEO is also the Registrar the Minister of Finance and the Board; effectively and efficiently. The Office also undertook the following Executive Management and the Board’s in terms of the various laws that the • Ensure that regulatory and supervisory tasks during the period under review: Audit and Risk Committee on internal • Provided secretarial support to the audit activities and the internal audit Board and its Committees; responsibility, as well as on performance • Assessed the performance of the Board; relative to its Annual Internal Audit Plan. • Assessed the Board’s training needs OFFICES, COMMITTEES and facilitated training; Committees • Drafted the Regulatory Risk Management Framework; The following Committees have been • Conducted compliance assessments established to assist the Office of the and reported on them to management CEO in the specialised or technical areas AND DIVISIONS and to the Board Committees; mentioned. • Agreed on key strategic objectives for the Office; Executive Committee • Implemented the NAMFISA Ethics This Committee is chaired by the CEO. Programme and declaration-of-interest Other members are the CEO, the ACEOs, assessments; General Managers, the Board Secretary • Developed a whistle-blower and the Head of Legal Services. The programme; and Manager of Risk and Internal Audit and the • Assisted the Board and management Manager of Corporate Communications in the investigation and assessment of and Consumer Education may attend ethics matters. Committee meetings if invited to do so. The Executive Committee’s three arms – Operations, Strategy and Supervision Phillip Shiimi Boni Paulino Kenneth Matomola Isack Hamata – implement the Authority’s Strategy, Chief Executive Officer Assistant CEO Support Functions Assistant CEO Supervision Manager Corporate Communications & monitor organisational activities, and Consumer Education manage risks. Offices • Proper accounting records are kept and • Relevant and up-to-date policies are in audited; place; and Licensing and Litigation Committee • Financial statements and a report on the • The Authority employs best practice in its Office of the CEO This Committee is chaired by the activities of the Authority are submitted to governance capacity. The CEO drives the implementation of the ACEO of Supervision and consists of the Minister of Finance and the State-owned Strategy, the direction of policy within the ACEOs, selected General Managers, Enterprises Governance Council; In summary, the CEO’s responsibilities are to Authority, and presides over the organisational and the Head of Legal Services. The • Risks within the organisation are managed ensure that the Authority carries out its functions. regulatory and supervisory operations. This Committee considers applications for well; leadership is provided to accomplish the the approval or registration of financial • Relevant legislation is complied with; The CEO is supported by two ACEOs; the regulatory and supervisory objectives conferred Cletius Simasiku institutions and intermediaries and makes • Relevant technology and processes are in Board Secretary and Head of Governance, on the Authority by the statutes it administers. Head Internal Audit recommendations to the CEO, who takes place; Risk and Compliance; the Manager of Risk the ultimate decision. The Committee • The Authority’s staff are appropriately skilled; and Internal Audit; the Manager of Corporate Internal Audit Office The CEO is responsible for implementing the also considers litigation by or against the • Stakeholder relationships are effectively Communications; and Consumer Education; The function and mandate of this Office is Strategy set by the Board and, amongst others, Authority, and recommends appropriate managed; and two Executive Assistants. derived from the NAMFISA Internal Audit ensures that: action to the CEO.

38 39 Committees (continued) Divisions Each of the Divisions below is headed by a General Manager who oversees various Departments.

Petrus Kafidi Yamillah Katjirua Johannes Smit Heritha Muyoba GM Information Communications Lovisa Indongo-Namandje Head Governance, Risk and Compliance GM Finance & Admin GM Human Resources & Technology GM Supervisory Support Risk Management Committee Procurement Committee Finance and Administration Division Human Resources Division Information and Communications Supervisory Support Division The CEO chairs this Committee. This Committee is chaired by the General This Division is responsible for This Division is charged with ensuring Technology Division This Division comprises the Consumer Additional members are the ACEOs, Manager of Finance and Administration. controlling the Authority’s finances and that the Authority is able to attract and This Division was established to provide Complaints Department and the Inspections, General Managers, the Head of Legal Other members are one Legal Advisor, any for providing general administrative retain competent staff, and is responsible the Authority with ICT leadership and Anti-money-laundering (AML) and Services, the Manager of Risk and Internal Manager designated by the CEO to serve services. Its key duties include financial for the development of NAMFISA’s human strategic planning in order to ensure that Combatting of the Financing of Terrorism Audit, the Board Secretary and the on the Committee, one Accountant, the accounting, producing the Annual resource policies. Besides coordinating its ICT systems and services are employed (CFT) Department. The Division reports Manager of Corporate Communications Manager of Corporate Communications Financial Statements, facilitating the the training of employees in accordance effectively. The Division provides critical to the ACEO of Supervision, and has a staff and Consumer Education. Theand Consumer Education, and an completion of external and internal with specific training plans, the Division support to the Authority’s various business complement of 14. Committee assists the CEO in identifying individual who may be co-opted by the audits, strategic budgeting, budgetary also performs the vital function of units. The core of the ICT support function and managing risks within the Authority. Committee Chairperson based on his/ control, cash flow management, revenue performance management. NAMFISA is planning for, acquiring, implementing The functions of the Consumer Complaints her special knowledge or expertise. Such invoicing and recovery, contract uses the Balanced Scorecard methodology and maintaining ICT systems and services. Department are to receive and resolve The ICT Steering Committee co-opted person may only sit for a specific management, procurement, office to agree on and measure both performance The Division strives to become and complaints lodged by consumers, conduct The ACEO of Support Functions chairs tender or meeting of the Committee. security, general maintenance, insurance, and the achievement of strategic goals. continuously operate as a strategic partner specialised inspections and investigations this committee. Other members are the fleet management and control of fixed The Division is headed by a General to NAMFISA’s business units. It reports into the conduct of financial institutions, and General Manager of Information and The Committee’s primary purpose is to assets. Manager, who oversees a Manager, six to the ACEO of Support Functions and ensure that registered financial institutions Communications Technology (ICT), the review, evaluate and make recommendations staff members, and consultants from time is headed by a General Manager. Two comply with AML and CFT legislation. ICT Manager, the General Manager of on submissions from the Divisions for The Division, which is headed by a to time. The Division reports to the ACEO Departments fall under the Division, Supervisory Support, one representative the procurement of goods and services in General Manager, is made up of a Finance of Support Functions. namely Business Systems and Services, and The Department analyses all consumer from each of NAMFISA’s regulatory excess of N$500 000. Department and an Administration ICT Security and Infrastructure. A Manager complaints received by the Authority. In Divisions, and any other person whom Department, each of which is headed by in turn heads each Department. As at the resolving them, the Department consults the Executive Committee or CEO may Investment Committee a Manager. The Division reports to the end of the period under review, the Division with or interviews the complainants, and co-opt. The Committee oversees the The ACEO of Support Functions chairs ACEO of Support Functions, and has a had a staff complement of nine. liaises with the Legal Services Department. governance of ICT at the Authority on this Committee. Other members are staff complement of 21. The objective is to resolve all complaints behalf of the Executive Committee. the General Manager of Finance and satisfactorily and expediently. Among other things, it also endorses the Administration and the Manager of execution of ICT-related projects and Finance, as well as another General The objective of the Inspections, AML and services, identifies information security Manager and Manager designated by CFT Department is to conduct specialised risks, promotes information security the CEO – unless otherwise indicated inspections and investigations into the affairs of practices in business units, and provides in the Delegation of Authority. For an financial institutions whenever a specific request advice on the appropriateness of security Investment Committee meeting to be arises. In addition, the Department works initiatives to business objectives. duly constituted, three members have to closely with the Bank of Namibia’s Financial be present. The Committee has the duty Intelligence Centre to ensure that registered to ensure that surplus funds are invested financial institutions comply with the Financial according to guidelines stipulated in the Intelligence Act, and that the Authority fulfils its Investment Policy. functions as a supervisory body.

40 41 of the Usury Act, 1968 (No. 73 of 1968), including the Exemption Notices thereunder, and the Inspection of Financial Institutions Act.

The Division has a total staff complement of 23, which includes a General Manager and three Managers. The Division reports to the ACEO of Supervision.

Investment Institutions Division Absalom Kapenda Cornelius Verwey Maria Nakale-Gaomas Grace Mohammed Evangelina Nailenge GM Strategic Projects Head Legal Services GM Provident Institutions GM Insurance Institutions GM Investment Institutions

Legal Services Department Provident Institutions Division Insurance Division This Division regulates and supervises Strategic Projects Division This Department is responsible for providing This Division is charged with the This Division is charged with the entities in the cluster of capital markets, The Strategic Projects Division defines and advice to the Board, the Office of the CEO supervision and regulation of pension supervision and regulation of long- inclusive of collective investment schemes maintains the standards and processes related and the supervision-related Divisions funds, friendly societies and medical aid and short-term insurers, reinsurers, and microlending. Accordingly, the to NAMFISA’s project management. The on all financial laws administered by the funds. The Division reports to the ACEO brokers, reinsurance brokers and agents. Division consists of three Departments, Division’s core objective is to provide a stable Authority as well as on any other relevant of Supervision. The Division reports to the ACEO of i.e. the Capital Markets Department, project management framework that supports law; drafting legislation and subordinate Supervision. the Collective Investment Schemes the Authority in realigning and consolidating legislation; ensuring that the Authority The Division consists of the Pension Department, and the Microlending all strategic activities into projects with the Erna Motinga defends or opposes litigious actions against Funds Department and the Medical The Division consists of the Short- Department. aim of improving the probability of successful GM Research, Policy & Statistics it; initiating litigation where necessary in a Aid Funds and Friendly Societies term Insurance Department and the delivery of all its services. court of law or other proceedings; enabling Department. The two Departments are Long-term Insurance Department. The The Capital Markets Department’sResearch, Policy and Statistics Division the Authority to better regulate financial charged with ensuring that registered Division’s aim is to protect insurance responsibilities are carried out in terms This Division reports to the ACEO of The Division achieves its objectives and services or enforce its powers in supervising financial institutions are able to meet policyholders and to promote sustainable of several pieces of legislation. These laws Supervision. Its principal focal area is to ensures organisation-wide clarity and focus by: financial institutions; and providing legal their obligations to their members. This and responsible insurance business. This are the Stock Exchanges Control Act, formulate the policy framework governing • Setting project management standards advice and support with regard to the is achieved through off-site surveillance, is achieved through off-site surveillance, 1985 (No. 1 of 1985) and the Financial financial institutions, undertake relevant and methodologies; Authority’s operations. The Department industry review and on-site inspections industry review and on-site inspections Institutions (Investment of Funds) Act, research, and develop associated statistics. • Establishing and standardising project reports to the ACEO of Support Functions. to assess whether financial institutions to assess whether financial institutions 1984 (No. 39 of 1984). The Department management processes; are managed prudently and comply with are managed prudently and comply with therefore provides a supervisory oversight The Division’s policy framework function focuses • Providing quality assurance for all The Authority’s legal team is mostly involved the relevant statutes. These statutes are the the relevant statutes. These statutes are the function and regulates the stock exchange, on policy development and documentation, and projects; in facilitating legal proceedings in situations Pension Funds Act, 1956 (No. 24 of 1956); Short-term Insurance Act, 1998 (No. 4 of stockbrokers and investment managers. ensuring that the regulatory and supervisory • Supplementing project resources for that NAMFISA is called on to clarify or defend. the Friendly Societies Act, 1956 (No. 1998), the Long-term Insurance Act, 1998 framework conforms to international best specific activities; While the Department itself cannot initiate 25 of 1956); and the Medical Aid Funds (No. 5 of 1998), and their regulations. The Collective Investment Schemes practice, principles and standards. Periodically, • Providing project support, training, legal proceedings in a court of law, it gives Act, 1995 (No. 23 of 1995), as well as The Division had a staff complement Department’s responsibilities are informed the Division provides statistical and other coaching and mentoring; and briefings and support to legal practitioners their respective regulations. The General of 18 at the end of the reporting period, by the following legislation: the Unit reporting. • Creating a centralised repository/data to initiate and sustain proceedings. These Manager heads the Division, which has 22 which included the General Manager of Trusts Control Act, 1981 (No. 54 of 1981); bank of project management knowledge. proceedings involve, amongst other things, staff members in total. Both Departments the Division and two Managers: one for Regulations issued under the Pension The Division has 11 staff members. curatorship of financial institutions and civil are each headed by a Manager. the Long-Term Insurance Department Funds Act; and the Inspection of Financial These are the General Manager, four The Division is headed by a General action against the Authority. The Department and one for its Short-Term Insurance Institutions Act, 1984 (No. 38 of 1984). Policy Advisors, two Policy Analysts, one Manager, who is assisted by three Project is also involved in proceedings before the counterpart. The Department supervises and regulates Manager, one Risk Analyst (in training), Managers. The Office reports to the ACEO Appeal Board. the trustees of unit trusts, management one Executive Assistant, and one of Support Functions. companies, unlisted investment managers Administrative Assistant. The Department is led by the Head of and the special purpose vehicles for the Legal Services, who is assisted by three unlisted investments. Legal Advisors and two Secretaries. The Department’s staff complement is, The Microlending Department is therefore, 6. While the Legal Advisors responsible for the regulation and are responsible for giving advice on supervision of microlenders, and other regulatory, supervisory and litigation providers of credit, for instance, the matters, the Head of Legal Services bears hire purchase outlets. The Department’s overall responsibility for the Department. responsibilities are carried out in terms

42 43 STRATEGY AND PERFORMANCE 44 45 STRATEGY PERFORMANCE

The Board has adopted a Strategy that sets the Authority on a trajectory of major transformation in order to turn it into a respected Towards the end of the previous financial • A regulatory framework safeguards the relevant functionality and capabilities regulator of financial institutions in Namibia. The Strategy contains four key result areas of strategic intent, which in turn give rise to eight year, the Board set priority areas for the industry and consumers; to effectively assist and support strategic objectives (Table 7). 2014/15 reporting period ahead. These • The existence and effective business processes in a protective priorities were set to steer the Authority implementation of sufficient and environment whilst guaranteeing Table 7: Key result areas and strategic objectives towards achieving its strategic objectives appropriate regulatory measures to system security and business continuity Key result area Strategic objective despite constraints in resources, i.e. the ensure a stable financial sector; at all times; and 1. A sound regulatory and supervisory framework that promotes • To develop an efficient and effective regulatory and limited supply of skilled human capital, • The existence of an effective Enterprise • That NAMFISA remains a financially a safe, stable, and trusted financial sector in Namibia supervisory framework funds and time. Key priority areas for the Risk Management Framework; sustainable organisation. • To build productive relationships with key stakeholders and 2014/15 financial year, were to ensure: • Overall operational effectiveness within earn their trust and respect • Consumer awareness, protection and the Authority; During the 2014/15 financial year the 2. Well-informed and financially literate consumers of • To contribute to the development of well- informed satisfaction; • That NAMFISA is the employer of Authority focused on certain strategic financial products and services in Namibia consumers of financial products and services in Namibia, • That supervision is applied in a choice; initiatives within these key priority areas, and capable of making sound financial decisions consistent manner at all times; • That the ICT platform provides the outlined below is progress and performance. 3. A well-managed, efficient and effective regulator of financial • To manage financial resources prudently institutions in Namibia • To ensure the operational efficiency of all business processes 1. To ensure consumer awareness, 2. To ensure that supervision is applied 3. To ensure a regulatory framework • To shape NAMFISA’s corporate culture over time for optimum protection and satisfaction in a consistent manner at all times safeguards the industry and consumers execution of the Strategy, and to develop a high-engagement working environment that includes capacity-building The Authority has a Board-approved The Authority continued with its regulatory During the reporting period the Authority • To deploy appropriate ICT systems Malpractices Action Plan in place. During and supervisory activities, which included identified 79 key pieces of subordinate 4. A reliable source of data, research and policy advice on • To produce accurate statistics, conduct leading research the period under review, the Authority the on- and off-site inspection of regulated legislation that would give effect to the financial institutions in Namibia and provide quality policy advice on regulated entities and identified malpractices in certain financial entities. Several on-site inspections were Financial Institutions and Markets Bill. Once financial services sectors under its regulatory ambit. The conducted, after which the inspected the Bill is enacted, these pieces of subordinate focus was directed largely on the insurance entities were informed of the Authority’s legislation will be issued under it. A total of 79 sector and on provident and investment observations and findings. Severalpieces of subordinate legislation were drafted, The NAMFISA Strategy was informed by In pursuit of the strategic intent, the institutions. In this respect, several enforcement actions were undertaken. and 36 of these were issued for industry the following factors: Authority’s regulatory and supervisory directives were issued and media campaigns In order to determine the impact of its consultations. However, these consultations • The importance of improving the approach strives to: were embarked on. These initiatives aimed supervisory role, the Authority engaged an could not be concluded, as industry players Authority’s reputation by strengthening • Employ risk-based supervision; to increase awareness among consumers independent service provider to conduct needed more time. An extension was granted its regulatory and supervisory • Promote market soundness and of their rights and obligations, and of an appropriate survey. The survey results to allow adequate time for consultations. effectiveness; integrity; and NAMFISA’s role in protecting consumers. indicated that 80% of respondents were • The Authority’s limited institutional • Enhance consumer awareness and An independent service provider was satisfied with the Authority’s engagement. Eight pieces of subordinate legislation capacity (skills, corporate culture, protection. then engaged to conduct a survey to The process of enhancing operational were drafted during the review period in processes and systems); gauge the success of these initiatives. efficiency was top of the Authority’s respect of the Microlending Bill. In order to • The Authority’s inappropriate and To achieve this strategic intent, the The survey results indicated that 80% agenda during the reporting period, and aid the drafting of subordinate legislation, inadequate regulatory and supervisory Authority has broken down the eight of respondents were satisfied with the took the form of reviewing processes the Authority drafted the process and framework; strategic objectives into pre-agreed annual Authority’s engagement with respect to and procedures across the board. These procedure manual for issuing these bylaws. • Limited literacy and activism among deliverables. These deliverables in turn consumer awareness and protection. measures aim at reducing the number of the consumers of financial products form the basis of performance agreements Another outcome of these initiatives was dissatisfied respondents by enhancing the Amendments to other financial laws were and services; with the Authority’s leadership and all that the Authority received complaints Authority’s effectiveness and efficiency in initiated as well. These amendments included • The regulatory and supervisory other levels of staff. from the users of certain financial products carrying out its regulatory and supervisory aligning the recourse process available to environments of the Common and services. NAMFISA subsequently took mandate. The Authority also appointed aggrieved persons, based on certain decisions Monetary Area and the Southern action against the product and service legal officers in Regulatory Units, which by the Registrar on various financial laws as African Development Community, providers, and achieved a complaints resulted in improved supervisory activities. well as other developments in the financial as well as the need to collaborate with resolution rate of above 80%. sector. In addition, the Authority issued other regulators in financial sectors; and various circulars and directives with the aim • Global financial regulatory and of safeguarding the industry and consumers. supervisory best practice. Furthermore, a gap analysis of the current legislation was completed, and a related action plan developed and implemented.

46 47 PERFORMANCE CONTINUED

4. To ensure the existence and effective 6. To ensure overall operational 8. To ensure that the ICT platform implementation of sufficient and effectiveness of the Authority provides the relevant functionality BUDGET appropriate regulatory measures to and capabilities to effectively assist ensure a stable financial sector The Authority targeted operational and support business processes in efficiency during the reporting period. a protective environment whilst During the review period, the Authority The success of this imperative was guaranteeing system security and drafted the Financial Services Adjudicator measured through an internal audit of all business continuity at all times COMMENTARY Bill (previously the Financial Services of the Authority’s key operational areas. Budget implementation is closely monitored through monthly reports distributed to management for their information, perusal and Ombudsman Bill), and the Microlending Whilst some improvements in efficiency In its quest to enhance ICT functionality action, ultimately ensuring compliance with internal budgetary requirements as well as ensuring financial transparency. Bill. Feedback from industry consultations were recorded, this key priority area and capabilities, the Authority adopted the was incorporated into the Bills prior to their remains in sharp focus, as it needs further COBIT 5 IT governance framework and During the review period, total income was 14.7% (N$ 16.3 million) higher than the budget of N$ 111.1 million for the period. submission to, and subsequent approval enhancement. Other efforts to this end relevant strategy, policies and procedures by the Minister of Finance. This process included the development and review of that support it. Specific gains during the Chart 1: Total comprehensive income

was completed in a short time despite the policies, operations manuals, processes reporting year included the acquisition 140 000 000 131 042 603 magnitude of work involved. and procedures to harmonise these across of additional modules for NAMFISA’s 124 635 359 all business units. All endeavours in this human resources operations, and enhanced 120 000 000 116 800 187 During the reporting period, the Minister key priority area aim at optimising service functionality on the finance and electronic of Finance requested the Authority to draft delivery to stakeholders. regulatory systems. 100 000 000 95 832 887 93 114 259 92 470 234 a Policy Paper on the National Medical 81 216 340 Total Income Control Board. Following consultations 7. To ensure that the Authority is the 9. To ensure that NAMFISA remains a 80 000 000 70 397 767 74 362 903 with the Ministry of Health and Social employer of choice financially sustainable organisation Total Expenses

Services, the Policy Paper was finalised and 60 000 000 57 150 266 submitted to the Minister of Finance for In an effort to address this key priority The Authority and its subsidiary (together, consideration. area, the Authority embarked on various the “Group”) managed its financial resources 40 000 000 initiatives such as analysing the leadership prudently in line with the approved budget. Another related development in this key skills gap and identifying training needs. In this respect, the Group’s total income for 20 000 000 priority area included the development of The Authority developed training and the year ending 31 March 2015 amounted to an implementation plan for the NAMFISA leadership plans and some key training N$127.4 million, with expenditure totalling - 2011 2012 2013 2014 2015 Bill and the Financial Institutions and interventions were conducted. N$134.1 million. The total comprehensive Markets Bill once they are enacted. loss for the year amounted to N$ 4.4 million, Higher income was accounted for by industry levies and interest earnings (Chart 2). Industry levies are statutory charges collected by The reporting period also saw the Authority which was far lower than the budgeted NAMFISA from the industry. These are used to finance administrative costs incurred in running NAMFISA’s daily operations. 5. To ensure the existence of an effective continuing to inculcate its corporate deficit of N$66 million. Enterprise Risk Management values and rally around its mission and Chart 2: Levies per industry segment Framework vision. These activities included setting performance challenges among its 30 000 000 26 636 288 The Authority reviewed its Enterprise operations Divisions. Staff were rewarded 24 893 727 25 000 000 24 179 413 Risk Management Framework, which for understanding and executing the 22 597 582 was subsequently approved by the Board. Strategy, for performance excellence, and 19 205 306 20 000 000 Following a review of the Strategic Risk for living the corporate values. 17 948 884 2015 16 732 672 15 893 791 15 638 011 Register, the Framework was implemented. 14 854 010 15 000 000 2014 The Framework now provides for risk In addition, the Authority participated appetite parameters, which guide the virtually in Deloitte’s Best Company to 10 000 000 Authority in executing its mandate. Work For survey during the review period. 3 476 548 The results revealed that the Authority’s 5 000 000 3 249 110 2 443 853 rating of 3.77 would have placed it among 2 283 975 955 810 893 280 the best companies to work for in Namibia. - Microlending Medical aid Pension funds Long-term Short-term Stockbrokers Asset Unit trusts funds and insurance insurance management friendly societies

48 49 BUDGET COMMENTARY CONTINUED

On the other hand, total expenditure showed a positive variance of 24.6% (N$43.7 million) when compared with the budget of N$177.8 million for the period. This positive variance is the result of a significant cost-saving achieved in staff salaries and related costs, as a result ASSET of timing differences between the actual and anticipated dates of filling vacancies. Chart 3 depicts the various components of the Group’s operating costs. Chart 3: Operating costs COMMENTARY Office rental expenses The Group’s total assets decreased by Non-current financial assets, which by N$25.5 million to N$57.3 million as N$2.2 million to N$245.5 million as at represent investments in unit trusts, have at 31 March 2015, compared with N$82.8 8% 31 March 2015, compared with N$247.7 decreased by N$27 million to N$61.8 million as at 31 March 2014.

Professional and consulting fees million as at 31 March 2014. million as at 31 March 2015 compared 20% 9% with N$88.8 million as at 31 March 2014. The reduction in financial assets can be Other operating costs The Group capitalises all its assets with a life The unit trust investment aims at retaining largely attributed to the acquisition of 10% 19% expectancy greater than a year and with a these funds for the foreseeable future, i.e. a 100% shareholding in Metropol (Pty) 7% value greater than N$1 000. The Group has extending over more than one year, in order Ltd at a cost of N$ 42.0 million. Metropol invested about N$2.4 million in equipment to enhance capacity and build reserves for (Pty) Ltd is the owner of Erf 1503, and intangible assets, which represents the capital and other major projects. Independence Avenue, Windhoek on cost of acquiring computer equipment for which the Authority plans to erect office new staff as well as replacing old equipment Current financial assets, which represent buildings for own occupation. 2015 2014 in accordance with the ICT Plan for the year. investments in fixed deposits, decreased RESERVES 64% POLICY, FUNDING 63%

Staff costs

Savings in project costs were achieved mainly as a result of draft legislation – the NAMFISA Bill, the Financial Institutions and Markets AND LEVY MODELS Bill, and the Financial Services Adjudicator Bill – not being promulgated as anticipated. Increased regulatory, supervisory and operations exceeds its funding which The Funding model in turn will set out the policy research activity by NAMFISA in situation will necessitate a review of its levy approach to building a reliable revenue base carrying out its mandate has resulted in an structures. to support the Authority’s operations. increased cost incurred by the Authority. This review will be done in line with a The Funding model will be based on Although the level of activity and related cost Reserves Policy, Funding and Levy Models principles which are fair towards all have increased levies have remained static which will be developed during the 2015/16 stakeholders and will provide transparency since the last amendment by Government financial year. to the way in which the Authority is funded Gazette No 64 of 2004. Subsequently to this and will be built on the following principles: levies have never been adjusted to reflect The Reserves Policy will clarify the the effect of nominal inflationary increases. Authority’s objective in terms of the desired level of reserves that it will be required to For this reason the Authority has reached hold as well as the circumstances under a point where the cost of supporting its which it will be allowed to access these.

50 51 RESERVES POLICY, FUNDING AND LEVY MODELS CONTINUED

Principle Elaboration Buffer • Levy income supports NAMFISA's objective of holding enough resources as required by its PRIORITIES Reserves Policy Cost recovery • Levies are sufficient to raise only enough funds to cover the envisaged cost of regulation over a 3 year rolling strategic period. Equity • Users in similar industry categories pay similar levies FOR 2015/16 No cross-subsidation • Costs of regulation development and implementation is allocated in such a way that it reflects The Authority reviews its priorities annually. The priorities identified for the coming financial year are presented in Table 9. the cause of regulation and/or the incidence of benefits from regulation Reliability • Levy income is as stable and certain as possible Table 9: Priorities for 2015/16

Lastly the Levy model will guide the structure of the Authority’s levies, for example: Theme of priority Objective of priority Focus of priority • fixed amounts or percentage based; The consumer • To ensure consumer awareness, • Malpractices in the pension funds protection and satisfaction sector • monthly, quarterly or annually; • method (invoiced or returns based); The regulatory framework • To ensure a regulatory framework that • Speedy enactment of the Financial safeguards the industry and consumers Institutions and Markets Bill, • payment terms. NAMFISA Bill, Financial Services The Levy model will satisfy the following principles: Adjudicator Bill and Microlending Bill • Implementation plan for the new Principle Elaboration regulatory and supervisory regime Accuracy • Levies accurately reflect amounts due to NAMFISA • To ensure the existence and effective • On- and off-site inspections, and implementation of sufficient and enforcement of various financial laws Adjustable • The levy model is easily adjustable to reflect changing circumstances and cost of regulation appropriate regulatory measures to • Risk-based supervision framework Facilitate compliance • The levy model facilitates compliance in that it is easy to understand and carry minimal maintain a stable financial sector compliance costs Operations • To ensure the existence of an effective • Implementation of the Enterprise Risk Payment Terms • Payment of levies occur within a reasonable time after the regulated entity have / should have Enterprise Risk Management Management Framework received payment from its customers Framework • To ensure compliance with Acts and • Full compliance with the NAMFISA regulations Act, the State-owned Enterprises Governance Act, and NAMFISA’s Performance Agreement with the Minister of Finance • To ensure overall operational • Harmonisation of systems, processes effectiveness within the Authority and procedures Human resource management • To ensure that the Authority is the • Living the NAMFISA values employer of choice • Development of a long-term Human Resources Plan Financial perspective • To ensure responsible financial • Prudent management of financial stewardship resources • Revision of the Authority’s Funding Model

52 53 SUPPORT This section of the Annual Report provides highlights on support function developments within the organisation during the period under review. These include developments in the human resources,finance and administration, ICT, legal services, and strategic projects functions, as outlined below. FUNCTION HIGHLIGHTS 54 55 Employment equity

NAMFISA is an equal opportunity employer, and remains committed to the HUMAN provisions as prescribed in the Affirmative Action (Employment) Act, 1998 (No. 29 of 1998). To ensure that this commitment is sustained and to monitor progress in that RESOURCES respect, the Human Resources Division provides management and the Board with In line with its stated mandate, during the NAMFISA strives to be an employer of quarterly updates on the progress made period under review the Human Resources choice and, as such, ensures that it continues in implementing the approved NAMFISA Division set itself the following initiatives to comply with relevant employment Employment Equity Plan (Table 10). to be undertaken in the next financial year: legislation. In addition, to promote effective • Drafting a five-year Human Resources employee engagement as well as boost staff Plan; morale, NAMFISA also continues to hold Table 10: NAMFISA Employment Equity Plan • Reviewing the Remuneration Policy; regular staff meetings presided by the CEO. Category of employee Affirmative 31 March 2014 31 March 2015 • Drafting an Attraction and Retention Action Plan Strategy; # % # % • Carrying out an intervention to manage Disadvantaged males 52 38 35 55 37 NAMFISA’s organisational culture Advantaged males 1 2 2 2 1 • Conducting a skills audit; and Non-Namibian males 0 3 3 4 3 • Making NAMFISA the “Best Company Disadvantaged disabled males 1 1 1 1 1 to Work For” in its category in Namibia. Disadvantaged females 53 55 52 79 53 Advantaged females 11 7 6 6 4 Staff complement Non-Namibian females 0 1 1 2 1 Disadvantaged disabled females 0 0 0 0 0 As at 31 March 2015, a complement of 149 employees was recorded. This number, which includes contract employees, represents a growth TOTAL 118 107 100 149 100 of 28.2% from the previous financial year, as depicted in Chart 4.

Chart 4: Staff complement Recruitment and selection

180 From 1 April 2014 to 31 March 2015, the 156 160 149 Division filled a total of 63 vacancies across all bands, as indicated in Chart 5. 140

120 107 Chart 5: Recruitment per Graded Band

100 70 87 1 April 2014 63 80 31 March 2015 60 63 62 60 44 50 40 42

40 1 April 2014 20

31 March 2015 0 30 26 28 27 Females Males Approved Total Positions 20 15

10 5 3 1 0 0 0 0 B C D E F Total

56 57 HUMAN RESOURCES CONTINUED

Staff promotions Bursaries

A total of 16 staff members were promoted to various senior positions, as depicted in Chart 6. In line with the Namibian Government’s Financial Sector Strategy and its National Human Resources Plan for Namibia, during the period under review, NAMFISA awarded bursaries to the tune of N$1 540 000 in total. Ten deserving students are now able to pursue careers in various fields of study, as presented in Table 12. Chart 6: Promotions

16 16 Table 12: Bursaries awarded

14 Field of study Number of bursaries awarded

12 11 31 March 2015 1 April 2014

10 Actuarial Science 4 0

1 April 2014 Quantitative Risk Management 1 0 8 Financial Mathematics 1 2 31 March 2015 6 5 5 Economics 1 1

4 Accounting 2 2 3 Law 0 2 2 2 Investment Management 0 1

0 Commerce (Financial Analysis and Portfolio Management) 1 1 Females Males Total TOTAL 10 8 Senior management terminations Average age of employees Performance management Employee wellness One General Manager resigned from NAMFISA during the year under review, as presented in Table 11. NAMFISA has a very young workforce: As a tool to assess NAMFISA’s organisational It has become customary for NAMFISA Table 11: Termination of service among senior management the average age of its employees is 36 effectiveness in achieving its strategic to observe World AIDS Day in years. objectives, the Performance Management commemoration of those living with or Nature of termination of service 31 March 2015 1 April 2014 Framework has taken on a great degree affected by the human immunodeficiency Resignations 1 3 Organisational climate of importance, with the performance virus (HIV). A successful event was held on 1 management process being continuously December 2014 where a guest speaker from survey Staff turnover monitored to ensure its purpose is fulfilled. the World Health Organisation gave some In this process, employees’ performance is insight into the latest facts and statistics on The aim of the organisational climate reviewed at the end of March and at the end the acquired immune deficiency syndrome The staff turnover for the period under review was 12.08%, which is 4.58 percentage points higher than the turnover for the previous survey is to improve operational of September each year. (AIDS) caused by HIV. financial year. Although this increase is greater than the previous reporting period, it is still within the industry (regulators’) norm of 15% effectiveness and to deliver on the a year. Chart 7 presents the data on staff turnover for the 2014/15 financial year. Authority’s mandate. NAMFISA has a huge Employer–employee responsibility serving the financial sector Chart 7: Staff turnover and Namibia at large. Thus, it is important relations 14.00% that the Authority continuously assesses 12.08% 12.00% the organisational climate internally, in NAMFISA has recognised the Namibian terms of its people and processes. In this Financial Institutions’ Union (NAFINU) 10.00% regard, the Organisational Development as its employees’ exclusive bargaining 7.5% 8.00% 1 April 2014 function has introduced the use of agent. Meetings are held between the questionnaires to assess the effectiveness, parties on a monthly basis to address 6.00% 31 March 2015 environment, leadership and systems matters affecting employees’ well-being.

4.00% within NAMFISA’s respective Divisions.

2.00%

0.00%

58 59 HUMAN RESOURCES CONTINUED Training and development FINANCE AND In an effort to continuously build organisational capacity, employees across Divisions attended various training and exposure programmes during the course of the reporting period. Chart 8 shows how many employees underwent training. Training costs for the 2014/15 financial year amounted to N$4 337 164. In addition, NAMFISA extended study loans to employees to assist them in furthering their education. ADMINISTRATION Chart 8: Training | 2014/15 Financial Year During the 12 months to 31 March 2015, in finalising reviews of the Authority’s • The Acting Entitlements and Benefits, 35 32 the Finance and Administration Division Procure to Pay and Accounts Receivable • Finance and Administration Service 29 compiled the Annual Financial Statements processes. Delivery Timelines, 30 for the previous reporting year, which were • The Coordination Process between the

25 approved by the Board on 24 June 2014. The Division completed coordination Finance and Supervision Functions Monthly management reporting was also of the half-year budget review process • The Credit Card Policy, and 18 20 consistently performed in a timely manner. as well, while it played a central role in • The Budget Compilation and Review

16 Financial, investment and debt collection coordinating, consolidating and reviewing Process. 15 reports were compiled for and presented the 2015/16 financial year’s budget, which during Audit and Risk Committee and was subsequently approved by the Board. Furthermore, the Division exercised 9 10 Board meetings. on-going prudence in its financial 6 6 To promote continuous improvement, management, which contributed towards 5 5 The Division played its part in finalising the the Division either reviewed or drafted the Authority realising savings in respect 2 3 1 1 2014/15 financial year audit, which resulted the following policies, procedures and of certain expenditure in comparison to - in an unqualified audit report being issued. processes during the reporting period: budgeted amounts. April May June July August September October November December January February March In addition, it supported internal auditing • The Delegation of Authority,

Table 13 shows the number of employees who received certification in various fields during the reporting year.

Table 13: Certifications Certification title Division No. of employees certified INFORMATION AND Vizor Certified Builder Engineer Information and Communications Technology 2 Balanced Scorecard Certified Human Resources 3 Professional Certified Executive Personal Assistant Executive Assistants 10 COMMUNICATIONS Personal Development Assessment Human Resources 3 Analyst COBIT 5 Certification Information and Communications Technology 1 TOTAL 19 TECHNOLOGY The NAMFISA ICT Strategy was reviewed function was reviewed and now comprises The Electronic Regulatory System and approved during the course of the two complementary Departments, namely Enhancement Project, whose principal aim reporting period, with the main goal being Business Systems and Services, and ICT is to further automate the business processes, to transform the ICT function from a mere Security and Infrastructure. was executed as scheduled. This not only service provider to a strategic business improved the existing functionalities, but partner. Instead of aligning the ICT The ICT policies and related procedures also provided additional services for both objectives to NAMFISA’s business objectives, were reviewed and, where applicable, were internal and external users. The Division also the Authority aims to make ICT an integral compiled and implemented accordingly. An launched an infrastructure upgrade in order part of the Authority’s strategic planning and ICT Governance Framework was also devised to ensure the Authority has appropriate and operations. In order for the ICT function and approved during the period under review. up-to-date infrastructure as well as business to effectively support the business and to Its implementation will be cyclical, and is continuity capabilities. undergo the required transformation, the scheduled for subsequent financial years.

60 61 Business Policies, Enterprise Content To achieve this objective, the Authority intends to acquire and deploy a business Processes and Procedure Management Project intelligence system. Such systems Manuals Project transform raw data into meaningful and LEGAL SERVICES NAMFISA, with its implied character useful information for business analysis of being a data bank and a knowledge- purposes. They also help to make the right This Project’s aim is to develop Litigation Legislation based institution, has a corresponding information available to decision-makers and document refined policies and duty to ensure that business records and at the right time. standardised business processes, the In Alwyn Petrus van Straten NO & 88 Others The Legal Services Department finalised information are properly managed and latter duly accompanied by procedure v NAMFISA & 2 Others, the plaintiffs the drafting of the Financial Services are accessible at all material times. Thus, manuals. Such manuals need to support Implementation of instituted action against NAMFISA during Adjudicator Bill and the Microlending Bill there is an ever-present need to maintain the NAMFISA Strategy to establish Legislation Project March 2012. They claimed payment of after receiving and considering extensive and improve control over information transparent, auditable and identical N$105,258,586.39, being damages allegedly comments and suggestions from all resources to aid organisational efficacy approaches in processes across all suffered as a result of NAMFISA’s alleged financial sector participants. The Bills have and to ensure compliance with relevant The NAMFISA Bill and the Financial supervisory and support Divisions. breach of its statutory duty of care. been submitted to the Ministry of Finance legislation. Institutions and Markets Bill – which for final approval before submission to the include the Risk-based Supervision NAMFISA exception to the plaintiffs’ Legislative Drafters within the Ministry of NAMFISA Office Building The Authority therefore needs a framework Framework – are expected to be Particulars of Claim was upheld on 31 Justice for review. Project within which it can manage records promulgated in the near future. January 2014. The plaintiffs appealed and content in line with professional against the judgment upholding the NAMFISA is also involved in an on-going standards. Such a framework will help These new laws are intended to broaden exception, but the appeal has since lapsed. process of promulgation and advising on In recent years, the Authority has to adopt a formal referencing system, NAMFISA’s mandate by introducing new However, the plaintiffs filed an application new and amendment legislation in respect experienced immense growth in its promote consistency in record-keeping, functions and amending certain others. to condone their non-compliance with the of financial institutions and services. These staff complement as a result of the drive reduce the unnecessary duplication of The new legislation will also effect changes rules of the Supreme Court of Namibia and pieces of legislation include the NAMFISA to improve regulatory efficiency. Such records, and enable the national archiving to the way in which financial institutions for the lapsed appeal to be reinstated. By the Bill and the Financial Institutions and operational growth will continue in the or disposal of all records that are no longer and intermediaries – the regulated entities end of NAMFISA’s 2014/15 financial year, Markets Bill. foreseeable future as the Authority aspires required. – are regulated and supervised. Thus, the Registrar of the Supreme Court had not to become a respected regulator. not only will the Authority’s operations yet provided a date for the hearing of this This Project, therefore, is determining be re-engineered, financial institutions application and appeal. However, challenges have emanated from and addressing all requirements relating and intermediaries will also need to the resulting limited office space. Currently, to content/record storage, security and make adjustments to their regulatory NAMFISA rents space in two separate access management, as well as their compliance frameworks and, in some buildings – albeit in close proximity to impact on business continuity. cases, prepare themselves for broader each other. The operational and economic compliance measures and controls that challenges this has presented prompted include activities and reports covering a STRATEGIC the Authority to acquire a plot (Erf 1503, Business Intelligence Project risk-based approach to supervision. Independence Avenue, Windhoek) on which to develop an office building with NAMFISA needs to have instant access These new laws’ implementation will best its own corporate identity. Construction to critical data to ensure the effectiveness be executed if driven from a central point, PROJECTS is envisaged to commence during the and efficiency not only as regards to the which is where the Strategic Projects During the reporting period, the Strategic • Setting project management standards, • Contracting the principal agent for the 2015/16 financial year. discharging of its duties, but also in respect Division comes in: it has been designated Projects Division ensured that project establishing best practices and NAMFISA Office Building Project. of its decision-making. Furthermore, these to carry out this function with the plans were executed with operational implementing sound methodologies; activities need to occur in a manner that support of an Implementation Steering effectiveness and efficiency within the • Drafting an operations manual for During the year under review, the Division supports the Authority’s vision of being a Committee. organisation by – projects; managed processes pertaining to each of respected regulator of the financial sector, • Establishing a Project Management • Setting up project plans for all key the projects below. fostering a stable and reliable information Framework within the organisation, projects; system, and contributing to economic which served as an initial ‘roadmap’ for • Establishing project teams on all development. This mandate includes the Office itself; planned projects; and presenting current and historical data in executive dashboards that are available on an ad-hoc basis and accessible to support predictive analysis.

62 63 CONSUMER EDUCATION 64 65 CONSUMER EDUCATION The regulation of financial services and The Namibia Financial Sector Strategy – it points out that education and awareness While NAMFISA’s consumer education • Radio clips: A 13-episode radio • Financial Literacy Initiative: This products is predominated by a focus on implemented by the Namibian Government are essential to ensure that current levels of interventions continued to focus on the series was broadcast on the Namibian Initiative, which celebrated its first restrictions on financial services and as a sectoral tool for achieving Vision information and guidance are enhanced. Authority’s general mandate and role, as Broadcasting Corporation’s Sunshine anniversary in March 2015, is a national products, regulating business practices, 2030, its long-term national development well as on the types of financial services Club programme on National Radio. The platform for various stakeholders involved and disclosure to consumers. As these programme – states that consumer protection In response to the Government’s call and and products available, consumer rights programme deals with various issues in the development of financial literacy financial services and products become and financial literacy are important to the on the Authority’s own accord, NAMFISA and responsibilities in the insurance sector affecting young children. The “Kids and in Namibia. NAMFISA is a founding more complex and change frequently due economy. This Strategy highlights the concern recognises that consumer education is one were highlighted. Money” episode, for example, provided member, together with partners such to innovation and technology, consumers that low levels of consumer knowledge of the catalysts to financial inclusion and advice to children on their financial as the Bank of Namibia, the Ministry are often left alone with the burden to regarding financial rights, products and the financial well-being of all the citizens Other activities conducted during the rights and responsibilities, the use of of Finance, the Ministry of Education create their own understanding of the services; deficient protection mechanisms; of Namibia. Thus, as one of its strategic reporting period were as follows: money, savings and investment, etc. and Culture, the Ministry of Justice, the various services and products sold to and poor personal financial management can imperatives, the Authority will continue • Consumer Education Quarterly • TV interviews: Following on from Ministry of Trade and Industry, civil them. Thus, governments, regulators and lead to adverse impacts not only on citizens in to provide educational information Bulletin: NAMFISA distributed 60,000 broadcasts it made in the previous society organisations such as the Namibia financial institutions have sought to protect general, but also on the national economy. The consistently through various mediums of copies of this Bulletin, whose content reporting year, NAMFISA has now Consumer Trust, and numerous other consumers by educating them on how to Strategy stresses the need for the necessary communication, to the actual and potential reflected the supervisory and consumer secured a dedicated slot on NBC TV’s non-governmental organisations. The make informed decisions. infrastructure to be put in place to protect users of financial services and products. protection agenda in which the Authority morning magazine programme, Good Initiative conducts road shows, places consumers from unfair practices. In addition, has engaged. Such content was largely Morning Namibia, to discuss topical newspaper advertorials, and presents guided by the number and nature of issues that tackle the broad spectrum of financial-services-related discussions on complaints registered with the Authority. financial literacy. radio and television.

66 67 REGULATORY Over the past few years, NAMFISA has been undergoing radical transformation. This process includes shifting its regulatory and supervisory regime from being compliance-based to being risk-based. The transformation requires a complete realignment not only of its processes and systems, but also, and more expediently, of its regulatory framework– as articulated below. REFORM UPDATE 68 69 AMENDMENTS TO EXISTING DRAFTING OF LEGISLATION NEW LEGISLATION In the 2014/15 financial year, the Authority drafted amendments to various laws and submitted them to the Minister of Finance for NAMFISA’s reform process has also necessitated the drafting of new legislation, as summarised in Table 15. approval and gazetting. Table 15: Drafting of new legislation Table 14: Amendments to existing legislation Title of Bill Purpose Current stage of development Title of Act Nature of amendment Practical outcome of amendment Namibia Financial To reform NAMFISA by expanding its mandate, Changes suggested after the Bill’s review by the Ministry of Stock Exchanges Control Act, To provide for the Registrar of Stock The amendment empowers the Registrar, subject to any Institutions Supervisory increasing its supervisory powers, and improving Finance were incorporated, after which the Bill was submitted Authority Bill its governance capacity to the Legislative Drafters at the Ministry of Justice. NAMFISA 1985 (No. 1 of 1985) Exchanges to issue conditional provisional conditions and/or restrictions as may be determined and licences - to carry on the business of a stock imposed, to issue a conditional provisional licence to an and the Ministry of Finance provide technical support and exchange - to enable applicants for such applicant to carry on the business of a stock exchange if the clarification on issues that may arise. licences to fully comply with the requirements Registrar is satisfied that there is a reasonable possibility that Financial Institutions and To consolidate and modernise all the laws that Changes suggested after the Bill’s review by the Ministry of section 8(1) of the Act the applicant may fully comply with all the requirements Markets (FIM) Bill govern all industries that the Authority currently of Finance were incorporated, after which the Bill was contemplated in section 8(1) within a reasonable period. regulates, with the exception of the Usury Act, submitted to the Legislative Drafters at the Ministry An applicant issued with a provisional licence is then obliged, 1968 (No. 73 of 1968), which regulates and of Justice, NAMFISA and ministry of Finance – via its at such time as the applicant is of the opinion that all conditions continues to regulate the microlending and credit Economic Policy Advisory Services – provide technical and requirements have been complied with but before the agreements industry support and clarification on issues that may arise. expiry of the provisional licence, to notify the Registrar Financial Services To create a complaints adjudicator for the entire After consultation with industry stakeholders – including accordingly and request a reconsideration of his/her application. Adjudicator Bill (previously financial sector, including banks and other State- the Ministry of Finance – for comments, relevant changes If, on reasonable grounds, the Register is satisfied that the known as the Financial owned (but only non-regulated) financial service they suggested were incorporated into the Bill, after which applicant complies fully with section 8(1) requirements, the Register may issue a full licence to such applicant. Services Ombudsman Bill) providers it was submitted to the Ministry of Finance along with an explanatory memorandum. Short-term Insurance Act, 1998 To provide for appeals against decisions of Instead of appeals being directed to the Minister of Finance, (No. 4 of 1998) the Registrar of Short-term Insurance or his/ they are now directed to the Board of Appeal established in Microlending Bill To make appropriate and comprehensive provision After consultation with industry stakeholders – including her staff to be made to the Board of Appeal terms of the NAMFISA Act. to regulate the microlending and credit agreement the Ministry of Finance – for comments, relevant changes established in terms of the NAMFISA Act, industries, as previously provided for under the they suggested were incorporated into the Bill. The Ministry and to remove the requirement for insurance The requirement for insurance brokers and reinsurance Exemption Notice of the Usury Act. is in the process of submitting the Bill to the Legislative brokers and reinsurance brokers to deposit brokers to deposit a bank guarantee with Treasury as part of Drafters at the Ministry of Justice. with the Treasury a bank guarantee of not less the registration process was removed. (It is important to state that the consolidation of than N$25 000 laws under the Financial Institutions and Markets Long-term Insurance Act, 1998 To provide for appeals against decisions of Instead of appeals being directed to the Minister of Finance, Bill does not include the Exemption Notice under (No. 5 of 1998) the Registrar of Long-term Insurance or his/ they are now directed to the Board of Appeal established in the Usury Act, i.e. the legislation used to regulate her staff to be made to the Board of Appeal terms of the NAMFISA Act. the microlending industry. In fact, the Consumer established in terms of the NAMFISA Act, Credit Chapter was purposely excluded from the and to remove the requirement for insurance The requirement for insurance brokers and reinsurance brokers and reinsurance brokers to deposit brokers to deposit a bank guarantee with Treasury as part of Financial Institutions and Markets Bill with the with the Treasury a bank guarantee of not less the registration process was removed. view that a separate law would be drafted.) than N$25 000 Medical Aid Funds Act, 1995 To provide for appeals against decisions of the Instead of appeals being directed to the Minister of Finance, (No. 23 of 1995) Registrar of Medical Aid Funds to be made to they are now directed to the Board of Appeal established in the Board of Appeal established in terms of terms of the NAMFISA Act. the NAMFISA Act Unit Trusts Control Act, 1981 To provide for appeals against decisions of Instead of appeals being directed to the Minister of Finance, (No. 54 of 1981) the Registrar of Unit Trusts to be made to the they are now directed to the Board of Appeal established in Board of Appeal established in terms of the terms of the NAMFISA Act. NAMFISA Act

70 71 UPDATE ON OTHER REFORMS Proposed standards and Proposed Medical Control Proposed Conditions for New regulations for unit The transition to risk-based regulations Board Investment Managers trusts supervision

In contrast to the out-dated laws that The cost of healthcare services in Namibia In the 2014/15 financial year, the Authority On 24 December 2014, the regulations Although the Authority began developing the Financial Institutions and Markets is relatively high – and it is escalating. drafted new Conditions for Investment issued by the Minister of Finance in terms of a new risk-based supervisory framework Bill will replace, the FIM Bill provides However, the Namibian Association of Managers. These set out the basic regulatory the Unit Trusts Control Act were gazetted. for NAMFISA a few years ago, such for a framework that allows for a more Medical Aid Funds – the statutory body framework for supervising investment These regulations, which came into effect on a guideline is not yet in place. In the flexible and progressive approach towards that could, amongst other things, set managers, as provided under section 4(1) 1 January 2015, relate to capital requirements previous reporting period, research was prudential and market regulation. To this benchmark tariffs – not only lacks express of the Stock Exchanges Control Act. The for management companies, while the conducted on best practices in risk-based end, the Bill provides for NAMFISA to issue powers to set or enforce such tariffs, but Conditions address matters related to General Notices (per a Determination supervision and concept notes based on standards and for the Minister of Finance to is also occasionally challenged by medical the establishment and operations of an issued by the Registrar) relate to: the research outcomes were completed. issue regulations, both of which subordinate service providers in respect of making investment manager, such as: • The determination of securities and Further development of the new measures can easily be amended to deal changes to the existing benchmark tariffs. • The procedure for approval to operate as other assets that may be included in the framework is contingent on the enactment with market developments. Not only will such a manager; unit portfolios of unit trust schemes; of the Financial Institutions and Markets it be convenient and practical to introduce The foundation of all these problems lies • Arrangements for compliance with • Capital requirements relating to unit Bill as well as certain proposed standards such subordinate measures with high in the fact that medical service providers investment requirements; trust schemes; and and regulations. priority in order to implement the FIM Act charge higher amounts than those set in the • The duties of an investment manager; • “Fit and Proper” requirements for once it has been promulgated, but rolling tariff guidelines. This consequently pushes • Record-keeping; compliance with the provisions of the Act. out such measures will be done in a way up the contributions to medical aid funds. • The appointment and duties of auditors; that does not place a regulatory burden on In light of this, NAMFISA has drafted a • The appointments and duties of the Authority or the regulated entities. policy paper on the creation of a Board portfolio managers; to set healthcare tariffs. The policy brief • Client reporting requirements; and Consequently, NAMFISA drafted 79 has been finalised and submitted to the • Arrangements for professional subordinate measures, consisting of 69 Ministry of Finance for further action. indemnity and fidelity insurance. standards and 10 regulations. During 2014/15, 36 of these measures (30 standards The Conditions also incorporate and 6 regulations) were sent to the industry international best practices criteria in and to the relevant Insurance Advisory assessing the fitness and propriety of Committees for comment. The remaining all key responsible persons, compliance 43 standards and regulations are in various officers, directors and portfolio managers stages of the reviewing process. of such regulated entities. This is in keeping with Financial Intelligence Act provisions imposed on NAMFISA as a supervisory body.

Stakeholders were consulted on these Conditions during 2012 through 2014, after which relevant comments were incorporated. The revised Conditions were submitted to the Ministry of Finance for review in December 2014 for promulgation.

72 73 SUPERVISORY DEVELOPMENTS 74 75 GUIDE TO NAMFISA’s LADDER OF SUPERVISORY INTERVENTION Various Acts provide a wide range of with applicable NAMFISA legislation, • Summarise the circumstances under Table 16: Stages of supervisory concern and NAMFISA intervention discretionary intervention powers to the regulations, standards, guidelines or which intervention measures may be Indicator category Stage of intervention Reason for or nature of intervention Authority to address situations that give directives. The objectives of the Guide are to: expected; and No significant problems Stage 1 The Authority carries out on-going supervisory and regulatory activities on a regulated entity it cause for concern. NAMFISA therefore • Identify areas of concern early and to • Set out NAMFISA’s core supervisory pursuant to its mandate. devised a Guide to its Ladder of Supervisory intervene effectively to protect the users principles, outline its supervisory Early warning Stage 2 The Authority identifies some deficiencies in policies or procedures or the existence Intervention, which sets out the procedures of financial services; activities and provide the framework for of other practices, conditions and circumstances that could lead to the development that the Authority will generally follow • Promote awareness and enhance remedial supervisory intervention. of problems described in Stage 3 intervention. when it has cause for concern regarding the the transparency of the system of Risk to viability or solvency Stage 3 Situations or problems exist that, although not presenting an immediate threat operations of a regulated entity, or in the intervention for regulated entities and to viability or solvency, could deteriorate into a Stage 4 situation if not addressed event a regulated entity does not comply other stakeholders; promptly. Future viability in serious Stage 4 Situations or problems described at Stage 3 pose a material threat to future viability doubt or solvency unless prompt, effective and corrective measures are applied. NAMFISA’S supervisory principles Entity not viable or Stage 5 Severe financial, operational or market conduct difficulties are indicated, which will insolvency imminent result in one or more of the following: Not only does NAMFISA supervise its • The Southern African Development Financial institutions that form part of a • Failure or imminent failure of the regulated institution to meet capital adequacy regulated entities in accordance with Community’s Committee of Insurance, local banking group are supervised on a and solvency requirements coupled with an inability to rectify the situation within the NAMFISA Act, it also subscribes Securities and Non-banking Financial consolidated basis. Thus, the Memorandum a short period; to principles adopted by international Authorities (CISNA) guidelines; and of Understanding signed between • Failure of the regulated institution to develop and implement an acceptable business plan, thus making either of the two preceding circumstances inevitable standard-setting bodies. These include: • Principles of the Consolidated NAMFISA and the Bank of Namibia within a short period; and • International Organisation for Pension Supervision Framework. permits the exchange of supervisory • Prolonged and consistent failure to comply with the Registrar’s directives. Supervisors (IOPS) standards for the and other information between the two supervision of pension funds; Another principle that is fundamental to regulators for the purpose of facilitating • International Association of Insurance NAMFISA’s operations is the on-going consolidated supervision in accordance Supervisors (IAIS) core principles of review of its policies and practices to ensure with the Consolidated Supervision supervision for insurance; that they remain effective and efficient Framework. • The International Organization of and that they are in line with the needs of Securities Commissions (IOSCO) Namibia’s financial sector and international principles and standards; best practices.

76 77 INVESTMENT PROVIDENT INSTITUTIONS INSTITUTIONS For the financial year under review, also in line with the general findings of entities under its purview. These forums In the period under review, the Provident With regard to pension funds, in inspected during the previous financial the Investment Institutions Division on-site inspections conducted during the serve not only as a platform to discuss Institutions Division continued with its November 2014 the Division released a year, no inspections were conducted continued to contribute to two of the financial year. policy initiatives, but also as a feedback activities to improve service delivery return to be completed by the industry on them during the 2014/15 reporting Authority’s key strategic objectives, channel between the Authority and the and to enhance its supervisory and in order to capture data for assessing period. However, the two friendly namely to: To reinforce regulatory and supervisory respective regulated entities. regulatory interventions. Key goals in this Regulation 28 compliance. The first societies were monitored through on- • Develop an efficient and effective efforts, the Division issued various respect were to ensure the following were responses, which were due on 28 February going engagement to assess whether regulatory and supervisory framework; circulars, directives and cautionary The Division also continued to capacitate maintained: 2015, constituted 78 submissions. The previous recommendations had been • Build productive relationships with key notices. The Division’s Collectiveits human resources for enhanced service • A sound and appropriate regulatory data from these have since been assessed. implemented. The key findings from the stakeholders; Investment Schemes Department issued delivery to NAMFISA stakeholders. framework; In addition, analysis of the data captured various inspections include the following: • Conduct effective and efficient two circulars to the industry. The aim of To this end, a number of staff attended • Effective and efficient supervision; in the quarterly returns for pension funds • Some provident institutions failed to operations; one was to announce the tabling of the training courses and seminars both locally • Effective and efficient operations; will be released during the first quarter of submit statutory returns; • Increase productivity; and regulations pursuant to the Unit Trust and regionally. Training covered the areas • Increased productivity; and the 2015/16 financial year. • Corporate governance in pension • Exercise responsible financial Control Act, while the other circular of investment management and client • Responsible financial management. funds and friendly societies was weak; management. detailed to the industry the mechanisms servicing, exchange demutualisation, Furthermore, the Authority is in the process • Weak risk management processes, by means of which pension funds were to collective investment schemes, money As part of NAMFISA’s overall stakeholder of changing its regulatory and supervisory which included the lack of risk To this end, the Division conducted 12 full comply with Regulations 28(4) and (29) laundering control, and business writing engagement, the Division attended approach from being compliance-based management policies; compliance inspections on all three clusters issued under the Pension Funds Act. skills for professionals. meetings with key partners in the industry, to being risk-based. The successful • Employers’ late submission of, or of regulated entities, namely collective including the Ministry of Finance and the implementation of the risk-based failure to submit, contributions to investment schemes, microlending, and The Division’s Microlending Department Bank of Namibia. Other forums targeted approach hinges on, amongst other things, pension funds; and the capital market. In addition, nine post- issued four circulars during the reporting for engagement included meetings on the appropriate systems, skilled employees, • Failure by members of friendly societies registration inspections were conducted year. These dealt with the following: establishment of the National Pension and a well-crafted risk-based supervisory to pay contributions into the fund. in the microlending industry as per the • A “Fit and Proper” requirements Fund and the National Medical Benefit framework. In this regard, the Division is approved Supervisory Plan for 2014/15. questionnaire generated in terms of the Fund – projects currently spearheaded faced with the challenge of assessing the Follow-up inspections revealed that most Whereas no major issues that threaten Financial Intelligence Act; by the Social Security Commission. The level of risks facing each pension fund, funds inspected in the previous reporting the financial system were detected, the • A request for the submission of an Division also participated in discussions medical aid fund and friendly society, period had adopted the Registrar’s Authority detected some malpractices in AML and CFT programme; relating to universal health coverage, identifying those entities with a high net recommendations and corrective action the microlending industry. Similarly, in • An appeal to microlenders regarding which is a Ministry of Health and Social risk, and directing the limited resources had been taken. the capital market, some entities inspected their obligation to submit quarterly Services project. to the most risky entities, in terms of were found not to be in full compliance financial and statistical returns; and appropriate supervisory interventions. Quarterly off-site inspections were also with on-going regulatory obligations, • A cautionary notice to the public, In addition to the Financial Institutions conducted for medical aid funds, as these especially in the area of AML and CFT, but warning them against the unlawful and Markets Bill project, the Division The Division also developed a Risk are the only entities regulated by the also in other minor operational matters. activities of a dubious moneylending identified some circulars, notices and Assessment Model in order to objectively Division that submit quarterly returns entity that was not registered with the regulations that were either out-dated or no identify risky entities. The Model will be to NAMFISA. Inspection reports are Other progress involved the ‘Back to Authority. longer applicable. A plan to review/repeal discussed with the industry in the 2015/16 normally shared with the Board of Trustees Basics’ Project – whereby non-compliant these instruments was developed and financial year. of the respective medical aid funds entities are identified and categorised The Division’s Capital Markets implemented during the review period. and corrective measures are discussed, in accordance with NAMFISA’s Ladder Department issued a directive to Other developments during the reporting especially in cases where key risks like of Supervisory Intervention – which investment managers requiring them In order to improve efficiency, the period include an Inspection Plan, which solvency are at levels of concern to the continued during the period under to submit quarterly returns containing Division also continued with the revision facilitated full and follow-up on-site Authority. Turnaround strategies would review. The majority of entities supervised compositions of their portfolios. of its business processes. Thus, more inspection activities. Inspections were then be agreed on between such funds by the Investment Institutions Division resources were geared towards this conducted on 15 entities during the and the Division, and regular reporting to fell into Stage 1, which testified that many In line with NAMFISA’s strategic objective internal perspective. 2014/15 financial year, namely 4 medical monitor progress in addressing the issues entities were fairly sound and posed no to build strong stakeholder relationships, aid funds and 11 pension funds. Since raised are submitted to the Registrar. threat to the financial system. This was the Division held industry forums with the two existing friendly societies were

78 79 PROVIDENT INSTITUTIONS CONTINUED

The Division developed 13 operations As part of the implementation of Anti societies and then implemented. The manuals during the reporting year, while Money Laundering and Combating the completed questionnaires were submitted 14 were implemented. All regulated entities Financing of Terrorism (CFT) Compliance to NAMFISA at the end of June 2014. are now required to use new forms when Supervision Level 1, in collaboration with applying for registration, when notifying the Authority’s Inspections, AML and CFT Furthermore, seven regulations were the Registrar about the appointment of Department, the Division developed a “Fit repealed through Government Notice service providers such as auditors and and Proper” requirement questionnaire No. 38 of 2015 (contained in Government actuaries, or when applying for business for friendly societies. The questionnaire Gazette No. 5689 of 16 March 2015), set out amalgamations. was first discussed with the two friendly in Table 24.

Table 17: List of repealed circulars – Pension funds Table 20: List of directives issued – Pension funds

Circular No. Date of issue Title Repealed by Date of issue Title Directive No. Date of issue Title Circular No. PI/PF/01/2015 13 February 2015 Submission of fund related documents by means of the PF No. 01 17 June 1994 Pension Funds Act No. 24, of PI/PF/02/2014 29 September 2014 Revocation of certain circulars prescribed application forms 1956: Amendment to Regulation due to the amendment of PI/PF/DIR/01/2014 02 January 2014 Voluntary termination of participating employer 28 under the Act Regulation 28 under the Pension PI/PF/DIR/02/2014 12 December 2014 Late payment and non-payment of contributions in Funds Act, Act No. 24 of 1956 contravention of s13A PF No. 02 27 June 1994 Pension Funds Act No. 24, of 1956: Compliance with paragraph (a) of sub-regulation Table 21: List of directives issued – Friendly societies 5 of Regulation 28 of the Pension Funds Regulations Directive No. Date of issue Title PF No. 05 15 March 1995 Pension Funds Act, PI/FS/01/2014 20 November 2014 Amendment of rules of friendly societies 1956:Amendment of Regulations PF No. 06 15 March 1995 Pension Funds Act No. 24 Table 22: List of directives issued – Medical aid funds of 1956: Compliance with paragraph (b) of sub-regulation Directive No. Date of issue Title 5 of Regulation 28 of the PI/MA/4/31/7/2014 8 August 2014 Submission of fund related documents by means of the Pension Funds Regulations prescribed application forms PF No. 07 15 June 1995 Pension Funds Act No. 24, PI/MA/5/29/9/2014 29 September 2014 Submission of quarterly and annual financial information of 1956: Amendment of by means of the electronic regulatory system Regulation 28 PF No. 2/2002 20 May 2002 Limits of Investments Table 23: List of explanatory notes issued – Pension funds

Table 18: List of repealed circulars – Medical aid funds Date of issue Title 18 July 2014 Roles and responsibilities with regards to regulation 29 Circular No. Date of issue Title Repealed by Date of issue Title 13 February 2014 Pension Funds’ compliance with Regulation 28 and 29 Circular No. 4 December 2014 Compliance with Regulation 28 (4) in respect of 2/2002 19 April 2002 Payments to Healthcare PI/MAF/ 30 March 2015 Revocation of Circular Letter No. investments in unlisted investments by pension funds intermediaries by medical CIR/01/2015 2 of 2002 aid funds and/or medical aid administrators Table 24: List of regulations repealed – Pension funds

Regulations Government Notice No. Government Gazette No. Heading Table 19: List of reviewed circulars – Pension funds and date and date Circular No. Date of issue Title Repealed by Date of issue Title 1–7 38 of 2015 5689 of 16 March 2015 Manner in which and time within which appeals to the Circular No. minister are to be prosecuted under section three PI/PF/04/1994 06 October 1994 Pension Funds Act, No.24 of 1956 PI/MAF/ 30 March 2015 Revocation of Circular Letter No. Section 13A arrear contributions CIR/01/2015 2 of 2002 PI/PF/4/2003 17 June 2003 Voluntary termination of PI/PF/ 12 December 2014 Voluntary termination of an participating employer under an DIR/01/2014 employer’s participation in an umbrella scheme umbrella fund

80 81 INSURANCE INSTITUTIONS The Insurance Institution Division’s key • Contribution to consumer education As per its approved Supervisory Plan Government Gazette on 31 December underpinned the amendment under this In addition, the Division performed focus areas for the 2014/15 financial year and advocacy; for 2013/14, the Division conducted on- 2013 (Government Notice No. 350). regulation compels registered long-term an exercise on detecting malpractice were the following: • Implementation of the Ladder of and off-site inspections on insurance Regulation 13 deals with the overall insurers and reinsurers to invest 1.75% of in registered entities. This resulted • On-site inspections of registered Supervisory Intervention; companies and intermediaries during the commission payment to an insurance the market value of their total investments in the identification of some cases of insurance companies and • Review of internal business processes; year under review, as set out in Table 25: agent or an insurance broker or a in unlisted investments within a period of malpractice. The process necessitated the intermediaries; • Stakeholder engagement; reinsurance broker in respect of long- 12 months from the date of publication crafting of specific interventions aimed • Off-site inspections of registered • Implementation of Electronic term insurance business as remuneration of the notice in the Gazette. However, the at addressing malpractice in the industry. insurance companies; Regulatory System upgrades; for rendering services as an intermediary unlisted investments may cumulatively Various directives and circulars were • Conversion of broker-agents to • Production of quality data on a towards effecting, maintaining or servicing not exceed 3.5% of the market value of a issued in this regard. insurance brokers; quarterly basis; and any long-term policy. With regard to registered long-term insurer or reinsurer’s • Employee training and development. Regulation 15, the major change that investments.

Table 25: Inspections conducted

Type of entity On-site inspections Off-site inspections Short-term insurance companies 0 5 Short-term insurance intermediaries 5 0 RESEARCH, POLICY Long-term insurance companies 6 16 Long-term insurance intermediaries 32 0 TOTAL 43 21 AND STATISTICS The Division continued reviewing its industries respectively, where operational and natural) conducting insurance The Research, Policy and Statistics Division Regulatory reform is partly aimed at Supervisors. The Division not only assisted internal business processes to identify areas and regulatory matters were discussed business as insurance agents and continued to provide support to the maintaining an enhanced consumer in planning and hosting this event, which of improvement and to develop procedure and such consultations form part of brokers and reinsurance brokers; Authority in three key areas: regulatory protection environment. In this regard, the was a great success, but was also involved in manuals that would assist employees in the Division’s broader Stakeholder • Remuneration of insurance agents and reform, supervisory cooperation, and Division enabled the Authority to submit drafting various presentations on behalf of maintaining consistency, and improve Engagement Plan. brokers and reinsurance brokers; publications. the draft Medical Control Board Policy NAMFISA representatives. turnaround times and efficiency when • Selling insurance products outside Paper and the Policy Brief on Consumer executing its mandates and duties. The The Short- and Long-term Insurance Acts approved classes of insurance; In terms of strategic regulatory reform, Credit. Other policy work included a To keep its stakeholders informed and for introduction of automation through the together with subordinate regulations, • Administration fees payable by short- the Division continued to draft and review position paper on the optimal interest the purposes of adhering to the provisions Electronic Regulatory System also brought directives and circulars issued by the and long-term insurance brokers and standards and regulations to be promulgated rate for moneylenders and microlenders, in the NAMFISA Act, the Authority about improved operational efficiency, as Registrar during prior years were reinsurance brokers; and under the Financial Institutions and and participating in the drafting of the publishes an annual report, quarterly well as improved quality of data collection thoroughly reviewed during the reporting • Policy fees. Markets Bill. In this respect, 79 regulations Microlending Bill. In addition, the Division bulletins and regulatory reform newsletters. and quicker turnaround times. year in order to foster and establish the and standards were drafted, of which only collaborated in drafting the Financial The Division coordinated and published sound enforcement of all provisions in The main purpose of issuing the above- 36 were shared with the industry by way of Services Adjudicator bill. three Quarterly Statistical Bulletins, four In addition, the Division continued to current laws. As an outcome of these mentioned directives and circulars was to a consultative engagement. Consultations Regulatory Reform Newsletters and the release a quarterly report for both the short- extensive review exercises, the Division rectify incorrect practices, provide clarity with the regulated entities and industry NAMFISA is an active member of regional 2013/14 Annual Report. and long-term insurance industries. These issued the following directives and on inconsistent practices, and request bodies commenced as well, and this process and international supervisory bodies reports provide financial performance and circulars through the Registrar: improved practices to ensure a sound is on-going. and organisations. In this capacity it was statistical analyses as part of the Division’s • Payment and recovery of levies; insurance industry. asked to host the 2014 meeting of the off-site supervisory mandate. • Registration of principal officers for International Organisation of Pension insurance intermediary firms; With effect from 1 January 2014, the The reporting period also saw the • Entertainment of insurance and Division enforced Regulation 13 as well as Division host two consultation meetings reinsurance brokers; the amended Regulation 15 to the Long- for the long-and short-term insurance • Registration of all persons (both juristic term Insurance Act as published in the

82 83 on AML and CFT compliance activities The Inspections, AML and CFTDuring the year under review, out of conducted in terms of its mandate. Department also launched a campaign six targeted inspections, as at 31 March aimed at the public at large as well as 2015 the Inspections, AML and CFT Following the on-site assessment, the at regulated institutions to create and Department had completed four; the fifth SUPERVISORY International Co-operation Review Group enhance awareness on money laundering was being finalised, while the sixth had (ICRG) submitted the Africa–Middle and the financing of terrorist activities, on just begun. East Review Group’s report on Namibia. the statutory measures in place to combat Consequently, the FATF Plenary approved these scourges, and on the penalties for Table 27 summarises the number of Namibia’s removal from the ICRG not complying with such measures. targeted inspections per sector. SUPPORT Compliance Document and duly issued a Inspections, and AML and CFT compliance public statement to that effect.

The Supervisory Support Division is charged bodies/regulators; and accountable or reporting institution; Table 27: Targeted inspections with coordinating AML and CFT activities, • Attending industry meetings and • Ensuring that accountable and Industry No. of inspections performing targeted on-site inspections, conducting workshops with supervisory reporting institutions have AML and Long-term insurance 3 and dealing with the complaints of users of divisions aimed at enhancing awareness CFT control measures in place; and Short-term insurance 1 financial products and services. of AML and CFT compliance. • Ensuring that accountable and Provident institutions 1 reporting institutions have developed, Microlending 1 During the year under review, NAMFISA The Inspections, AML and CFT adopted and implemented customer continued to build its AML and CFT supervisory Department also focused on the acceptance policies, internal rules, TOTAL 6 and monitoring capacity, mainly by focusing implementation of the AML and CFT programmes, policies, procedures and on skills development through education and tools and guidance manuals to monitor controls to effectively manage and Complaints Activities training initiatives. These included: compliance, especially as regards: mitigate the risks of money laundering In terms of compalints activities for the period under review, Authority received a total of 537 complaints (Table 28). This is a • Training supervisory analysts on • Ensuring that any person who is not and financing of terrorism activities. significant increase, considering only 366 complaints were received during the previous financial year. The increase may indicate that the AML and CFT legislative and declared fit and proper to do so is not consumers have become more aware of their rights and are expressing greater confidence in NAMFISA. A heightened awareness supervisory framework; controlling, or participating, directly Table 26 summarises the reports on has also been driven by the campaign NAMFISA embarked on in respect of a “Know Your Rights” initiative, following certain • Exposure to regional and international or indirectly, in the directorship, compliance received by the relevant malpractices identified in the insurance industry. AML and CFT standard-setting management or operation of an Departments.

Table 28: Number of complaints Table 26: Supervisory support inspections Industry Cumulative Received Resolved In progress Industry Institutions registered “Fit and proper” reports AML and CFT compliance Microlending and credit agreements 1 236 220 17 received checklists received Collective investments 0 0 0 0 Collective investments 21 15 3 Long-term insurance 4 135 115 24 Capital markets 22 21 12 Short-term insurance 3 58 49 12 Microlending 288 78 25 Pension funds 5 95 61 39 Short-term insurance 13 13 8 Referrals (cases not within NAMFISA’s 0 10 10 0 Long-term insurance 18 17 16 jurisdiction and which had to be Friendly societies 3 1 0 referred elsewhere) TOTAL 366 145 64 Capital markets 0 1 1 0 Medical aid funds 0 2 2 0 Once the above-mentioned reports had the Department developed an AML and Task Force on Money Laundering (FATF) Friendly societies 0 0 0 0 been assessed, the Department finalised CFT Compliance Programme template conducted an on-site assessment of TOTAL 13 537 458 92 institution-specific intervention plans. for use by regulated institutions for whom Namibia to verify whether the process of The plans contain a detailed guide the resource burden of developing such a implementing the required reforms and The nature of the complaints received repudiation of hospital benefit claims, claim represents a 75.4% increase, and can be aimed at getting the relevant institutions programme would be prohibitive, i.e. mainly actions aimed at addressing deficiencies, ranged from non-cancellation of contracts, dispute, overpayment, illegal deductions attributed to increased awareness among compliant with the provisions of the players in the microlending and friendly previously identified in the detailed non-payment of pension benefits, non- and extension of loan repayment periods. consumers of their rights. An amount of Financial Intelligence Act as well as its societies sectors. The Department conducted assessment report by the World Bank in payment of pension contributions, N$195 127 was recovered from the short- regulations, notices and guidance notes. workshops around the country over the 2007, was under way. The assessment repudiation of funeral benefits, repudiation Furthermore, the Authority recovered an term insurance industry, while N$310 679 The intervention plans are scheduled for period of two weeks to assist the various included an evaluation of NAMFISA as a of disability benefit claims, repudiation amount of N$2 521 075 during the year was recovered from long-term insurance discussion and sign-off with the institutions institutions with completing their own AML supervisory body in terms of the Financial of insurance claims, queries, overcharged under review in respect of complaints institutions. A total of N$565 332 was concerned in the coming financial year. and CFT compliance programmes. Intelligence Act, as well as its AML and interest, non-payment of refunds, poor addressed, compared with the recovery recovered from microlending and credit CFT compliance activities in terms of the information on loan granted, service not of N$1 437 684 in the previous financial agreement institutions, while N$1 449 937 With the assistance of the Bank of In January 2015, the Africa–Middle East Act. NAMFISA representatives reported delivered, unacceptable service delivery, year for the benefit of consumers. This was recovered from pension funds. Namibia’s Financial Intelligence Centre, Review Group of the Financial Action to the Africa–Middle East Review Group

84 85 INDUSTRY REVIEW 86 87 INVESTMENT INSTITUTIONS The Authority supervises the stock exchange, investment managers, management companies, trustees of unit trust schemes, and The shares quoted in the consumer goods shares traded improved by more than 50% The repo rate - the rate at which the Bank microlenders in terms of the governing legislation. As at 31 December 2014, this oversight function extended to 1 stock exchange, 24 and financial sectors drove the increase during 2014, the relative size and increase of Namibia extends credit to commercial investment managers, 13 management companies, 3 trustees and 290 microlenders. These financial institutions and intermediaries in prices of shares. The prices of shares in in the market value resulted in the slight banks - increased by 50 basis points fall under the Investment Institutions Division, and the Authority supervises them in terms of the governing legislation. the consumer goods sector increased by gain. However, the local market liquidity, to 6%. The total debt is 17.4% of 2013 19.8% for the year, and contributed 12.3% although relatively better than the overall GDP. Government issued N$1.6 billion Capital markets to the gain in the NSX overall market. The market, declined to 1.9% from 4.6% in of new debt during the reporting period, securities’ prices in the financial sector 2013. increasing its debt to N$17.3 billion, The value of the Namibian Stock Exchange better than the 7.6% of the JSE’s FTSE/JSE rose by 19.96%, adding 7.5% to the gains. or 13.7% of GDP. On the other hand, (NSX) increased significantly during the All Share Index, which is a much larger and In the debt market, significantly more banking institutions added N$1.1 billion year, driven by higher share prices, a rise more liquid exchange than the NSX. The JSE’s The liquidity of the NSX varied over the net debt securities were issued during in debt securities to the market. in the volume of outstanding shares, and prices came off the relatively high gains of reporting period. Liquidity measures the year. The issuers brought net new the listing of new instruments. The market 22.6% in 2012 and 17.8% in 2013 (Chart 9). how easily tradable shares are. The overall debt securities of N$2.8 billion to the capitalisation of the NSX increased by market liquidity improved slightly to debt market. As a result, the total debt 0.4% on the 0.3% of the past two years. increased by 14.8% to N$21.8 billion in 22.4% to N$1,722.6 billion. This increase Chart 9: Market Indices in the market value was mainly driven by Although both the volume and value of a rising interest-rate market (Chart 10).

the increase in the prices of shares and 1 098 997 Chart 10: Debt market the 7.1% increase in the volume of shares 984 outstanding. The listing of electronically 867 838 145 traded funds added N$42.1 billion to the 1 186 1 070 1 633 1 909 2 899 market capitalisation. 1 427 1 427 1 427 1 427 1 427 Corporate The market capitalisation of shares issued Banking institutions by companies incorporated in Namibia 389 332 and primary-listed on the NSX, increased 274 5 988 12 147 14 065 15 741 17 335 Sate-owned enterprises by 19.2% to N$22.3 billion. This increase 173 221 is due mainly to the 17.2% gain in prices of Central Government shares quoted on the primary market. The 2010 2011 2012 2013 2014 price of the outstanding shares remained the same from 2013. NSX Overall Index NSX Local Index

2010 2011 2012 2013 2014 The increases in the shares outstanding 49 771

were due to net new shares quoted on 46 256 the NSX. During the year, Mediclinic International Ltd and PSG Konsult Ltd 39 250 listed 1.9 billion net new shares on the 32 119 32 003 main board. The Trustco Group Holdings Ltd, which transferred its shares from the local board as a primary listing to the main board as a secondary listing.

Trustco’s primary listing is now on JSE Ltd 2010 2011 2012 2013 2014 (JSE) in South Africa. FTSE/JSE All Share Index The prices of shares quoted on the NSX increased by 10.1% for the year compared with 1.3% in 2013. This performance is relatively

88 89 INVESTMENT INSTITUTIONS CONTINUED

Investment management

The assets under the administration Investment managers continued to invest However, this level is below that from The key investors of the assets were pension are managed on a proprietary basis, i.e., for of investment managers continued to the bulk of assets under administration in 2010 to 2012, but a gain on the 47.5% funds, unit trust schemes and long-term unit trust schemes associated with or in the grow. These assets increased by 10.4%, or Namibia. The assets invested in Namibia in 2013. Although the nominal assets insurers (Chart 13). Pension fund assets same group with the managers. Long-term N$12.9 billion to N$136.2 billion, as at 31 grew by 13.8% to N$66.7 billion, or 49% invested in the Common Monetary Area of N$77.7 billion made up 57.0% of the insurance companies made up 15.1% of the December 2014. This increase is due to of the assets in Namibia (Chart 11). This (CMA) and in foreign markets increased, total assets. The level of pension assets has assets. Most of the N$20.5 billion insurance net new inflows of assets as well as to the increase is due partly to an increased these assets reduced as a percentage of remained steady over the past five years, assets are also managed on a proprietary reinvested income and the appreciation in reallocation of assets to Namibia and total assets. The managers kept 38% of the despite a slight reduction between 2011 and basis. Pension funds contributed 5% to invested assets. partly to relatively lower performance in assets in the CMA, which is the average 2013. Unit trust scheme assets contributed the growth in total assets, while unit trust foreign markets. for the past five years. The foreign assets 23.4% to total assets. Most of these assets schemes added 2.8%. reduced to 13.1% after a build-up from 9.8% in 2010 to 13.2% in 2013. Chart 13: Investment managers’ clients

57% Chart 11: Country allocation by investment managers

52.9% 50.6% 50.5% 47.5% 49.0% 24.3%

14.8% 37.4% 38.2% 38.2% 39.3% 38.0% Offshore 2.3% 0.7% 0.5% 0.3% 0.2% Common Monetary Area Pension funds Unit trust Long-term Other Short-term Companies Medical aid Natural persons Namibia schemes insurance insurance funds companies companies 13.2% 13.1% 9.8% 11.1% 11.3% Collective investment schemes The assets under management byby 6.1% compared with 11.2% for the CMA, N$19.9 billion, of funds in Namibia (Chart 2010 2011 2012 2013 2014 management companies or invested in due mainly to an increased reallocation 14). Investments in the CMA declined from unit trust schemes continued to grow. of assets to foreign markets or to relatively 44.4% in 2013 to 43.7% in 2014. Offshore The managers invested assets in accordance years. In 2010, managers invested 42.6% The assets increased by N$4.8 billion, or better performance in foreign markets. assets grew from N$346 million in 2010 to with their nature and typical investment in listed equity and 12.9% in listed debt. 12.9%, to N$42.1 billion. Net new inflows N$3.8 billion in 2014. These assets made up horizons for the assets. Over 70% of the For liquidity, the managers invested 26.4% of funds, especially from pension funds, as Management companies continued to 9% of total assets, compared with 5.3% in assets were long-term assets. The managers in money market instruments, consisting well as from the reinvested income and the invest the bulk of assets under management 2013 and 1.3% in 2010. invested 49.3% of the assets in listed mainly of Treasury bills and commercial appreciation in invested assets resulted in in Namibia. Despite the slowdown in equity and 14.0% in listed debt (Chart bank deposits. However, money market this growth. Assets invested in Namibia grew allocation, schemes invested 47.2%, or 12). The assets in listed equity and debt investments have fallen steadily since the have increased steadily over the past five level of 35.3% registered in 2010. Chart 14: Country allocation by unit trust schemes

Chart 12: Asset allocation by investment managers 54.9% 52.2% 50.3% 46.8% 49.1% 47.2% 49.6%

43.0% 44.5% 44.4% 43.7%

30.9% Namibia

Common Monetary Area

14.0% Offshore 6.7% 1.0% 0.4% 9.0% 0.1% 5.3% 1.3% 2.1% 3.2% Listed equity Money market Listed debt Other assets Unlisted equity Unlisted Unlisted debt investments property

2010 2011 2012 2013 2014

90 91 INVESTMENT INSTITUTIONS CONTINUED Microlending

The schemes invested the assets in bank deposits. Money market instruments Market composition and size accordance with the risk and return are less risky and offer a certain return to Microlending businesses continued expanding during the period under review, not only in terms of the number of lenders and the preferences of the key investors. The risk-averse investors, such as households. number of loans, but also as regards the average value of disbursed loans. Thus, the number of lenders rose from 273 in 2013 to 289 management companies allocated 72.5%, However, schemes also invested 14.7% in in 2014. This represents a net positive registration of 16 entities (Chart 17), which compares favourably to the total of 7 recorded or N$24.8 billion, of funds to money listed equity and 8.0% in listed debt. These during the preceding reporting year. market instruments (Chart 15). Most allocations reflect the medium- to long- of these funds were held in commercial term nature of unit trust investments. Chart 17: Microlending market size

500 2500 Chart 15: Asset allocation by unit trust schemes 450 72.5% 2 262 2 259 388 398 400 2000

350 347

273 289 300 1 586 1500 1 484 250 14.7% 200 1 094 1000 8.0%

2.1% 1.9% 150 0.8% 100 500 Money market Listed equity Listed debt Unlisted equity Other assests Unlisted debt investments 50

The key investors of the assets were Household funds increased by 4.8% from assets inflow increased by N$4.1 billion or 0 0 households, companies, unit trust schemes, 2013 to N$20 billion in 2014. Company 1.7 times to 7.2% of total assets. Pension 2010 2011 2012 2013 2014 and pension funds (Chart 16). Despite assets made up 20.3%, while other unit funds contributed 11% of the growth in reducing from 58.3% of assets in 2011 to trust schemes constituted 11.6% of total assets, while households contributed 2.5%. Disbursements 53.1% in 2014, households continued to assets. These unit trust schemes operate as The total value of loans disbursed during the period under review decreased only slightly, year-on-year, namely by 0.07% to N$2 259 be the key investors in unit trust schemes. fund-of-funds or as feeder funds. Pension million from the N$2 261 million reported for 2013. This decrease was due mainly to a lower amount of credit from ‘term lenders’ (Chart 18). As a result, of the total value of loans disbursed in 2014, term loans amounted to N$1.6 billion, which accounted for 68.7% Chart 16: Unit trust schemes’ clients of the total value of disbursed loans. ‘Payday’ loans constituted the remaining 31.3%.

53.1% Chart 18: Credit extension by term lenders

2500

2 261 2 259 20.3% 2000

11.6% 7.2% 1 586 4% 3.3% 1500 0.5% 0.1% 1 484

Natural persons Comanies Unit trust Pension funds Other Long-term Short-term Medical aid schemes insurance insurance funds 1000 1 094 companies companies Value of loan in N$ millions loan of Value

500

0 2010 2011 2012 2013 2014

92 93 Chart 21.B: Credit extension by payday lenders

MICROLENDING CONTINUED 3 500 3 302

3 000 Disbursements continued 2 538 2 500 In terms of the value of loans extended to Chart 19: Credit extension to individuals 2 000 1 685 1 641 individuals, a slight increase was noted 1 552 740 000 1 440 from the N$698 460 reported for 2013 N$ millions 1 500 717 031 720 000 1 059 957 1 079 to N$717 031 for 2014, representing a 1 000 698 460 607 growth of 2.7% (Chart 19). The growth in 700 000 the number of loans disbursed emanated 500 680 000 mainly from the category ‘payday lenders’, - 656 061 who made up 86% of the total volume of 660 000 2010 2011 2012 2013 2014 the loans disbursed to individuals during 640 000 638 132 Disbursements Outstanding amounts 2014. Number of loans disbursed loans of Number 620 000 613 307 600 000

580 000 560 000 PROVIDENT 2010 2011 2012 2013 2014

On the contrary, over the same period, the Chart 20: Loans disbursed v Loans outstanding

total amount of outstanding loans as at 31 4 000 December 2014 stood at N$3.4 billion, INSTITUTIONS 3 500 3 382 resulting in a significant increase of 29.3% The Authority supervises pension funds, medical aid funds and friendly societies in terms of governing legislation. These bodies from the N$2.6 billion recorded in 2013 3 000 collectively fall under the supervision of the Provident Institutions Division. The total number of registered and active provident 2 616 (Chart 20). As a result, the gap between institutions as at 31 December 2015 was 122, (109 pension funds, 10 medical aid funds and 3 friendly societies) with 548 485 members. 2 500 the total amount of the extended loans and 2 000 1 753 Pension funds those outstanding widened significantly 2 262 2 260 1 501 N$ millions in the period under review in comparison 1 500 Industry overview 1 118 1 586 with 2013. However, the 29.3% increase 1 484 The number of active funds registered with Chart 22: Pension fund categories 1 000 is still lower than the average growth rate 1 094 NAMFISA declined to 109 as at 31 December 7.1% witnessed in outstanding amounts since 500 2015, from 111 funds recorded at 31 7.0% 2010, namely 32%. - December 2013. The decline was as a result of 2010 2011 2012 2013 2014 four active funds that were deregistered after transferring into umbrella fund schemes, Outstanding amounts Disbured amounts while two new funds were registered in 2014. The total number of inactive funds The term lenders, although they disbursed Chart 21.A: Credit extension by term lenders as at 31 December 2015 was 142. Funds are 2.1% fewer loans, extended higher loan 800 regarded as inactive if they are in the process 1.9% amounts on average than payday lenders 708 700 of deregistration or liquidation. For the year (see Charts 21.A and 21.B). Thus, the 621 0.6% ended 31 December 2014, there were 106 0.4% 0.4% 600 0.3% average amounts of loans obtained from 0.1% 527 defined contribution funds (including 13 0.0% 0.0% 0.0% 507 term lenders in 2014 rose to N$15 705 in 487 500 umbrella funds) and 2 defined benefit funds. comparison with N$14 293 disbursed in Retirement Provident Preservation Pension Civil servants Other annuity 2013, while the average loan from payday 400 Chart 22 shows the different pension funds lenders rose to N$1 148 compared with the N$ millions 2013 2014 300 in which members participated as at 31 average of N$1 064 loaned to individuals December 2014. The bulk of retirement in 2013. Furthermore, payday lenders had 200 savings remains with pension funds, 58 61 67 78 80 higher amounts of disbursements relative 100 and comprises mainly the Government to the outstanding amounts, unlike their - Institutions Pensions Fund for civil term lender counterparts (Charts 21.A 2010 2011 2012 2013 2014 servants followed by other occupational and 21.B). Disbursements Outstanding amounts pension funds.

94 95 Expenditure PROVIDENT INSTITUTIONS CONTINUED The industry’s total expenses increased by insurance premiums (28%) and 29 provide a breakdown of the industry’s by 25% from N$744.6 million reported administration fees (26%). The remaining expenses over the past five years, showing Membership a year earlier to N$928.6 million as at expenses are attributed to other costs that a sizable portion of the cost is Total fund membership increased by 22% from 297 455 as at 31 December 2013 to 364 045 as at 31 December 2014. Membership 31 December 2014, (Chart 25). The (Table 29). used for the insurance premiums. The comprised 324 686 active members and 39 359 pensioners (Chart 23). expenses mainly include administration premiums are for different risk benefits, fees, investment management fees, The growth in total expenses can be such as group life assurance, disability Chart 23: Pension fund membership insurance premiums and other costs such attributed to the same factors that led income and funeral benefits. Risk benefits 400 000 as actuarial, auditing, consultancy and to the increase in contributions, i.e. an play a critical role in enabling income 324 686 trustee expenses. Investment fees made increase in membership and general continuation in the event of various life- 300 000 251 741 258 769 up the bulk of the costs at 30%, followed salary increments. Chart 25 and Table changing circumstances and events. 234 919 222 241 Active members 200 000 Chart 25: Pension fund expenses Pensioners 300 279 745 Number of members of Number 100 000 257 983 40 739 38 686 39 359 240 915 34 363 37 948 250 241 821 222 607 - 227 654 202 186 205 881 216 857 Administration fees 2010 2011 2012 2013 2014 200 186 401 194 407 175 040 Insurance premiums 144 041 Income 150 142 364 142 168 N$ millions Total contributions rose to N$5.6 billion voluntary contributions increased by 21%. the bulk of contributions (more than Other costs 100 as at 31 December 2014 from N$4.4 The gains in total contributions can be 90%) constituted retirement savings. The Investment management fees billion recorded during the previous year, attributed to an increase in membership average amount of retirement savings per representing a 28% increase (Chart 24). and in remuneration. Encouragingly, not active member per annum increased from 50 The total contribution mainly comprises only did contributions made towards the N$15 800 at 31 December 2013, to N$20 - members’ and employers’ contributions costs of the fund increase by a comparably 270 in the current review period. 73 081 59 564 62 435 77 501 149 047 towards retirement, which increased by low rate of 12%, but also, as depicted in 46% and 16%, respectively, while additional Chart 24, the five-year trend shows that 2010 2011 2012 2013 2014

Chart 24: Pension fund contributions Table 29: Pension fund cost experience 4 000 Member contribution towards retirement Cost item N$ ‘000 2 905 458 3 000 Employer contribution 2010 2011 2012 2013 2014 % Change 2 486 814 towards retirment 2 318 961 1 984 995 2013– 2014 1 731 798 Additional voluntary 2 000 contribution 1 490 696 1 549 915 1 584 663 Cost category (N$) 1 399 609

N$ millions 1 360 837 Contribution Administration fees 175 040 202 186 194 407 227 654 241 821 6% 1 000 towards costs Insurance premiums 240 915 186 401 205 881 222 607 257 983 16% 415 966 274 993 308 182 320 056 359 209 Other Other costs 73 081 59 564 62 435 77 501 149 047 92% - 13 292 11 368 20 857 3 921 14 066 17 138 17 166 5 387 20 936 22 780 Investment management fees 144 041 142 364 142 168 216 857 279 745 29% TOTAL (incl. investment fees) 633 077 590 515 604 891 744 619 928 596 25% 2010 2011 2012 2013 2014 Cost category (% of total) Administration fees 28% 34% 32% 31% 26% n/a Insurance premiums 38% 32% 34% 30% 28% The year-on-year growth in additional suggests that members are cultivating expectancy over recent decades and the Other costs 12% 10% 10% 10% 16% voluntary contributions remained at a habit of supplementing their pension increasing numbers of the members who Investment management fees 23% 24% 24% 29% 30% 22.0%, similar to the rate recorded in contributions. This is encouraging, live longer after retirement. TOTAL 100% 100% 100% 100% 100% the previous year. This steady growth particularly in light of increasing life

96 97 Investments PROVIDENT INSTITUTIONS CONTINUED Total investments increased by 13%, Chart 27: Pension fund investments

from N$104.0 billion to N$117.2 billion 140 000 Liquidity as at 31 December 2014. The growth in 117 163 Liquidity is a measure of the ability of eliminating the need to divest money value of less than 1 would be an indication 120 000 investment assets is due to an increase 103 613 funds to meet their short-term financial from the market. Thus, liquidity in this that contributions would fall short. As at in contributions as well as positive 100 000 84 174 obligation as they fall due. With sense is the ratio of contributions due and 31 December 2014, the industry liquidity investment returns recorded during the 74 712 80 000 retirement funds, monthly contributions received to expenses and benefits due and ratio stood at 1.16, indicating a healthy period under review. Chart 27 shows

N$ millions 62 821 play an important role in meeting a paid. A ratio of 1 (or more) means the liquidity position. Table 30 shows the the growth in pension funds’ investment 60 000 fund’s liquidity requirements as they are contributions would sufficiently cover the industry’s liquidity position during the assets over a five-year period. 40 000 frequently used to pay benefits (liabilities), payment of the costs and benefits, while a five-year period. 20 000

Table 30: Pension fund liquidity 0 Liquidity (N$ millions) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Contributions due and received 3 292 159 3 431 178 3 874 296 4 414 086 5 627 344 Geographical asset allocation Expenses and benefits due and paid 3 216 832 3 115 515 3 485 399 4 341 432 4 855 652 Chart 28 summarises the industry’s five years. This development is consistent industry as a whole also complied with RATIO 1.02 1.10 1.11 1.02 1.16 jurisdictional asset allocation as at 31 with the provisions of Regulation 28 of the Exchange Control Regulations, which December 2014, notably showing that the Pension Funds Act, which prescribes that limit foreign investments to 35%. Benefits industry has been investing at least more at least 35% of pension funds’ assets are Total benefits paid stood at N$3.9 billion benefits made up 45% (52% in 2013) benefits is reassuring, as this is indicative than 35% in domestic assets over the past obliged to be invested domestically. The as at 31 December 2014, representing an (Chart 26). Withdrawal benefits only of increased pension preservation. Chart increase of 31.7% from the previous year. increased by 15% year-on-year, compared 26 and Table 31 provide an overview of Chart 28: Geographical asset allocation of pension fund investments Lump sum retirement benefits made up with retirement benefits paid, which the size and type of benefits for the various 100% the bulk of benefits, accounting for 47% soared by 56%. The low composition of reporting periods. 26% 28% 29% 35% 32% of total benefits paid, while withdrawal withdrawal benefits as a percentage of total 80% Outside CMA Chart 26: Pension fund benefits paid 33% 29% 60% CMA 28% 2 000 26% 27% Namibia 40% 1 500 Lump sum withdrawal benefits

Lump sum retirement benefits 41% 43% 42% 39% 41% 1 000 20% Lump sum death benefits N$ millions 500 Lump sum disability benefits 0% - 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Domestic asset allocation Table 31: Pension fund benefits experience As shown in Chart 29, during the past two Chart 29: Domestic asset allocation of pension fund investments 59% years, the industry showed an appetite 60% Benefits experience 2010 2011 2012 2013 2014 57% Benefits paid (N$ ’000) for local equities in relation to other local Lump sum withdrawal benefits 1 096 221 1 265 294 1 329 712 1 511 611 1 738 941 asset classes, followed by fixed interest 50% Lump sum retirement benefits 715 144 624 790 840 996 1 165 028 1 817 875 income. This is expected, as this strategy is commensurate with the long-term nature 40% Lump sum death benefits 186 458 176 139 244 543 225 011 260 600 of pension fund liabilities. Lump sum disability benefits 22 268 24 417 21 007 21 072 34 823 30% Lump sum funeral benefits 3 121 3 028 2 952 6 982 7 312

TOTAL 2 023 212 2 093 668 2 439 210 2 929 704 3 859 551 20% 16% 16% Benefits paid (% of total) 13% 11% 9% 10% Lump sum withdrawal benefits 54.2% 60.4% 54.5% 51.6% 45.1% 10% Lump sum retirement benefits 35.3% 29.8% 34.5% 39.8% 47.1% 2% 4% 1% 2% Lump sum death benefits 9.2% 8.4% 10.0% 7.7% 6.8% 0 Lump sum disability benefits 1.1% 1.2% 0.9% 0.7% 0.9% Property Unlisted Other Money market Fixed interest Equities investments Lump sum funeral benefits 0.2% 0.1% 0.1% 0.2% 0.2% TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 2013 2014

98 99 Assets and liabilities PROVIDENT INSTITUTIONS CONTINUED The assets of the retirement fund industry while the pensioner accounts totalled increased by 14%, from N$105.2 billion N$9.5 billion, representing an increase of Return on investments as at the end of 2013 to N$119.6 billion 2% in both cases. Matching the assets and The industry’s return on investment, as As shown in Table 32, by applying the while the NSX Overall Index was up by as at 31 December 2014. The growth in liabilities, the industry was found to be in estimated by the Authority, is computed above formula, the Authority noted 10.1% for 2014. funds’ assets can be attributed to the rise a sound financial position, consistently in this section. The return on investment a significant decline in the industry’s in the membership and the corresponding maintaining a healthy funding level of is derived as follows: return on investment between 2013 and increase in contributions. As at 31 between 101% and 102% during the 2014, which dropped from 17.83% (real December 2014 the members’ share period 2010 to 2014 (Table 33). R = 2i return: 12.93%) to 9.71% (real return: account amounted to N$55.3 billion, A+B-i 5.11%). The decline is mainly as a result of Where R = Return on investment lower investment income gained during Table 33: Pension fund funding position A = Initial value of investment this period, while the funds’ total assets B = End value of investment increased substantially. Over the same Funding position 2010 2011 2012 2013 2014 i = Net investment income + period, this performance is nonetheless in (N$ (N$ (N$ (N$ (N$ Capital appreciation – line with the overall market movements as millions) millions) millions) millions) millions) Investment costs the JSE All Share Index improved by 7.6%, Total assets 64 275 77 220 86 566 106 987 119 569 Active members account 29 104 36 229 46 657 54 202 55 335 Table 32: Return on pension fund investments Pensioners account 6 731 6 938 9 326 9 303 9 466 Reserve account 25 104 32 898 29 462 42 095 16 186 Investment performance 2011 2012 2013 2014 Other accumulated 2 128 2 21 1 35 993 Return on investment (Nominal) 8.54% 16.19% 17.83% 9.71% Total liabilities 63 067 76 067 85 467 105 602 116 980 Namibia Consumer Price Index 7.40% 6.30% 4.90% 4.60% Funding level 102% 102% 101% 101% 102% Return on investment (Real) 1.14% 9.89% 12.93% 5.11% Medical aid funds It is Interesting to note the relationship Chart 30: Growth in net investment income v Growth in Investment management fees

between net investment income earned by 140% Number of medical aid funds the industry and investment management 129% 120% The number of active funds did not change from 2013, i.e. there were nine funds as at 31 December 2014. Open funds are available fees paid. Chart 30 shows how the change to the general public, while closed funds are exclusive to specific employers or employer groups. Table 34 illustrates the number of in investment returns is followed by a 100% medical aid funds by size and type from 2010 to 2014. corresponding change in fees, albeit 80% after a lag in time. This is expected Table 34: Number of medical aid funds by size and type since investment management fees are 60% 54% Net investment income normally linked to the market value (and Type of fund Size of fund 2010 2011 2012 2013 2014 40% Investment fees performance) of the investment portfolio. 19% 30% Open fund Large* 2 2 3 3 2 20% Medium** 2 2 1 1 2 6% 0 Small*** 0 0 0 0 0 1% -1% TOTAL 4 4 4 4 4 -20% -31% Closed fund Large* 0 0 0 0 0 -40% Medium** 2 2 2 2 2 2011 2012 2013 2014 Small*** 3 3 3 3 3 TOTAL 5 5 5 5 5 All funds Large* 2 2 3 3 2 Medium** 4 4 3 3 4 Small*** 3 3 3 3 3 TOTAL 9 9 9 9 9

*Large scheme = ≥30 000 beneficiaries **Medium scheme = ≥6 000 members but <30 000 beneficiaries ***Small scheme = <6 000 members

100 101 Income PROVIDENT INSTITUTIONS CONTINUED The industry recorded a consolidated increases in contribution that were to be highly sensitive to price changes and, gross contributions income of N$2.6 applied during 2014 for open and closed therefore, more prone to the ‘buy-down’ Membership billion, which is 14.1% higher than the medical aid funds amounted to 10.2% phenomenon, which is characterised by Compared with 2013, the number of medical aid fund beneficiaries increased by 2.3% to 179,364 as at 31 December 2014. Open N$2.3 billion reported in 2013. The total and 10.0%, respectively. Annual increases switching from a more expensive benefit funds reported an increase in total beneficiaries of 3.5%, whilst closed funds reported a decrease of 4.9% for the same period. Table gross healthcare expenditure by medical in contribution for the past five years option to a cheaper one. Such behaviour 35 provides more detail on membership movement over the last five years. aid funds amounted to N$2.2 billion, exceeded the annual inflation rate (per the will keep the industry stagnant in terms up from N$2.0 billion reported in 2013, Namibia Consumer Price Index) in each of of growth. Chart 32 illustrates the trend in Table 35: Membership of medical aid funds which reflects an increase of 11.9%. those years. The long-term effect of such a gross contributions compared with gross trend is a possible downward migration of healthcare expenditure, as reported by the Type of fund Membership 2010 2011 2012 2013 2014 The Registrar of Medical Aid Funds beneficiaries to cheaper benefit options, or industry over the past five years. Open funds Principal members 58,083 60,460 65,590 68,471 73,624 approved contribution increases of 9.0– the outright deregistration of dependents. Dependents 71,796 75,753 81,396 83,338 83,423 10.7% in 2014. The weighted average Younger and healthier beneficiaries tend Total beneficiaries 129,879 136,213 146,986 151,809 157,047 % Change: Principal members 4.9% 4.1% 8.5% 4.4% 7.5% Chart 32: Gross contributions v Gross healthcare costs % Change: Dependents 4.3% 5.5% 7.4% 2.4% 0.1% 8.5% % Change: Total beneficiaries 4.5% 4.9% 7.9% 3.3% 3.5% 3 000 8.5% 2 642 Closed Funds Principal members 9,634 9,513 9,683 10,038 9,667 2 500 8.3% 8.2% 2 316 Dependents 12,815 13,024 12,991 13,431 12,650 2 002 2 195 2 000 Contributions received 1 708 1 962 Total beneficiaries 22,449 22,537 22,674 23,469 22,317 1 577 1 758 % Change: Principal members -5.4% -1.3% 1.8% 3.7% -3.7% 1 500 Claims 1 216 1 440 % Change: Dependents -5.8% 1.6% -0.3% 3.4% -5.8% 1 000 Claims ratio % Change: Total beneficiaries -5.6% 0.4% 0.6% 3.5% -4.9% members of Number 7.7% All funds Principal members 67,717 69,973 75,273 78,509 83,291 500

Dependents 84,611 88,777 94,387 96,769 96,073 - Total beneficiaries 152,328 158,750 169,660 175,278 179,364 2011 2011 2012 2013 2014 % Change: Principal members 3.3% 3.3% 7.6% 4.3% 6.1% % Change: Dependents 2.6% 4.9% 6.3% 2.5% -0.7% Total non-healthcare expenditure unchanged at N$11.0 million (N$11.1 a net underwriting surplus of N$50.0 % Change: Total beneficiaries 2.9% 4.2% 6.9% 3.3% 2.3% increased by 8.4% from N$265.5 million million in 2013). The increase in open million in 2014. This is an improvement of in 2013, to N$287.7 million as at 31 fund administration expenditure is N$66.1 million from a net underwriting December 2014. The non-healthcare primarily due to membership growth deficit of N$16.1 million for 2013. The number of principal members Pensioner membership, which represents ended 31 December 2014. The dependent expenditure of medical aid funds consists and Namibia Consumer Price Index The improvement is mainly due to the stood at 83 291 as at 31 December 2014, 3.8% (2013: 2.7%) of total beneficiaries, ratio measures the average number of primarily of the following: adjustments during the year. The slight industry’s reduced claims ratio, which climbing by 6.1% against the total of 78 increased significantly, i.e. by 43.6%, to dependents per principal member. Across • Administration expenditure; decrease in administration costs of closed dropped from 84.7% in 2013 to 83.1% 509 members reported as at 31 December 6 769 members as at 31 December 2014. the entire industry, the dependent ratio • Managed healthcare expenditure; funds is similarly due to the reduction in in 2014. As explained in the previous 2013. As was the case with beneficiaries, Open funds recorded a higher percentage declined slightly to 1.2 in 2014 from that • Operational expenditure; and membership. paragraph herein, the decline in the growth was evident in respect of the of pensioner members (83.2% of the of 1.3 since 2010, with the exception of • Consultant fees. number of claims was mainly due to the principal membership of open funds, total pensioner members) compared 2011 (Chart 31). Managed healthcare costs increased by implementation of managed healthcare which jumped by 7.5%, whereas the with closed funds (16.8%) for the year The total administration expenditure 12.1% from N$35.6 million reported in interventions as well as the effective principal membership of closed funds of the industry increased by 4.5% from 2013 to N$39.9 million reported in 2014. execution of wellness programmes and declined by 3.7% between 2013 and Chart 31: Dependent ratio in medical aid funds N$188.0 million as at 31 December 2013, This is primarily as a result of aggressive member education. 2014. The reduction in the principal 1.2 to N$196.2 million as at 31 December implementation of managed healthcare membership of closed funds was due to 1.1 1.1 1.1 1.1 1.1 1.1 2014. Administration costs constituted interventions by funds, which, although A net surplus of N$145.0 million was retrenchments, staff turnover and the 7.4% of gross contributions in 2014, down raising this cost component, helped to recorded for the year ended 31 December unaffordability of contributions. 1.1 from 9.4% in 2013. reduce claims. This is especially in respect 2014 (2013: N$109.1 million). Open 1.1 of those funds whose reserve levels were funds reported a net surplus of N$138.0 The total number of dependents remained 1.1 Open funds administration expenditure precariously close to 25%. million, while closed funds announced a relatively unchanged, dropping only by 1.1 increased by 4.8% to N$185.2 million in net surplus of N$7.0 million. 0.7% from 96 769 as at 31 December ratio Dependent 0.0 2014, while administration expenditure The industry reported an improvement in 2013 to 96 073 as at 31 December 2014. for closed funds remained virtually its net underwriting results, announcing The number of dependents of closed 0.0 funds declined by 5.8%, while open 0.0 funds reported a slight decline of 0.1% 2010 2011 2012 2013 2014

in dependents, during the year ended 31 Consolidated industry Open funds Closed funds December 2014.

102 103 Table 36 demonstrates that administration Medical aid funds normally experience winter, when beneficiaries visit doctors, PROVIDENT INSTITUTIONS CONTINUED costs as a percentage of gross contributions fluctuations in claims patterns during hospitals, clinics and pharmacies for cold- for the whole industry hovered between different quarters of the year. Chart 36 related illnesses). The exception is 2010, Expenditure 7.0% and 8.1% from 2010 through 2014, shows the seasonality of claims on a when the highest claims were reported in Although the industry’s healthcare expenditure for 2014 was 11.9% higher than its 2013 counterpart, the claims ratio recorded in whilst healthcare costs have consistently quarterly basis for the past five years. the fourth quarter of the year. 2014, namely 83.1%, was lower than 2013’s at 84.7%. Charts 33.A and 33.B show the claims typology recorded by the industry in 2014 made up over 80% of gross contributions Notably, claims are highest during the and 2013, respectively. over the same period, barring 2010. second and third quarters of the year (i.e.

Chart 33.A: Distribution of total healthcare Chart 33.B: Distribution of total healthcare Chart 36: Claims seasonality (N$) benefits paid, 2014 benefits paid, 2013 700 000 000

600 000 000 579 661 569 2014 556 790 645 497 674 145 500 000 000 2013 448 008 696 450 150 808 432 843 679 2012 400 000 000 371 195 182 2011 2014 2013 357 446 512 332 530 873 2010 300 000 000 299 503 082 Claims as % of gross contributions gross % of as Claims

200 000 000 Q3 Q4

Assets and liabilities

Hospitals 34.8% Dentists 4.6% Hospitals 34.5% Dentists 4.5% As at 31 December 2014, the industry The difference between a fund’s total Chart 37 compares assets and liabilities in General Practioners 9.8% Radiologists 3.6% General Practioners 9.7% Radiologists 3.6% held assets totalling N$1.2 billion, which assets and its total liabilities constitutes its open and closed funds for the 2013 and Pharmacies/Medicine 17.0% Dental Specialists 0.5% Pharmacies/Medicine 16.6% Dental Specialists 0.5% Specialists 11.5% Dental Therapists 0.1% Specialists 11.0% Dental Therapists 0.1% is 16.0% higher than the asset values liquidity gap. A positive number indicates 2014 years. Auxiliary Services 5.0% Psychiatric Institutions 0.2% Auxiliary Services 4.6% Psychiatric Institutions 0.2% reported as at 31 December 2013 (N$1.0 that the fund has sufficient assets to meet Pathologists 4.7% Optic Payouts 0.2% Pathologists 4.1% Optic Payouts 0.1% billion). The increase in total assets is its liabilities, while a negative number Optometrists 2.7% Other 5.4% Optometrists 3.3% Other 7.2% mainly due to additional funds invested as points to the fund having more liabilities Hospitals, pharmacies and medical specialist typologies were the three highest contributors to healthcare expenditure during 2014. Hospital a result of surpluses during the year. than assets, i.e. it is technically insolvent. claims amounted to N$763.1 million (34.8%) of total claims for 2014 (2013: N$672.3 million, or 34.5%). Claims paid to pharmacies amounted to N$373.1 million (17.0%) of total healthcare expenditure (2013: N$332.8 million, or 16.6%). Disbursements to medical specialists totalled Chart 37: Medical aid fund Assets v Liabilities

N$251.5 million (11.5%) of total healthcare expenditure (2013: N$215.3 million, or 11.0%). 1 200

970 Table 36: Healthcare costs (claims) ratio v Administration costs ratio 1 000 959 825 813 Type of cost as % of gross 2010 (%) 2011 (%) 2012 (%) 2013 (%) 2014 (%) Current assets contributions 800 Healthcare 77.1 81.9 85.3 84.7 83.1 Total assets 600

Administration 7.7 7.7 8.1 8.1 7.4 N$ millions Current liabilities

400 Total loabilities 222 209 222 209 200 192 192 177 177 42 42 34 34 - Open funds Open funds Closed funds Closed funds 2013 2014 2013 2014

104 105 Chart 39: Industry solvency trend PROVIDENT INSTITUTIONS CONTINUED 60.0% 53.6% 50.7% 51.3% 47.9% 45.5% The current ratio of open funds was 1:4.3 as obligations of medical aid funds are 38 depicts the claim-paying ability of the 50.0% Closed funds as at 31 December 2014, improving from normally of a short-term nature. As such, funds, measured in months of cover. The 40.0% 35.0% 33.0% 32.8% 34.0% 32.6% Industry reserve level 1:3.9 reported in 2013. Closed funds had medical aid funds are required to ensure a chart also shows that, for the past five 32.3% 30.0% 29.7% 30.1% a current ratio of 1:4.5 as at 31 December high percentage of their assets are highly years, the industry has held sufficient cash 29.3% 31.0% Open funds 2014, which is lower than in 2013 (1:5.3). liquid in order to enable them to settle and cash equivalents to pay approximately 20.0% Current assets of open medical aid funds claims as and when they become due. one month’s worth of claims. The cash 25.0% 25.0% 25.0% 25.0% 25.0% Prudential reserve level 10.0% constituted about 98.8% of total assets as Indeed, the industry duly holds a high coverage of claims – calculated by at 31 December 2014, the same as at the percentage of its assets in current assets, dividing cash and cash equivalents with 0.0% previous year end. In respect of closed enabling it to pay benefit claims should the claims incurred, multiplied by 12 2010 2011 2012 2013 2014 funds, there was similarly no change from unforeseen high claims be submitted for months – decreased significantly in 2013 to 2014, with all holdings being in payment within a short period. the first two years, before stabilising Investments current assets. over the next three. This trend does not Regulation 9 of Government Notice expected liabilities. The assets of a fund accounts accounted for only 0.5% of total The financial soundness of a fund is partly present a significant risk as the industry’s No. 1496 stipulates that all medical aid should also be spread so as to meet its investments as at 31 December 2014, up It is expedient that due consideration measured by its ability to pay claims investment, mostly in current assets, can funds are to invest a minimum of 35.0% liabilities and minimum accumulated from 0.3% in 2013. be given to liquidity of investments, from cash and cash equivalents. Chart easily be converted into cash. of their assets inside Namibia. As at fund requirements (reserves) at any time. December 2014, the aggregate industry Closed funds invested 68.1% in unit trusts, Chart 38: Average gross claims covered by cash and cash equivalents exposure healthily exceeded the domestic Chart 40 provides information on the a big increase from the 35.9% registered asset requirement in that 41.6% of its investments of medical aid funds as at 31 for 2013. Cash and cash equivalents 2 500 000 1.5 2 194 981 investments fell within Namibia’s borders. December 2013 and 2014. As at the end of accounted for 27.2%, falling from 49% 1.4 1 962 359 2 000 000 2014, open medical aid funds held 64.5% in 2013. The smallest proportional Months of cover 1 707 675 Medical aid funds are obliged to ensure of their investments in unit trusts (2013: investment, namely 4.7%, was collectively 1 500 000 Cash and cash equivalents that they have sufficient assets with 59.1%), 16.3% in cash and cash equivalents in shares, government and other bonds, as 1 440 207 1 215 848 0.9 0.9 which to pay claims when they fall due. (2013: 23.2%), 11.3% in Government well as fixed deposit accounts, as opposed 0.9 Claims

N$ ‘000 1 000 000 Thus, management of the medical aid and other bonds (2013: 9.6%), and 7.4% to 15.1% in 2013. fund’s assets needs to be structured in in shares (2013: 7.9%). Collectively, 500 000 such a way as to cope effectively with investments in debentures, loans stock 155 948 168 485 125 779 147 648 156 043 the magnitude, nature and timing of its investments, fixed deposits and savings - 2010 2011 2012 2013 2014 Chart 40: Fund investments

Reserves 60.0

Accumulated funds (reserves) constitute meet members’ claims as they arise. In Chart 39 shows the changes in solvency 5 .7% 50.0 the net asset value of a medical aid fund. addition, such a margin acts as a buffer ratios since 2010 for the industry, for open 46.4% Government & other stock/(bonds) Such reserves must be maintained at against unforeseen and adverse events funds, and for closed funds. The chart 40.0 the prudential level of at least 25% of from claims or expenses. illustrates that the average solvency ratio Shares/equities 28.8% gross contributions. This level serves as for closed funds has been declining since 30.0 N$ millions a benchmark against which to measure Net assets of members’ funds (total 2012. This has been due to high claims Unit trust schemes

the medical aid fund’s ability to meet its assets minus total liabilities) increased ratios that have resulted in accumulated 20.0 Debentures obligations. Moreover, the reserves also by 18.1%, i.e. from N$759.8 million as funds growing very slowly, as high claims 13.1% 5 .7% 6.2% function as a cushion to absorb losses in at 31 December 2013 to N$897.7 million reduce surpluses that contribute to the 10.0 8.7% 7.5% case the fund fails so as to collect enough as at 31 December 2014. The industry’s growth of such reserves. 1.0% 0.3% 1.0% 0% 0% 0% 0% 0% contributions to meet its obligations solvency ratio improved to 34.0%, up - during a specific period. from 32.8% in 2013. The solvency ratio The reserves of one open fund fell below 2014 2014 2013 2013 N$ N$ N$ N$ of open funds was 32.3% in 2014 (2013: the required prudential reserve level of Open fund industry Close fund industry Open fund industry Close fund industry Furthermore, a high solvency margin 30.1%), while the solvency ratio of closed 25.0% at the end of 2014. This situation not only protects members’ interests, it funds decreased from 47.9% in 2013 to will be monitored closely to ensure that also guarantees the continued operation 45.5% in 2014. the fund’s reserve levels improve and the of the fund, ensuring that it is able to solvency risk minimised.

106 107 Income Typology and quantum of claims Assets and liabilities

Gross written premiums represent the Vehicle, personal, fire and miscellaneous The total value of assets for the short-term domestic underwriting business, excluding insurance continued to contribute insurance industry was N$4.7 billion as INSURANCE insurance placed outside Namibia via over 105% of earned premiums, with at 31 December 2014, representing an exemption, as required by the Act. The personal insurance contributing 37% increase of 34.3% from the N$3.5 billion short-term insurance industry experienced alone. It should be noted that guarantees reported for the previous year. This an increase of 17.9% in gross premium contributed -7% of the earned premium. significant growth in assets was primarily income from N$2.8 billion reported as at This is attributed to the reporting structure attributed to increases in investments and INSTITUTIONS 31 December 2013 to N$3.3 billion as at 31 of alternative risk transfer: huge sums are technical assets. The Authority supervises long- and short-term insurance institutions in terms of the Long-term and Short-term Insurance Acts. These December 2014. This rate of growth shows paid in advance in the first quarter of the institutions collectively fall under the Insurance Division. a 3.9% increase from the 14% reported in year, which then significantly reduce in The total liabilities of the industry as at the previous year. The growth is mainly the fourth quarter due to withdrawals 31 December 2014 amounted to N$3.4 Short-term insurance attributable to new business undertakings and cancellations – leaving the earned billion, up from N$2.4 billion reported in and policy renewals with premium premiums negative. Alarmingly high the prior financial year. This represents a The Short-term Insurance Act covers activities for the year ended 31 December 2014 and includes unaudited financial figures of adjustment(s) at endorsement and/or losses and expenses to earned premium marked increase of 41.7%. This growth is the industry. In Namibia, only insurers and reinsurers registered in terms of this Act may conduct short-term insurance business. annual increases, similar to those instituted ratios attributed to Marine, Guarantee and mainly ascribed to increases in technical During the period under review, there was only one active registered reinsurance company in Namibia, namely the Namibia National in preceding years. Co-insurance classes of insurance business liabilities. Reinsurance Corporation Ltd (NamibRe). were also noted. In terms of profitability, Expenses an underwriting surplus continued to be The shareholder’s equity of N$1.4 billion Market structure and size recorded for most classes of insurance accounted for 29% of the assets of the The commission and claims of the short- business, with the exception of the industry as at 31 December 2014, although As at 31 December 2014, there were 736 2013 (Table 37). The increase was driven term insurance industry increased by Guarantee and Co-insurance classes, no significant change in equity or in short-term insurance industry participants. by a high rate of registrations relative to 6% during the reporting period, i.e. which generated significant underwriting the solvency ratio was observed if one This represents an increase from the 585 deregistrations. from N$1.5 billion reported in 2013 to losses of 176% and 775%, respectively, for compares the relevant figures with those recorded for the corresponding period in N$1.6 billion as at 31 December 2014. the year ended 31 December 2014. for the preceding reporting year. Thus, the Management expenses increased by 35%, short-term insurance industry continues Table 37: Short-term insurance – Net registration i.e. from N$340 million reported as at to remain sufficiently capitalised (for Industry agents 31 December 2013 Registrations Deregistrations 31 December 2014 31 December 2013 to N$459 million detailed information, see the Statistics Insurers 12 0 0 12 recorded at the end of 2014. The 35% section later herein). Reinsurers 1 0 0 1 increase in management expenses above Brokers 139 53 4 188 the increase in gross written premium Table 39 illustrates the solvency level Agents 433 121 19 535 income prompts a need for growth ranges for the 12 short-term insurers and TOTAL 585 174 23 736 margins on both expenditure and income the 1 reinsurer of short-term insurance to be monitored cautiously, and calls for business as at 31 December 2014. vigilant consideration of the impact of Table 38 depicts the number of insurers per class of short-term insurance business for the past two reporting years. The majority of inflation and economic performance. Table 39: Solvency (calculated on 4th quarter returns) businesses fell into the All Classes category. Solvency ranges 2013 2014 The cession of insurance at insurers Table 38: Classes of short-term insurers 1–20% 3 3 (the portion of a risk that is passed on 20–25% 0 0 Classes of insurance business – Insurers 2013 2014 to reinsurers by ceding companies), as All Classes 10 10 measured by the cession ratio, was 32%, 25–30% 2 0 Aviation 0 0 which represents an increase of 2% when 30–35% 1 0 Co-insurance 0 0 compared with the ratio reported in 2013. 35–40% 3 0 Fire 0 0 The reinsurance expense increased by >40% 4 9 Guarantee 0 0 26.1%, i.e. from N$0.833 billion in 2013 TOTAL INSURERS 13 12 Marine 0 0 to N$1.05 billion in 2014. This has been Miscellaneous 2 2 due to a 17.9% increase in gross written Personal 0 0 premiums (for detailed information, see Vehicles 0 0 the Statistics section later herein). TOTAL 12 12

108 109 Market structure and size - Continued Table 42: Long-term insurance classes (#) INSURANCE INSTITUTIONS CONTINUED In terms of the number of classes Classes 2013 2014 (licences) per insurer, the figure has Foreign insurance and reinsurance All classes (only) 13 13 remained constant at 16 over the past two Funeral (only) 2 2 In terms of sections 2(2), 3(1)(c)(ii) and for those risks that local insurers lack figures include the business of Lloyd’s, reporting years (Table 41). 65 of the Short-term Insurance Act, the capacity to cover. Table 40 provides an which is an approved insurer in terms of Disability 0 0 Fund 1 1 Authority has the power to grant foreign overview of insurance covered by foreign the Act. There are 16 classes of business in total insurers or reinsurers policies in Namibia insurers over the past five years. These in respect of long-term insurance. Credit life (only) 0 0 Thirteen of these licences are registered TOTAL 16 16 Table 40: Lloyd’s and Non-Lloyd’s exemption (N$ ’000) for underwriting all insurance business Type of risk 2010 2011 2012 2013 2014 classes, while two are registered in the Aviation 22 560 41 050 28 010 12 074 17 964 funeral class and one is registered as a Fire 7 400 22 410 23 980 32 453 24 388 fund (Table 42). Marine 50 820 74 490 92 870 92 740 183 483 Miscellaneous 46 110 40 800 71 830 37 625 269 043 Vehicles 35 000 1 8 31 6 Income and expenditure Assets and liabilities Guarantee – 490 – – 37 044 TOTAL 161 890 179 250 216 770 174 924 531 928 The long-term insurance industryThe assets of the long-term insurance Excess (surplus) assets over the capital Growth -9% 11% 21% -19.3% 204% announced a growth in gross premium industry increased from N$36.4 billion as adequacy requirement (CAR) is a measure income of 16.4% for the reporting year. This reported at 31 December 2013, to N$40.2 of the financial soundness of insurers and rise is due to an increase in new business and billion as at 31 December 2014. The 10.4% the insurance industry. A coverage ratio In this respect, from the 2013 to 2014 that 16% of the premiums are leaving the industry to maintain insurance the annual increase in rates on the premium. growth in assets is due to an increase in other of surplus assets/CAR equal to 1 time is reporting periods, short-term insurance the country, if one compares the relevant business locally as much as possible after In this respect, investment income assets such as mortgage bonds, unlisted acceptable for the industry, although a business placed in foreign markets figures with the gross written premium of careful examination and considerations of amounted to about N$3.8 billion, decreasing shares and foreign assets (i.e. in the CMA). cover of 1.5 times is preferred. The industry increased by 204%. The growth indicates N$3.3 billion. The Authority encourages the risk. by approximately 12.6% from the previous coverage ratio was 20.56 times for 2014, review period (2013: N$4.3 billion). The policy liabilities of the long-term rising from 5.7 times reported for 2013. Long-term insurance insurance industry amounted to N$33.9 The substantial rise in CAR cover from 5.6 The industry’s premium retention ratio billion as at 31 December 2014, which times reported in the prior year to 20.56 This report is submitted in terms of ended 31 December 2014. It also includes reinsurers registered in terms of this Act – its reinsurance expense as a percentage reflects a 9.71% increase in respect of the times for 2014, was due to a reduction in section 11 of the Long-term Insurance unaudited financial figures for the are empowered to conduct long-term of gross premium income received – was N$30.9 billion reported at 31 December CAR by 65.0% from the N$649 million Act and covers activities for the year industry. In Namibia, only insurers and insurance or reinsurance business. recorded at 97.7% because most of the 2013. It is observed that, since 2008, both reported as at 31 December 2013 to N$226 big insurance companies made use of total assets and policy liabilities have million reported as at 31 December 2014. Market structure and size parent companies’ or group reinsurance increased by about 12.0% on average. The merger of the two long-term insurance The long-term insurance industryin the Agents and Brokers categories been on short-term business. Another programmes. In these cases, the industry companies can also explain the decrease participants as at 31 December 2014 (Table 40). NamibRe is the only registered development during the period under did not incur premium outflows, but mentioned earlier. The long-term insurance totalled 2 653, which represents a 16.3% long-term reinsurer. However, its licence review involved two long-term insurers retained most of the premiums received. industry remains well capitalised. year-on-year increase in service providers for long-term reinsurance business that merged with each other with effect (2013: 2 265). This growth was reflected is currently dormant as its focus has from 1 July 2014 (Table 41). The industry paid total benefits of about Table 43 shows the cover ratios relative to N$5.0 billion for the year ended 31 CAR levels for the industry for the current December 2014, representing an increase and prior reporting periods. Table 41: Industry participants and annual movement of about 11.1% from N$4.5 billion Table 43: Cover ratios Industry participant 31 December 2013 Registration Deregistration 31 December 2014 reported for the year ended 31 December Insurers 16 1 0** 16 2013. The expenses incurred by the Surplus assets to CAR (x) 2013 2014 Reinsurers 1 0 0 1* industry decreased by 37.9% from the Cover 1 time 2 0 Brokers 132 25 2 155 previous year, while expenses for the year Cover 1–2 times 0 0 Agents 2 133 357 9 2 481 amounted to 14.0% of gross premium Cover 2–5 times 7 7 TOTAL 2 282 383 11 2 653 income. (For detailed information, see the Cover 5–10 times 4 2 Statistics section later herein.) Cover 10+ times 3 7 * Namibia National Reinsurance Corporation Limited (NamibRe) is the only registered long-term reinsurer. TOTAL INSURERS 16 16 However, their licence for long-term reinsurance business is currently dormant as their focus has been on short-term reinsurance. ** After the registration of one insurer within the reporting period, two insurers merged with one another effective 1 July 2014. This brought the total number of insurers to 16 as at 31 December 2014.

110 111 STATISTICS

112 113 LONG-TERM LONG-TERM INSURANCE INSURANCE Income and expenditure Balance Sheet - Assets and liabilities Income and expenses (N$ ‘000) Balance Sheet (N$ ‘000) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 INCOME ASSETS Premium income Immovable property – – – – 455 341 Single premiums 1 941 764 2 115 584 2 597 266 2 657 119 2 681 468 Property, plant and equipment 496 208 531 730 543 237 384 676 24 169 Recurring premiums 2 520 101 2 837 694 3 212 438 3 731 081 4 751 746 Intangible assets – – – – 279 813 Gross premium 4 461 865 4 953 278 5 809 704 6 388 200 7 433 214 Deferred tax – – – – 44 Less: Reinsurance premium 38 516 61 970 56 600 101 293 170 231 Other assets 211 400 3 176 2 545 218 886 3 319 555 Net premium written 4 423 349 4 891 308 5 753 104 6 286 907 7 262 983 Investments 18 415 484 21 180 727 25 601 521 28 205 274 26 346 262 Non-current assets 19 123 092 21 715 633 26 147 303 28 808 836 30 425 184 Gross policyholder benefits paid 3 620 903 3 590 179 3 937 090 4 454 130 4 999 082 Reinsurer debtors – – – – 152 165 Less: Reinsurance recoveries – – – – 71 782 Premium debtors 717 760 1 004 863 1 160 791 1 160 819 254 637 Net policyholder benefits 3 620 903 3 590 179 3 937 090 4 454 130 4 927 300 Technical assets 717 760 1 004 863 1 160 791 1 160 819 406 802 Change in policyholder liabilities – – – – 1 312 797 Cash and cash equivalents 5 298 283 3 758 023 4 043 090 6 114 550 3 021 720 Commission 299 639 330 783 370 905 440 871 522 703 Receivables 229 832 257 411 302 640 339 551 835 902 Policyholder benefits and commission 3 920 542 3 920 962 4 307 995 4 895 001 6 762 800 Investments – 5 534 841 Gross profit/(loss) 502 807 970 346 1 445 109 1 391 906 500 183 Current assets 5 582 115 4 015 434 4 345 730 6 545 101 9 392 463 Total other income 2 565 845 1 513 136 4 088 219 4 887 215 3 943 922 TOTAL ASSETS 25 368 967 26 735 930 31 653 824 36 423 756 40 224 449 Investment income 2 400 167 1 409 869 3 803 984 4 337 370 3 790 416 Other income 165 678 103 267 284 235 549 845 153 506 LIABILITIES Deferred taxation – – – – 274 EXPENSES Other liabilities 625 296 893 392 924 998 1 158 579 175 863 Total other expenses 605 596 660 084 683 577 847 763 526 555 Non-current liabilities 625 296 893 392 924 998 1 158 579 176 137 Management expenses 595 941 656 077 683 863 846 599 420 725 Policyholder liabilities 21 696 289 22 999 539 27 127 614 30 937 929 33 943 523 Finance costs – – – – 716 Reinsurance creditors – – – – 60 548 Other expenses 9 655 4 007 (286) 1 164 105 114 Technical liabilities 21 696 289 22 999 539 27 127 614 30 937 929 34 004 071 Trade and other payables – – – – 826 340 PROFIT/(LOSS) BEFORE TAXATION 2 463 056 1 823 398 4 849 751 5 431 358 3 917 550 Current income taxation – – – – 5 553 Capital adequacy requirement (CAR) 421 059 484 957 628 724 648 783 226 172 Other liabilities – – – – 335 747 Current liabilities 421 059 484 957 628 724 648 783 1 393 812 TOTAL LIABILITIES 22 742 644 24 377 888 28 681 336 32 745 291 35 574 020

EXCESS ASSETS 2 626 323 2 358 042 2 972 488 3 678 465 4 650 429

Note: Due to the changes in the reporting format resulting from the new version of the electronic reporting system developed in the previous financial year, some figures published in this report are slightly different from those in the 2013/14 Annual Report. This situation will be rectified going forward.

114 115 SHORT-TERM SHORT-TERM INSURANCE INSURANCE Income and expenditure Experience per class of business

Income and expenses (N$ ‘000) Experience per class of business 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Premium earned, by class (% of total) Gross premiums written 2 028 562 2 138 593 2 444 369 2 788 152 3 338 281 Fire 18% 18% 21% 21% 18% Net reinsurance expense 537 281 972 235 748 665 833 078 1 054 454 Marine 2% 2% 1% 1% 1% Net premiums written 1 491 281 1 166 358 1 695 704 1 955 074 2 283 827 Aviation 0% 0% 0% 0% 0% Change in provision for unearned premium reserve – – – – 42 623 Vehicles 37% 35% 34% 33% 29% Net premiums earned 1 503 262 1 548 639 1 702 227 1 936 713 2 214 532 Guarantee* 4% 2% 2% 1% -7% Gross claims and loss adjustment expenses – – – – 662 172 Miscellaneous 20% 21% 18% 20% 21% Change in claims incurred but not reported – – – – 8 590 Personal 20% 23% 24% 24% 37% Less: Gross claims and loss adjustment expenses – – – – 112 713 Co-insurance business 0% 0% 0% 0% 0% recovered from reinsurers Loss ratio, by class Net claims incurred 941 431 959 265 1 027 977 1 204 758 1 324 230 Fire 42% 44% 44% 55% 46% Commission incurred – – – – 199 964 Marine 55% 59% 76% 74% 85% Less: Commission earned – – – – 90 106 Aviation 33% -2147% -21% 375% 62% Net commission incurred 164 616 169 675 182 582 251 844 233 532 Vehicles 66% 65% 67% 64% 60% CLAIMS AND COMMISSION 1 106 047 1 128 939 1 210 559 1 456 602 1 557 762 Guarantee 74% 66% 42% 30% 175%

Miscellaneous 65% 61% 50% 60% 49% Underwriting surplus 397 216 419 700 491 668 480 111 656 770 Personal 73% 72% 73% 68% 58% Management expenses 239 087 241 846 313 805 340 457 459 232 Co-insurance business 0% -98% 118% 143% 6767% Finance costs – – – – 657 Expense ratio, by class Investment income 120 331 146 269 138 690 136 775 192 621 Fire 36% 30% 32% 35% 32% Other income 13 014 -42 498 6 598 42 848 176 214 Marine 19% 18% 20% 22% 23% Other Expenses – – – – – Aviation -4% -118% -6% 82% 36%

Vehicles 23% 24% 26% 27% 28% Profit before tax 291 474 281 625 323 151 319 277 565 716 Guarantee 20% 32% 51% 63% 90% Less: Estimated taxation (current and deferred) – – 73 460 78 136 98 995 Miscellaneous 27% 26% 33% 40% 35% PROFIT FOR THE YEAR 291 474 281 625 249 691 241 141 466 721 Personal 24% 25% 25% 24% 23% Other comprehensive income for the year – – – – (22 328) Co-insurance business 52% 0% 739% -1% 0% TOTAL COMPREHENSIVE INCOME 291 474 281 625 249 691 241 141 444 393 FOR THE YEAR Underwriting results (% of premiums earned) Fire 22% 25% 24% 9% 16% Performance ratios Marine 26% 22% 4% 4% 2% Cession ratio 26% 45% 31% 30% 32% Aviation 71% 2 365% 127% -357% 71% Net loss ratio 63% 62% 60% 62% 59% Vehicles 11% 11% 7% 9% 9% Underwriting expense ratio 27% 27% 29% 31% 32% Guarantee 6% 2% 7% 7% -235% Net combined ratio 89% 89% 90% 93% 91% Miscellaneous 8% 14% 17% 0% 8% Personal 3% 3% 2% 9% 15% Note: Due to the changes in the reporting format resulting from the new version of the electronic reporting system developed in the previous financial Co-insurance business 48% 198% -757% -42% -775% year, some figures published in this report are slightly different from those in the 2013/14 Annual Report. This situation will be rectified going forward. * Guarantee negative earned premiums due to withdrawals and cancellations of the alternative risk transfer policies in the last three quarters of the financial year, while huge amounts were underwritten in the first quarter.

116 117 SHORT-TERM SHORT-TERM INSURANCE INSURANCE Balance Sheet - Assets and liabilities Balance Sheet - Assets and liabilities

Balance Sheet (N$ ‘000) Balance Sheet (N$ ‘000) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 ASSETS LIABILITIES Non-current assets 1 051 984 1 319 354 1 314 563 1 506 834 1 251 240 Non-current liabilities 23 680 25 707 25 650 27 581 61 984 Immovable property 17 293 17 565 3 462 1 126 1 756 Deferred taxation 23 680 25 707 25 650 27 581 44 577 Property, plant and equipment 41 338 15 168 15 790 25 439 13 507 Other liabilities – – – – 17 407 Intangible assets – – – – 13 582 Technical liabilities 1 126 056 1 272 552 1 460 025 1 647 925 2 705 717 Deferred tax – – – – 11 172 Gross provision for unearned premiums 849 370 999 052 1 096 849 1 257 478 1 654 638 Other assets 342 019 351 899 352 141 330 447 231 801 Gross outstanding claims 165 847 173 676 199 034 206 092 588 575 Investments 651 243 934 722 943 170 1 149 822 979 422 Gross claims incurred but not reported 86 743 82 743 125 380 117 833 203 588 Technical assets 79 382 147 514 101 566 214 096 900 333 Commission due – – – – 30 817 Reinsurers’ share of unearned premiums – – – – 494 145 Reinsurance creditors 24 096 17 081 38 762 66 522 228 099 Reinsurers’ share of outstanding claims – 16 048 1 975 4 325 87 312 Current liabilities 304 150 378 196 585 046 703 931 628 255 Reinsurers’ share of claims incurred but not reported – – – – 60 356 Trade and other payables 157 865 168 922 270 996 348 146 214 731 Commission receivable – – – – 26 367 Current income taxation (647) 26 123 13 022 5 202 4 621 Premium debtors 79 382 131 466 99 591 209 771 232 153 Other liabilities 146 931 183 151 301 028 350 583 408 903 Current assets 1 226 142 1 156 764 1 585 830 1 740 550 2 597 529 TOTAL EQUITY AND LIABILITIES 2 357 418 2 623 632 3 001 959 3 461 480 4 749 102 Cash and cash equivalents 963 426 1 008 995 1 303 354 1 433 726 1 343 310 Solvency ratio 33.2% 30.8% 25.6% 26.2% 28% Other receivables 262 716 147 769 282 476 306 824 129 765 Note: Due to the changes in the reporting format resulting from the new version of the electronic reporting system developed in the previous Investments – – – – 1 124 454 financial year, some figures published in this report are slightly different from those in the 2013/14 Annual Report. This situation will be rectified TOTAL ASSETS 2 357 418 2 623 632 3 001 959 3 461 480 4 749 102 going forward.

CAPITAL AND RESERVES 903 533 947 177 931 238 1 082 043 1 353 146 Ordinary share capital 47 551 47 551 47 551 47 551 47 551 Share premium 100 774 100 774 100 774 100 774 100 774 Retained earnings 634 821 658 810 619 615 757 384 984 472 Contingency reserve 120 387 140 042 163 298 176 334 218 692 Other reserve – – – – 1 657

118 119 MEDICAL AID MEDICAL AID FUNDS FUNDS Membership Number and type of claims Membership Type of claim Category of membership 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Principal member 64 399 66 579 68 389 73 794 76 522 Hospitals 441 531 568 224 575 315 672 287 763 242 Dependent 84 611 88 777 90 622 96 769 96 073 General practitioners 157 668 211 576 177 910 188 903 215 641 Pensioner 3 318 3 394 3 460 4 715 6 769 Pharmacies/medicine 184 183 254 449 254 091 322 767 373 131 TOTAL 152 328 158 750 162 471 175 278 181 378 Specialists 116 404 185 855 182 994 215 326 251 504 Auxiliary services 49 634 73 141 71 431 89 293 110 091 Pathologists 52 589 64 337 71 371 79 853 103 363 Income and expenditure Optometrists 31 533 61 750 45 183 65 149 59 973 Income and expenditure (N$ ‘000) Dentists 53 479 72 415 71 165 87 439 100 454 2010 2011 2012 2013 2014 Radiologists 44 274 55 516 62 831 70 418 78767 Dental specialists 10 273 11 619 10 481 9 976 10 846 CONTRIBUTIONS Dental therapists 471 850 1 060 1 682 2 510 Contributions received 1 576 928 1 757 893 2 002 120 2 315 575 2 642 485 Psychiatric institutions 1 246 2 121 2 605 3 135 3 315 Savings plan contributions 87 206 69 443 76 393 83 552 89 611 Optic pay-outs 9 958 1 680 5 150 2 425 4 358 Reinsurance 29 273 24 108 12 009 20 245 20 142 Other 35 983 3 126 52 354 140 117 117 786 Net contributions 1 460 449 1 664 342 1 913 718 2 211 778 2 532 732 TOTAL 1 189 226 1 566 659 1 583 941 1 948 770 2 194 981

EXPENSES Claims 1 215 848 1 440 207 1 707 675 1 962 359 2 194 981 Administration costs 121 370 135 537 161 447 187 831 196 224 Operational expenses 29 379 34 013 33 814 38 016 47 624 Managed care: Management services 20 888 21 892 31 122 35 619 39 927 Consultant/professional fees – 3 742 5 038 4 033 – Underwriting surplus 72 964 28 951 -25 378 -16 080 50 012

Other income 6 000 2 365 13 664 29 684 12 402 Investment income 47 281 45 326 72 325 95 526 82 556 NET SURPLUS 126 245 76 642 60 611 109 130 144 971

120 121 MEDICAL AID MEDICAL AID FUNDS FUNDS Balance Sheet - Assets and liabilities Type and location of investment Balance Sheet (N$ ‘000) Investments (N$ ‘000) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 ASSETS Non-current assets 517 718 586 272 715 938 819 397 924 839 Investments in Namibia 341 076 386 240 403 576 530 555 379 683 Property, plant and equipment 4 076 8 707 11 747 11 736 11 687 Government and other stock/bonds 46 856 78 653 78 334 74 023 97 049 Investments 513 642 577 565 704 191 807 661 913 152 Equities/shares 17 894 18 781 49 140 62 442 66 515 Current assets 156 203 181 736 142 335 182 598 237 068 Unit trust schemes 44 572 61 455 88 857 128 226 56 205 Accounts receivable 37 797 30 146 47 676 34 768 26 144 Fixed deposits and savings accounts 75 806 58 866 56 985 113 192 – Cash and cash equivalents 118 406 151 590 94 659 147 830 210 923 Cash and equivalents (Call accounts) 155 948 168 485 125 779 147 648 156 043 TOTAL ASSETS 673 922 768 009 858 273 1 001 995 1 161 907 Treasury bills – – 4 481 – – Loans stock investment – – – 5 024 – FUNDS AND LIABILITIES Investments outside Namibia 270 472 308 868 368 848 421 146 533 469 Members' funds 519 151 615 940 660 968 759 829 897 689 Cash outside Namibia 15 741 1 839 7 471 3 933 27 667 Accumulated funds 514 183 615 940 660 968 759 829 897 689 Unit trust schemes 254 731 117 430 168 540 192 105 505 802 Revaluation reserve – Investments 4 968 – – – – Bonds – 35 535 23 877 17 352 – Current liabilities 154 771 152 069 197 305 242 166 264 217 Equities/shares – 154 064 168 960 207 756 – Accounts payable (creditors) 27 089 71 720 49 671 77 032 75 629 TOTAL INVESTMENT ASSETS 611 548 695 108 772 424 951 701 913 152 Provision for claims outstanding or incurred but 120 844 65 412 125 234 139 508 158 506 not reported % Namibian assets to total assets 55.77% 55.57% 52.25% 55.75% 41.58% Savings plan liability (Other liabilities) 6 838 14 840 19 801 23 372 28 336 % outside Namibia 44.23% 44.43% 47.75% 44.25% 58.42% Provision for bad debt – 97 2 599 2 254 1 747 % unit trusts 48.94% 25.73% 33.32% 33.66% 61.55% TOTAL FUNDS AND LIABILITIES 673 922 768 009 858 273 1 001 995 1 161 907 % cash 28.07% 24.50% 17.25% 15.93% 20.12% % equities/shares 2.93% 24.87% 28.24% 28.39% -% % fixed deposits 12.40% 8.47% 7.38% 11.89% -% % bonds 7.66% 16.43% 13.23% 9.60% -% % Treasury bills 0.00% 0.00% 0.58% 0.00% -% % loans stock investments 0.00% 0.00% 0.00% 0.53% -%

122 123 RETIREMENT INVESTMENT FUNDS MANAGERS: FUNDS Income and expenditure Income and expenditure (N$ m) Build-up of funds 2010 2011 2012 2013 2014 UNDER MANAGEMENT Country and asset allocations Contributions received 2 942 3 109 3 874 4 414 5 627 Net investment income 4 561 4 857 11 143 13 288 9 143 Country and asset allocations (N$ m) Capital appreciation 845 582 866 2 298 1 443 2010 2011 2012 2013 2014 Insurance proceeds 68 81 92 93 128 COUNTRY ALLOCATION Other income 38 39 37 11 22 Namibia 45 509 46 386 55 086 58 571 66 682 TOTAL INCOME 8 454 8 668 16 012 20 104 16 363 Common Monetary Area 32 148 35 061 41 707 48 467 51 725 Offshore 8 397 10 218 12 317 16 284 17 779 Administration expenses 131 147 161 262 242 TOTAL 86 055 91 665 109 110 123 322 136 186 Investment fees 140 139 140 215 280 Insurance premiums 177 181 206 223 258 ASSET ALLOCATION Other expenses 98 103 98 45 149 Money market investments 30 356 30 331 34 006 35 280 35 963 TOTAL EXPENSES 546 570 605 745 929 Treasury bills 9 966 12 269 13 817 15 180 14 836 Negotiable certificates of deposit 5 244 3 702 4 522 4 396 6 128 Net income before transfers and benefits 7 908 8 098 15 407 19 359 15 435 Bankers’ acceptances – – – – – Net transfers - 135 -374 - 377 - 288 -472 Debentures – 4 – – 28 Benefits paid 2 720 2 704 3 257 3 885 4 855 Notice, call and other deposits 11 348 11 495 11 519 11 096 10 867 Other 3 798 2 861 4 148 4 608 4 104 Net transfers and benefits paid 2 585 2 330 2 880 3 597 4 383 Listed equity 36 650 42 553 53 101 58 027 67 233 Net transfers 5 323 5 768 12 527 15 762 11 052 Listed debt 11 125 13 363 15 540 17 552 19 211 Benefits paid 2,942 3,109 3,874 4,414 – Unlisted equity 636 905 1 168 1 152 1 685 Unlisted debt 49 171 241 255 94 NET INCOME 4 561 4 857 11 143 13 288 – Unlisted property 322 372 376 650 685 Other assets 6 918 3 970 4 678 10 406 11 315 Balance Sheet - Assets and liabilities TOTAL FUNDS UNDER MANAGEMENT 86 055 91 665 109 110 123 322 136 186 Balance Sheet (N$ m) 2010 2011 2012 2013 2014

Non-current assets 62 960 68 306 84 434 103 997 118 044 Current assets 943 1 172 1 323 1 270 1 525 TOTAL ASSETS 63 903 69 478 85 757 105 267 119 569

Funds and reserves 62 696 68 365 84 659 103 886 116 980 Current liabilities 1 207 1 113 1 098 1 381 2 589 TOTAL FUNDS, RESERVES AND LIABILITIES 63 903 69 478 85 757 105 267 119 569

124 125 INVESTMENT CAPITAL MANAGERS: MARKETS

SOURCES OF FUNDS 2010 2011 2012 2013 2014 Source of funds Market performance Source of funds (N$ m) NSX Overall Index (points) 867 838 984 997 1 098 2010 2011 2012 2013 2014 NSX Local Index (points) 173 221 274 332 389 JSE All Share Index (points) 32 119 32 003 39 250 46 256 49 771

Pension funds 47 574 50 977 62 400 71 551 77 735 Overall value of equity securities traded (N$ m) 7 580 3 272 4 018 5 513 8 315 Short-term insurance companies 686 783 770 373 428 Local value of equity securities traded (N$ m) 134 103 508 352 263 Long-term insurance companies 12 822 13 757 16 133 18 796 20 523 Total shares in issue (m) – NSX Overall Index 25 985 23 361 26 357 27 228 29 170 Medical aid funds 288 321 320 320 455 Total shares in issue (m) – NSX Local Index 1 644 1 651 998 1 515 1 515 Unit trust schemes 22 333 22 878 26 183 28 409 31 824 Overall market capitalisation (N$ m) 1 178 257 1 148 879 1 357 247 1 407 654 1 722 577 Companies 406 532 524 808 1 285 Local market capitalisation (N$ m) 7 782 9 304 11 057 18 729 22 322 Natural persons 5 9 25 46 56 Overall volume of securities traded (m) 216 99 111 116 174 Other 1 941 2 408 2 754 3 019 3 880 Local volume of securities traded (m) 31 11 40 29 34 TOTAL 86 055 91 665 109 110 123 322 136 186 Nominal debt issued (N$ m) Central Government 5 988 12 147 14 065 15 741 17 335 State-owned enterprises 1 427 1 427 1 427 1 427 1 427 Banking institutions 1 186 1 070 1 633 1 909 2 899 Corporate – – – – 145 TOTAL 8 601 14 644 17 125 19 077 21 806

Debt securities traded (N$ m) Central Government 349 240 482 237 171 State-owned enterprises 86 15 13 – 26 Banking institutions 106 – – – – Corporate – – – – – TOTAL 541 255 495 237 197

126 127 UNIT TRUSTS: COMPLAINTS Number of complaints received, by industry Industry SOURCES OF FUNDS 2010 2011 2012 2013 2014

Source of funds (N$ m) Microlending and credit agreements 239 169 204 167 236 Long-term insurance 134 105 100 95 135 2010 2011 2012 2013 2014 Short-term insurance 64 51 69 43 58 Pension funds 74 53 37 56 95 Pension funds 1 281 1 230 1 511 2 388 6 482 Collective investment schemes 0 0 0 0 0 Short-term insurance companies 67 146 198 182 157 Capital markets 7 5 1 2 1 Long-term insurance companies 687 723 1 101 1 259 1 926 Medical aid funds 3 3 5 3 2 Medical aid funds 35 9 46 49 49 Friendly societies 0 0 1 0 0 Unit trust schemes 2 743 2 819 4 129 4 517 5 073 Other 8 11 0 0 10 Companies 6 639 5 418 5 413 8 292 7 180 TOTAL 529 397 408 366 537 Natural persons 13 708 16 044 17 817 19 096 20 020 Other 831 1 137 1 891 1 484 1 196 Total 25 991 27 526 32 106 37 267 42 083 Number of complaints resolved, by industry

Industry 2010 2011 2012 2013 2014

Microlending and credit agreements 238 163 204 166 220 MICROLENDING Long-term insurance 125 101 99 91 115 Credit extension Short-term insurance 57 50 69 40 49 Pension funds 64 51 35 51 61 Collective investment schemes 0 0 0 0 0 2010 2011 2012 2013 2014 Capital markets 7 4 1 2 1 Loans outstanding (N$ ’000) Medical aid funds 3 3 5 3 2 Total loans 1 118 003 1 051 208 1 752 556 2 615 536 3 382 060 Friendly societies 0 0 1 0 0 Term lenders 1 059 095 1 439 594 1 685 290 2 538 299 3 302 017 Other 7 11 0 0 10 Payday lenders 58 908 61 614 67 266 77 237 80 043 TOTAL 501 383 405 353 458

Loans disbursed (N$ ’000) Total loans 1 094 327 1 483 754 1 586 460 2 234 403 2 259 908 Term lenders 606 992 956 645 1 079 030 1 640 765 1 551 699 Payday lenders 487 335 527 109 507 430 593 638 708 209

Number of loans (#) Total loans 638 132 656 061 613 307 661 467 717 031 Term lenders 79 265 96 397 97 486 114 796 100 104 Payday lenders 558 867 559 664 515 821 546 671 616 927

Average loan amount (N$) Term lenders 7 658 9 924 11 074 13 157 15 501 Payday lenders 872 945 983 1 057 1 148

128 129 FOR THE YEAR ENDED 31 MARCH 2015 Board’s responsibility for financial reporting 132 Board’s approval of the consolidated annual financial statements 132 Independent auditor’s report 133 Report of the board 134 FINANCIAL Consolidated statement of profit or loss and other comprehensive income 135 Consolidated statement of financial position 136 Consolidated statement of changes in reserves 137 Consolidated statement of cash flows 138 Notes to the consolidated annual financial statements 139-170 STATEMENTS 130 131 BOARD’S RESPONSIBILITY FOR FINANCIAL REPORTING DELOITTE & TOUCHE The Board of the Authority is responsible The consolidated annual financialBOARD’S APPROVAL OF INDEPENDENT AUDITOR’S the preparation of financial statements the appropriateness of accounting policies for the maintenance of adequate statements are prepared on a going that are free from material misstatement, used and the reasonableness of accounting accounting records and the preparation concern basis. Nothing has come to the THE CONSOLIDATED REPORT TO THE BOARD whether due to fraud or error. estimates made by management, as well as and integrity of the consolidated attention of the Board to indicate that the ANNUAL FINANCIAL OF THE NAMIBIA evaluating the overall presentation of the annual financial statements and related Authority will not remain a going concern Auditor’s Responsibility financial statements. information. The consolidated annual for the foreseeable future. STATEMENTS FINANCIAL INSTITUTIONS Our responsibility is to express an opinion financial statements have been prepared in SUPERVISORY AUTHORITY on these financial statements based on We believe that the audit evidence we accordance with International Financial The consolidated annual financial statements our audit. We conducted our audit in have obtained is sufficient and appropriate set out on pages 134 to 170 were approved by Reporting Standards. The Authority’s We have audited the annual financial accordance with International Standards to provide a basis for our audit opinion. the Board and are signed on its behalf by: independent external auditors have statements of the Namibia Financial on Auditing. Those Standards require audited the consolidated annual financial Institutions Supervisory Authority that we comply with ethical requirements Opinion statements and their report appears on (“NAMFISA”) and its subsidiary, which and plan and perform the audit to obtain In our opinion, the financial statements page 133. comprise of the statement of financial reasonable assurance about whether the present fairly, in all material respects, …………………………………………. position as at 31 March 2015, and the financial statements are free of material the financial position of the Namibia Estelle Tjipuka The Board is also responsible for the statement of comprehensive income, misstatement. Financial Institutions Supervisory Chairperson: Board systems of internal control. These are statement of changes in reserves and the Authority as at 31 March 2015, and its designed to provide reasonable but not statement of cash flows for the year then An audit involves performing procedures financial performance and its cash flows absolute assurance as to the reliability of the ended, report of the Board and a summary to obtain audit evidence about the for the year then ended in accordance …………………………………………. consolidated annual financial statements, of significant accounting policies and amounts and disclosures in the financial with International Financial Reporting Date and to adequately safeguard, verify and other explanatory notes as set out on statements. The procedures selected Standards and in the manner required maintain accountability of assets, and to pages 134 to 170. depend on the auditor’s judgement, by the Namibia Financial Institutions prevent and detect material misstatement including the assessment of the risks of Supervisory Authority Act (No. 3 of 2001). …………………………………………. and loss. The systems are implemented Board’s Responsibility for the Financial material misstatement of the financial Gersom Katjimune and monitored by experienced personnel Statements statements, whether due to fraud or Chairperson: Audit Committee with an appropriate segregation of The board members are responsible for error. In making those risk assessments, …………………………………………. authority and duties. Nothing has come the preparation and fair presentation of the auditor considers internal control Deloitte & Touche to the attention of the Board to indicate these financial statements in accordance relevant to the entity’s preparation and fair Registered Accountants and Auditors …………………………………………. that any material breakdown in the with International Financial Reporting presentation of the financial statements in Chartered Accountants (Namibia) Date functioning of these controls, procedures Standards and in the manner required order to design audit procedures that are and systems has occurred during the year by the Namibia Financial Institutions appropriate in the circumstances, but not Per: AA Akayombokwa under review. Supervisory Authority Act (No. 3 of 2001), for the purpose of expressing an opinion Partner and for such internal control as the board on the effectiveness of the entity’s internal Windhoek members determine is necessary to enable control. An audit also includes evaluating 26 June 2015

132 133 REPORT OF COMPREHENSIVE THE BOARD INCOME The Board of the Authority has pleasure in The secretary to the board of NAMFISA OTHER MATTERS Consolidated statement of profit or loss and other comprehensive income presenting their report on the activities of is Yamillah Katjirua, appointed as from 16 Namibia Financial Institutions Supervisory January 2015, whose business and postal As is public record, NAMFISA is a co- Notes GROUP AUTHORITY AUTHORITY Authority (“NAMFISA”) and it’s subsidiary addresses are set out below: defendant in a case brought against 2015 2015 2014 (together, the “Group”) for the year ended the Authority by Alwyn Petrus van N$ N$ N$ 31 March 2015 (“the period”). Business address: Straten N.O. and others on 12 March 8th floor, Sanlam Centre 2012 claiming a total amount of N$105 Independence Avenue Revenue 2 113 282 610 113 282 610 102 582 844 GENERAL REVIEW million. NAMFISA filed Exceptions to WINDHOEK Investment income 3 11 243 752 11 243 752 10 844 042 the Particulars of Claim prior to 31 March Namibia Other income 4 2 862 955 2 593 330 3 373 301 NAMFISA was established by the 2013. The Exceptions were heard on 8 Total Income 127 389 317 127 119 692 116 800 187 Government of the Republic of Namibia October 2013 and were upheld in terms Postal address: on 14 May 2001 in terms of the Namibia of the judgement and order of 31 January P O Box 21250 Consumer education costs (1 308 220) (1 308 220) (651 952) Financial Institutions Supervisory 2014. The Plaintiffs filed an Appeal against WINDHOEK Depreciation and amortization expense 7,8 (2 703 310) (2 703 310) (1 824 220) Authority Act No. 3 of 2001. the judgement and order. At the date of Namibia Finance charges – Post-retirement benefits 16.2 (1 043 000) (1 043 000) (1 021 000) NAMFISA was established to exercise issue of the financial statements the Appeal Inspection and enforcement costs (860 248) (860 248) (908 817) supervision over the businesses of financial has lapsed due to the Plaintiffs’ non- Legal costs (413 800) (413 800) (721 899) institutions and over financial services, FINANCIAL YEAR END compliance with the Rules of the Supreme and to advise the Minister of Finance on Court. The Plaintiffs have however filed Office rental expenses 5 (11 022 508) (11 022 508) (9 765 411) matters related to financial institutions and The financial year end of NAMFISA an application for condonation of their Professional and consulting fees (12 393 488) (12 393 488) (6 120 529) financial services. is defined in the Namibia Financial non-compliance and for reinstatement Staff costs 5 (83 831 171) (83 831 171) (60 327 607) Institutions Supervisory Authority Act as of the lapsed Appeal. The Registrar of the Other operating costs 5 (20 539 925) (20 230 275) (12 826 799) Total Expenses (134 115 670) (133 806 020) (94 168 234) RESULTS 28 March of every year. The Board is of the Supreme Court must still provide a date view that the intention of the legislature for the hearing of the application and the was that the year-end be 31 March, and Appeal, if the Plaintiffs are successful with The financial results of NAMFISA and the (LOSS) / INCOME FOR THE YEAR BEFORE TAXATION (6 726 353) (6 686 328) 22 631 953 therefore the financial statements have the application. NAMFISA opposed the Group are set out in the attached annual Taxation 6 - - - been prepared as of 31 March. application and the Appeal and intends to financial statements on pages 133 to 168. continue contesting the claim and apply (LOSS) / INCOME FOR THE YEAR AFTER TAXATION (6 726 353) (6 686 328) 22 631 953 for its dismissal. BOARD MEMBERS AND SUBSIDIARY Other comprehensive income: SECRETARY NAMFISA acquired Metropol (Pty) Ltd SUBSEQUENT EVENTS Actuarial gain – Post-retirement medical aid 16.2 2 437 952 2 437 952 1 605 000 on 27 October 2014. The company is an Actuarial (loss) / gain – Severance 16.2 (86 717) (86 717) 93 000 The following persons served as members investment property holding company and The Board of the Authority is not aware of TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE YEAR (4 375 118) (4 335 093) 24 329 953 of the board during the period: owns a property situated in Independence any fact or circumstance, which occurred Avenue, Windhoek. The investment in the between end of the financial year and the Board members subsidiary is listed in note 9 of the annual date of this report, which might influence Estelle Tjipuka Chairperson financial statements. an assessment of the Authority’s affairs. Gersom Katjimune Vice-Chairperson Malverene Theron Member Bonifatius Konjore Member Simeon Amunkete Member

134 135 FINANCIAL CHANGES POSITION IN RESERVES Consolidated statement of financial position Consolidated statement of changes in reserves

ASSETS Notes GROUP AUTHORITY AUTHORITY ACCUMULATED INCOME GROUP AUTHORITY 2015 - N$ 2015 - N$ 2014 - N$ N$ N$

Non-current assets Balance at 1 April 2013 - 195 646 509 Property, plant and equipment 7 46 458 481 4 458 481 4 022 290 Intangible assets 8 3 544 463 3 544 463 3 809 673 Total comprehensive income for the year - 24 329 953 Other financial assets 10 61 778 674 61 778 674 88 766 403 Investment in subsidiary 9 - 42 000 000 - Balance at 31 March 2014 - 219 976 462

Total non-current assets 111 781 618 111 781 618 96 598 366 Acquisition of Subsidiary 219 976 462 -

Current assets Total comprehensive loss for the year (4 375 118) (4 335 093) Accounts receivable 11 39 971 043 39 724 207 34 209 424 Other financial assets 10 57 329 564 57 329 564 82 844 975 Balance at 31 March 2015 215 601 344 215 641 369 Loan to subsidiary 18.3 - 125 412 - Cash and cash equivalents 12 36 435 759 36 435 759 34 084 736

Total current assets 133 736 366 133 614 942 151 139 135

TOTAL ASSETS 245 517 984 245 396 560 247 737 501

EQUITY AND LIABILITIES

Accumulated income 215 601 344 215 641 369 219 976 462

Non-current liabilities Post-retirement benefit obligations 16.2 10 699 149 10 699 149 11 299 149

Current liabilities Accounts payable 13 19 145 971 18 984 522 16 455 790 Deferred income 14 71 520 71 520 6 100

Total current liabilities 19 217 491 19 056 042 16 461 890

TOTAL EQUITY AND LIABILITIES 245 517 984 245 396 560 247 737 501

136 137 CASH 1. ACCOUNTING FLOWS POLICIES Consolidated statement of cash flows NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

Notes GROUP AUTHORITY AUTHORITY The consolidated annual financial statements 1.1. Adoption of new and 2015 - N$ 2015 - N$ 2014 - N$ of the Group are prepared in accordance with revised standards and comply with International Financial Reporting Standards (“IFRS”) adopted by Cash flows from operating activities NAMFISA and the Group adopted all the International Accounting Standards Cash received from financial institutions 107 676 493 107 653 704 102 331 787 of the new and revised Standards and Board (“IASB”), and interpretations issued Cash paid to suppliers and employees (124 199 758) (124 051 557) (83 383 649) Interpretations issued by the International by the International Financial Reporting Accounting Standards Board (IASB) and Interpretations Committee (“IFRIC”) of the the International Financial Reporting Net cash (utilized) / generated by operating activities 20 (16 523 265) (16 397 853) 18 948 138 IASB. interpretations Committee (the IFRIC) of the IASI that are relevant to its operation The annual financial statements of Cash flows from investing activities and effective for annual periods beginning NAMFISA and Group are prepared on Acquisition of property, plant and equipment 7 (44 414 689) (2 414 689) (1 857 757) 1 April 2014. However, the adoption of the historical cost basis except for the Proceeds on disposal of equipment 36 331 36 331 25 694 the Standards and Interpretations did not following financial assets and liabilities Acquisition of intangible assets 8 (494 245) (494 245) (91 287) result in any material adjustments to the that have been measured at fair value: Investment in subsidiary 9 - (42 000 000) - reported figures. Loan to subsidiary 18.3 - (125 412) - • Financial assets and financial liabilities Interest received 3 6 851 528 6 851 528 6 442 232 New/Revised International Financial Reporting Standards Effective for annual periods classified as held for trading; beginning on or after Dividends received 3 4 392 224 4 392 224 4 401 810 • Financial assets and financial liabilities IFRS 10 Consolidated Financial Statements 1 January 2014 Decrease/ (Increase) in other financial assets 52 503 139 52 503 139 (32 909 267) designated at their fair value through — Amendments for investment entities

profit or loss; and IFRS 12 Disclosure of Interests in Other Entities 1 January 2014 Net cash generated / (utilized) in investing activities 18 874 288 18 748 876 (23 988 575) • Financial assets classified as available- — Amendments for investment entities for-sale. IAS 27 Consolidated and Separate Financial 1 January 2014 Net increase / (decrease) in cash and cash equivalents 2 351 023 2 351 023 (5 040 437) Statements Cash and cash equivalents at beginning of the year 34 084 736 34 084 736 39 125 173 IAS 32 Financial instruments: Presentation 1 January 2014 Non-current assets held for sale are stated — Amendments relating to the offsetting of at the lower of its carrying amount and assets and liabilities Cash and cash equivalents at end of the year 12 36 435 759 36 435 759 34 084 736 fair value less costs to sell. IAS 36 Impairment of Assets 1 January 2014 — Amendments arising from Recoverable The accounting policies set out below have Amount Disclosures for Non-Financial Assets been applied consistently to all periods IAS 39 Financial Instruments: Recognition and 1 January 2014 measurement presented in these financial statements. — Amendments for novations of derivatives In the preparation of the financial statements of NAMFISA and the Group recorded various assets and liabilities on A reliable estimate of the impact of the adoption of the recent standards and the presumption that the Group is a going adoption of the recent amendments on interpretations have no material impact concern. the Authority and Group’s Financial on the financial statements in future Statements has not yet been determined. periods, except for disclosure to the The Authority anticipates that the financial statements.

138 139 1. ACCOUNTING 1. ACCOUNTING POLICIES POLICIES NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

1.1. Adoption of new and revised 1.2. Consolidation The Authority has control of an entity when: of any minority interest. The excess of the 1.3. Revenue to the extent that it reverses a revaluation standards (continued) • it has power over the investee; cost of acquisition over the fair value of the decrease for the same asset previously 1.2.1. Basis of consolidation • it is exposed, or has rights to the group’s share of the identifiable net assets Revenue is measured at the fair value of recognised in profit or loss, in which case The following table contains International variable returns from its involvement acquired is recorded as goodwill. If the cost the consideration received or receivable the increase is credited to profit or loss Financial Reporting Standards and The consolidated financial statements with the investee; and of acquisition is less than the fair value of from the services rendered from the to the extent of the decrease previously International Accounting Standards recently incorporate the financial statements of • it has the ability to use its power over the net assets of the subsidiary acquired, Group’s ordinary business activities. expensed. A decrease in the carrying issued but not yet effective, which have not the Authority and all entities controlled the investee to affect the amount of the the difference is recognised directly in amount arising on the revaluation of been early adopted by the Group and that by the Authority. investor’s returns. the statement of comprehensive income Revenue comprises levies, registration such land and buildings is recognised in might affect future financial periods: and inter-company transactions, balances and licence fees charged to financial profit or loss to the extent that it exceeds The Authority reassess whether or and unrealised gains on transactions institutions. The revenue is recognised the balance, if any, held in the properties not it controls an investee if facts and between group companies are eliminated. revaluation reserve relating to a previous New/Revised International Financial Reporting Standards Effective for annual periods when the levies and fees become due in circumstances indicate that there are Unrealised losses are also eliminated. revaluation of that asset. beginning on or after terms of NAMFISA regulations. changes to one or more of the three Accounting policies of subsidiaries have IFRS 7 Financial Instruments: Disclosures 1 January 2018 — Deferral of mandatory effective date of IFRS elements of control listed above. been changed where necessary to ensure Interest income is accrued on an Properties in the course of construction 9 and amendments to transition disclosure consistency with the policies adopted by apportionment basis, with reference to the for production, supply or administrative IFRS 9 Financial Instruments 1 January 2018 1.2.2. Subsidiaries the group. principal outstanding using the effective processes are carried at cost, less any — Classification and Measurement of financial recognised impairment loss. Cost includes assets interest method. Subsidiaries are all entities over which The results of subsidiaries are included professional fees and, for qualifying IFRS 9 Financial Instruments 1 January 2018 — Reissue to include requirements for the the group has the power to govern the in the consolidated annual financial Dividend is recognised when NAMFISA’s assets, borrowing costs capitalised in classification and measurement of financial financial and operating policies generally statements from the effective date of right to receive payment is established. accordance with the Group’s accounting liabilities and incorporate existing recognition accompanying a shareholding of more acquisition to the effective date of disposal. policy. Such properties are classified to requirements than one half of the voting rights. The Adjustments are made when necessary 1.4. Property, plant and appropriate categories of buildings and IAS 36 Recoverable Amount Disclosures for Non-Fi- 1 January 2015 existence and effect of potential voting to the annual financial statements of equipment when completed and ready for nancial Assets (Amendments to IAS 36) equipment rights that are currently exercisable subsidiaries to bring their accounting intended use. Depreciation of these assets, IAS 39 Novation of Derivatives and Continuation of 1 January 2015 Hedge Accounting or convertible are considered when policies in line with those of the group. Land and buildings held for use in the on the same basis as other property assets, IFRS 10 Consolidated Financial Statements 1 January 2015 assessing whether the group controls production or supply of goods or services, commences when the assets are ready for — Amendments for investment entities another entity. Subsidiaries are fully All intragroup transactions, balances, or for administrative purposes, are stated their intended use. IAS 19 Defined Benefit Plans: Employee Contributions 1 July 2015 consolidated from the date on which income and expenses are eliminated in in the consolidated statement of financial IFRS 12 Disclosure of Interests in Other Entities 1 January 2015 control is transferred to the group. They full on consolidation. position at their revalued amounts, being Depreciation of revalued buildings is — Amendments for investment entities are de-consolidated from the date that the fair value at the date of revaluation, less recognised in profit or loss. On the IAS 27 Consolidated and Separate Financial Statements 1 January 2015 control ceases. The purchase method Where a subsidiary is disposed of and a any subsequent accumulated depreciation subsequent sale or retirement of a revalued — Amendments for investment entities of accounting is used to account for the non-controlling shareholding is retained, and subsequent accumulated impairment property, the attributable revaluation IAS 32 Financial Instruments: Presentation 1 January 2015 acquisition of subsidiaries by the group. the remaining investment is measured to surplus remaining in the properties — Amendments relating to the offsetting of losses. Revaluations are performed with financial assets and financial liabilities The cost of an acquisition is measured as fair value with the adjustment to fair value sufficient regularity such that the carrying revaluation reserve is transferred directly the fair value of the assets given, equity recognised in profit or loss as part of the to retained earnings. New/Revised International Financial Reporting Effective for annual periods amounts do not differ materially from Interpretations Committee beginning on or after instruments issued and liabilities incurred gain or loss on disposal of the controlling those that would be determined using fair IFRIC 21 Levies 1 January 2015 or assumed at the date of exchange, interest. values at the end of each reporting period. Freehold land is not depreciated. plus costs directly attributable to the acquisition. Identifiable assets acquired Any revaluation increase arising on the and liabilities and contingent liabilities revaluation of such land and buildings assumed in a business combination are is recognised in other comprehensive measured initially at their fair values at the income and accumulated in equity, except acquisition date, irrespective of the extent

140 141 1. ACCOUNTING 1. ACCOUNTING POLICIES POLICIES NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

1.4. Property, plant and The depreciation rates applicable are as 1.7. Cash and cash equivalents transaction affects either accounting nor 1.10.2. Subsequent measurement arising from changes in the fair value equipment (continued) follows: taxable profit or loss. Deferred income tax are recognised directly in profit and loss. Cash and cash equivalents comprise cash is determined using tax rates (and laws) Fair values and the recognition methods Dividends on Available-for-Sale equity Land and buildings are derecognised upon Computer equipment 3 – 10 years on hand, bank balances and demand that have been enacted or substantially of the different financial instruments instruments are recognised in profit or disposal or when no future economic Office equipment 3 – 10 years deposits, and other short term highly enacted by the reporting date and are are disclosed in the notes to the annual loss when the Authority’s right to receive benefits are expected to arise from the Furniture and fittings 10 years liquid investments that are readily expected to apply when the related financial statements. Fair value represents the dividends is established. continued use of the asset. Any gain or Motor vehicles 5 – 7 years convertible to a known amount of cash deferred income tax asset is realised or an approximation of the year end value, loss arising on the disposal or retirement and are subject to an insignificant risk of the deferred income tax liability is settled. which may differ from the value that will Fair-Value-through-Profit-and-Loss of land and buildings is determined as the 1.5. Intangible assets changes in value. be finally realised. Financial assets difference between the sales proceeds and Deferred tax assets are recognised for Financial assets are classified as at Fair- the carrying amount of the asset and is NAMFISA and the Group carry 1.8. Taxation deductible temporary differences and Held-to-Maturity Financial assets Value-through-Profit-and-Loss where the recognised in profit or loss. capitalised software assets at cost less unused tax losses only if it is probable that Held-to-maturity investments are financial asset is either held for trading amortisation and any impairment losses. The income tax expense or revenue future taxable amounts will be available financial assets with fixed determinable or it is designated as at fair value through Equipment is stated at cost, less The Authority amortises these assets on for the year is the tax payable on the to utilise those temporary differences and payments and fixed maturity that the profit and loss. accumulated depreciation. Depreciation a straight-line basis at a rate applicable to current period’s taxable income based losses. Authority has the positive intent and is calculated on cost, less residual value the expected useful life of the asset, but on the applicable income tax rate for ability to hold to maturity. Held-to- A financial asset is classified as held for over the estimated useful lives of the not exceeding ten years. the jurisdiction adjusted by changes Current tax is recognised in profit and maturity investments are measured at trading if: assets using straight line method. in deferred tax assets and liabilities loss, except to the extent that it relates to amortised cost using effective interest • It has been acquired principally for the 1.6. Interests in subsidiaries attributable to temporary differences and items recognised in other comprehensive method less any impairment, with revenue purpose of selling in the near future; or The residual value and the useful life of to unused tax losses. income or directly in equity. recognised on an effective yield. • It is a derivative that is not designated each asset are reviewed at each financial In NAMFISA’s separate financial statements, and effective as a hedging instrument. period-end. investments in subsidiaries are carried at The current income tax charge is 1.9. Retirement benefits Investments are classified as financial assets cost less any accumulated impairment. calculated on the basis of the tax laws in terms of IAS39: Financial Instruments 1.10. Financial instruments Each part of an item of equipment with enacted or substantively enacted at the Contributions to the NAMFISA provident – Recognition and Measurements. a cost that is significant in relation to the The cost of an investment in a subsidiary end of the financial year. Management fund are calculated so as to provide Investments are classified as held-to- 1.10.2. Subsequent measurement total cost of the item shall be depreciated is the aggregate of: periodically evaluates positions taken in funding at a constant percentage of maturity assets (HTM), financial assets at (continued separately. • the fair value, at the date of exchange, the tax returns with respect to situations pensionable remuneration. Contributions fair value through profit and loss (FVTPL) The depreciation charge for each period of assets given, liabilities incurred or in which applicable tax regulation is are therefore charged to income as and available for sale (AFS). Held-to- A financial asset other than a financial is recognised in profit or loss unless it assumed and equity instruments issued subject to interpretation. It establishes incurred. maturity investments are financial assets asset held for trading may be designated is included in the carrying amount of by the authority; plus provisions where appropriate on the basis with fixed or determinable payments and as at fair value through profit and loss another asset. • any costs directly attributable to the of amounts expected to be paid to the tax 1.10. Financial instruments fixed maturity that NAMFISA has the upon initial recognition if: purchase of the subsidiary. authorities. intent and ability to hold to maturity. Such The gain or loss arising from 1.10.1. Initial measurement investments are measured at amortised • Such designation eliminates or derecognition of an item of equipment An adjustment to the cost of a business Deferred income tax is provided in cost using the effective interest rate significantly reduces a measurement or is included in profit or loss when the combination contingent on future events full, using the liability method, on Financial assets and financial liabilities are method, less any impairment. recognition inconsistency that would item is derecognised. The gain or loss is included in the cost of the combination temporary differences arising between recognised on NAMFISA and the Group’s Available-for-Sale Financial assets otherwise arise; or arising from derecognition of an item of if the adjustment is probable and can be the tax bases of assets and liabilities and statement of financial position when the Unlisted shares and listed redeemable • It forms part of a contract containing equipment is determined as the difference measured reliably. their carrying amounts in the financial entity has become a party to the contractual notes are investments held by the one or more embedded derivatives, between the net disposal proceeds, if any, statements. However, the deferred income provisions of the instrument. Financial Authority that are traded in the active and IAS 39 Financial Instruments: and the carrying amount of the item. tax is not accounted for if it arises from instruments carried on the statement of market are classified as being Available- Recognition and Measurement permits initial recognition of an asset or liability financial position include cash and cash for-Sale and are stated at fair value. the entire combined contract (asset in a transaction other than a business equivalents, accounts receivable, accounts Fair value is determined in the manner or liability) to be designated as at fair combination that at the time of the payable and investments. described in note 22.9. Gains and losses value through profit and loss.

142 143 1. ACCOUNTING 1. ACCOUNTING POLICIES POLICIES NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

Financial assets at fair value through profit Impairment of financial assets With the exception of available for sale equity Financial liabilities at FVTPL are stated retaining nor transferring substantially that the increased carrying amount does not and loss are stated at fair value, with any For all other financial assets, objective instruments, if in a subsequent period, the at fair value, with any resultant gain or all the risks and rewards of ownership exceed the carrying amount that would have resultant gain or loss recognised in profit evidence of impairment includes: amount of the impairment loss decreases loss recognised in profit or loss. The net of the asset, but no longer retains been determined had no impairment loss or loss. The net gain or loss recognised in and the decrease can be related objectively gain or loss recognised in profit or loss control of the asset. been recognised for the asset in prior years. A profit or loss incorporates any dividend • Significant financial difficulty of the to an event occurring after the impairment incorporates any interest paid on the reversal of an impairment loss is recognised or interest earned in the financial asset. issuer or counterparty; was recognised, the previously recognised financial liability. A financial liability is derecognised when immediately in profit and loss, unless the Fair value is determined in the manner • Default or delinquency in interest or impairment loss is reversed through profit and only when the liability is extinguished, relevant asset is carried at the revalued amount, described in note 22.9. principal payments; or or loss to the extent that the carrying Trade and other payables that is, when the obligation specified in the in which case the reversal of the impairment • It becoming probable that the borrower amount of the investment at the date the Trade and other payables are initially contract is discharged, cancelled or has loss is treated as a revaluation increase. Loans and receivables will enter bankruptcy or financial re- impairment reversed does not exceed what measured at fair value, and are expired. Trade receivables, loans, and other organisation. the amortised cost would have been had the subsequently measured at amortised cost, 1.12. Post-retirement benefits receivables that have fixed or determinable impairment not been recognised. using the effective interest rate method. 1.11. Impairment of tangible and payments that are not quoted in an For certain categories of financial assets, intangible assets 1.12.1. Medical benefits active market are classified as loans such as trade receivables, assets are 1.10. Financial instruments Bank overdrafts and other short-term and receivables. Loans and receivables assessed for impairment on an individual (continued) borrowings At each reporting date, the Group reviews The Group provides for post-retirement are measured at amortised cost using basis. Objective evidence of impairment Interest-bearing bank overdrafts and the carrying amounts of its tangible and medical benefits in the form of a medical the effective interest method, less any for a portfolio of receivables could 1.10.2. Subsequent measurement other short-term borrowings are recorded intangible assets to determine whether aid scheme for eligible employees and impairment. Interest income is recognised include the Authority’s past experience (continued at the proceeds received, net of direct there is any indication that those assets may pensioners. The cost of providing benefits by applying the effective interest rate, of collecting payments, and increase in issue costs. be impaired. If any such indication exists, is determined using the Projected Unit except for short-term receivables when the number of delayed payments in the In respect of available for sale equity the recoverable amount of the asset is Credit Method prescribed by IAS19 the recognition of interest would be portfolio past the average credit period securities, impairment losses previously 1.10.3. Offsetting financial estimated in order to determine the extent Employee Benefits. The liability for the immaterial. of 30 days, as well as observable changes recognised through profit or loss are not instruments and related income of the impairment loss if any. Group’s contribution to the scheme is in national or local economic conditions reversed through profit or loss. Any increase in respect of current and future periods, Impairment of financial assets that correlate with default on receivables. in fair value subsequent to an impairment Financial assets and liabilities are offset and Recoverable amount is the higher of fair provided for by means of a liability on Financial assets, other than those at fair loss is recognised directly in equity. the net amount reported in the statement value less costs to sell and value in use. In the statement of financial position. The value through profit and loss, are assessed For financial assets carried at amortised of financial position only when there is assessing the value in use, the estimated magnitude of the liability is based on an for indicators of impairment at each cost, the amount of the impairment is the Financial liabilities at fair value through a legally enforceable right to offset and future cash flows are discounted to their annual actuarial valuation. Actuarial gains reporting date. Financial assets are impaired difference between the asset’s carrying profit and loss (FVTPL) intention to settle either on a net basis or present value using a discount rate that and losses on the post-retirement medical where there is objective evidence that, as a amount and the present value of the estimated Financial liabilities are classified as at FVTPL to realise the asset and settle the liability reflects current market assessments of the benefits are accounted for in the year in result of one or more events that occurred future cash flows, discounted at the financial when the financial liability is either held for simultaneously. time value of money and the risks specific which they arise. after the initial recognition of the financial asset’s original effective interest rate. trading or it is designated as at FVTPL. The to the asset. If the recoverable amount of an asset, the estimated future cash flows of the Authority only has financial liabilities as 1.10.4. Derecognition asset is estimated to be less than its carrying The amount recognised in the statement investment have been impacted. The carrying amount of the financial asset held for trading under this category. amount, the carrying amount of the asset is of financial position represents the present is reduced by the impairment loss directly The Group derecognises a financial asset reduced to its recoverable amount. value of the defined benefit obligation as For unlisted shares classified as Available for all financial assets with the exception A financial liability is classified as held for when: adjusted for unrecognised actuarial gains and for Sale, a significant or prolonged decline of trade receivables, where the carrying trading if: An impairment loss is recognised immediately losses and unrecognised past service costs, in the fair value of the security below its amount is reduced through the use of an • it has been incurred principally for the • The contractual rights to the cash flows in profit and loss, unless the relevant asset and reduces by the fair value of plan assets. cost is considered to be objective evidence allowance account. When a trade receivable purpose of repurchasing in the near arising from the financial assets have is carried at a revalued amount, in which of impairment. is considered uncollectible, it is written off future; or expired or been forfeited by the Group; or case the impairment loss is treated as a against the allowance account. Subsequent • it is a derivative that is not designated • It transfers the financial assets revaluation decrease. Where an impairment recoveries of amounts previously written and effective as a hedging instrument. including substantially all the risks and loss subsequently reverses, the carrying off are recognised in profit or loss. rewards of ownership of the assets; or amount of the asset is increased to the revised • It transfers the financial asset, neither estimate of its recoverable amount, but so

144 145 1. ACCOUNTING 2. REVENUE NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS POLICIES GROUP AUTHORITY AUTHORITY 2015 - N$ 2015 - N$ 2014 - N$ NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Levies 112 734 469 112 734 469 102 358 579 1.12.2. Severance pay to be reimbursed by another party, the 1.15.2. Recovery of deferred tax Registration and license fees 548 141 548 141 224 265 reimbursement shall be recognised when, assets 113 282 610 113 282 610 102 582 844 In accordance with the Namibian Labour and only when, it is virtually certain Act of 2007, severance benefits are payable that reimbursement will be received Judgement is required to determine which Levies per Industry segment to an employee, if: if the entity settles the obligation. The arrangements are considered to be a tax on Unit Trusts 16 135 205 16 135 205 14 854 010 reimbursement shall be treated as a income as opposed to an operating cost. Asset Management 19 153 620 19 153 620 17 948 884 • The employee is retrenched; separate asset. The amount recognised for Judgement is also required to determine Stock Brokers 4 604 580 4 604 580 2 283 975 • Dies while employed; or the reimbursement shall not exceed the whether deferred tax assets are recognised in Short Term Insurance 33 159 358 33 159 358 24 893 727 amount of the provision. • Retires on reaching the age of 65. the statement of financial position. Deferred Long Term Insurance 11 066 552 11 066 552 15 638 011 tax assets, including those arising from Pension Funds 3 489 973 3 489 973 3 249 110 1.14. Leases The obligation for severance benefits unutilised tax losses, require management Medical Aid Funds and Friendly Societies 938 650 938 650 893 280 to current employees is actuarially to assess the likelihood that the Group Micro Lending 24 186 531 24 186 531 22 597 582 1.14.1. Operating leases determined in respect of all its employees will generate sufficient taxable earnings in 112 734 469 112 734 469 102 358 579 and is provided for in full. The cost of future periods, in order to utilise recognised providing benefits is determined using Rentals payable under operating leases are deferred tax assets. Assumptions about the the Projected Unit Credit Method, charged to income on a straight-line basis generation of future taxable profits depend prescribed by IAS 19 Employee Benefits, over the relevant period. Any contingent on management’s estimates of future cash with actuarial valuations being carried out rents are expensed in the period they are flows. These estimates of future taxable at each reporting date. incurred. income are based on forecast cash flows from operations (which are impacted by Actuarial gains and losses on severance 1.15. Critical accounting production and sales volumes, commodity pay are accounted for in the year in which estimates and judgements prices, reserves, operating costs, closure and they arise. The magnitude of the liability in applying accounting rehabilitation costs, capital expenditure, is based on an annual actuarial valuation. policies dividends and other capital management The amount recognised in the statement transactions) and judgement about the of financial position represents the fair In the process of applying the Group’s application of existing tax laws in each value of the severance pay obligation accounting policies, management has jurisdiction. To the extent that future cash adjusted for unrecognised actuarial gains made the following judgements, which flows and taxable income differ significantly and losses. have the most significant effect on the from estimates, the ability of the Group to amounts recognised in the consolidated realise the net deferred tax assets recorded 1.13. Provisions financial statements. at the reporting date could be impacted.

Provisions are recognised when the Group 1.15.1. Contingencies In addition, future changes in tax laws has a present obligation as a result of a in the jurisdictions in which the Group past event and it is probable that this will By their nature, contingencies will be operates could limit the ability of the result in an outflow of economic benefits resolved only when one or more uncertain Group to obtain tax deductions in future that can be reliably estimated. future events occur or fail to occur. The periods. Refer note 6. assessment of the existence and potential The amount of a provision is the present quantum of contingencies inherently value of the expenditure expected to be involves the exercise of significant required to settle the obligation. judgement and the use of estimates Where some or all of the expenditure regarding the outcome of future events. required to settle a provision is expected

146 147 3. INVESTMENT 5. INCOME FOR THE INCOME YEAR BEFORE TAXATION NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

GROUP AUTHORITY AUTHORITY GROUP AUTHORITY AUTHORITY 2015 -N$ 2015 - N$ 2014 - N$ 2015 - N$ 2015 - N$ 2014 - N$

Interest received Office rental expenses: -Held-to-maturity investments 4 753 777 4 753 777 4 666 600 - Office equipment 391 098 391 098 334 590 -Bank deposits 2 097 751 2 097 751 1 775 632 - Parking 1 171 084 1 171 084 794 381 - Offices 9 460 326 9 460 326 8 636 440 6 851 528 6 851 528 6 442 232 11 022 508 11 022 508 9 765 411 Staff costs: Dividend received - Salaries and bonuses 48 406 346 48 406 346 34 884 258 -Unit trusts 4 392 224 4 392 224 4 401 810 - Housing and transport allowances 14 422 750 14 422 750 10 809 113 - Defined contribution pension plan 7 557 107 7 557 107 5 569 684 11 243 752 11 243 752 10 844 042 - Other pension funds 123 777 123 777 110 942 - Defined benefit medical aid plan 739 952 739 952 1 104 000 - Other medical aid costs 3 530 624 3 530 624 2 316 957 - Training and development 4 596 217 4 596 217 2 196 697 - Other staff costs 4 454 398 4 454 398 3 335 956 83 831 171 83 831 171 60 327 607 4. OTHER INCOME Other operating expenses which includes the following: 20 539 926 20 230 276 12 826 799 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Audit fees GROUP AUTHORITY AUTHORITY External auditor fees - audit 889 899 763 160 425 261 2015 - N$ 2015 - N$ 2014 - N$ External auditor fees - other audit services - - 53 572 889 899 763 160 478 833 Interest on late payments 351 785 351 785 436 466 (Profit) / Loss on disposal of equipment and intangible assets (1 687) (1 687) 24 274 Rules amendments 3 210 3 210 1 775 Penalty fees 1 864 001 1 864 001 2 798 520 Board member’s emoluments – for services as Board members: Other income 643 959 374 334 136 540 Rick Kukuri - Chairperson (outgoing) - - 150 512 2 862 955 2 593 330 3 373 301 Titus Ipumbu - Vice-Chairperson (outgoing) - - 77 742 Heinrich Nashenda - (outgoing) - - 61 485 Estelle Tjipuka - Chairperson (incoming) 150 431 150 431 141 609 Gersom Katjimune - Vice-Chairperson (incoming) 185 398 185 398 60 339 Malverene Theron 137 454 137 454 74 359 Bonifatius Konjore - (incoming) 127 843 127 843 51 939 Simeon Amunkete - (incoming) 193 372 193 372 80 765 794 498 794 498 698 750

Doubtful debts impairment 2 705 767 2 705 767 963 425 Information and communication technology 3 833 641 3 833 641 3 200 783 Stakeholder engagement 4 063 364 4 063 364 1 566 684 Regulatory seminars 2 052 389 2 052 389 1 396 277 Social responsibility 1 414 159 1 414 159 1 237 521 Subscriptions and membership fees 1 079 942 1 079 942 801 222

148 149 6. TAXATION 7. PROPERTY, PLANT NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 6.1. Authority The Authority is exempted from income taxes in terms of section 16(1) (e) of the Income Tax Act, No 24 of 1981. AND EQUIPMENT 6.2. Group NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Namibian Normal taxation 2015 - N$ 2014 - N$ 7.1. Group Land and Motor Furniture Office Computer Total Current tax – current year - - Buildings vehicles and fittings equipment equipment Deferred tax – current year - - N$ N$ N$ N$ N$ N$ - - Cost At 1 April 2013 - 982 641 2 461 902 607 189 2 698 532 6 750 264 Income tax expense Additions - - 357 643 55 624 1 444 490 1 857 757 Income tax - current year - - Disposals - - (53 295) (71 975) (117 720) (242 990) Deferred income tax - current year - - At 31 March 2014 - 982 641 2 766 250 590 838 4 025 302 8 365 031 - - Additions 42 000 000 - 760 509 342 193 1 311 987 44 414 689 Reconciliation of the tax expense Disposals - - (20 016) (2 550) (367 880) (390 446) Loss before tax (40 025) - At 31 March 2015 42 000 000 982 641 3 506 743 930 481 4 969 409 52 389 274

Tax at applicable tax rate of 33% (13 208) - Accumulated depreciation At 1 April 2013 - 221 435 924 836 396 552 1 790 438 3 333 261 Tax effect of adjustments on taxable income Deferred tax asset not recognised 13 208 - Depreciation for the year - 185 833 343 165 105 468 568 036 1 202 502 - - Disposals - - (37 150) (67 371) (88 501) (193 022) The current tax expense of N$ nil (2014: N$ nil) and the Group does not have any current tax. At 31 March 2014 - 407 268 1 230 851 434 649 2 269 973 4 342 741 Deferred tax assets are not brought to account as the generation of sufficient future taxable income to utilise such asset is not probable. Depreciation for the year - 196 528 290 495 187 837 1 268 994 1 943 854 Disposals - - (3 614) (2 549) (349 639) (355 802) At 31 March 2015 - 603 796 1 517 732 619 937 3 189 328 5 930 793

Carrying amount At 31 March 2014 - 575 373 1 535 399 156 189 1 755 329 4 022 290 At 31 March 2015 42 000 000 378 845 1 989 011 310 544 1 780 081 46 458 481

150 151 7. PROPERTY, PLANT 8. INTANGIBLE ASSETS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

Group and Authority - N$ AND EQUIPMENT Computer Software Cost NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS At 1 April 2013 5 469 752 7.2. Authority Motor Furniture Office Computer Total Additions 91 287 Disposals - vehicles and fittings equipment equipment At 31 March 2014 5 561 039 N$ N$ N$ N$ N$ Additions 494 244 Cost Disposals - At 1 April 2013 982 641 2 461 902 607 189 2 698 532 6 750 264 At 31 March 2015 6 055 283 Additions - 357 643 55 624 1 444 490 1 857 757 Disposals - (53 295) (71 975) (117 720) (242 990) Amortisation At 31 March 2014 982 641 2 766 250 590 838 4 025 302 8 365 031 At 1 April 2013 1 129 648 Charge for the year 621 718 Additions - 760 509 342 193 1 311 987 2 414 689 Eliminated on disposal - Disposals - (20 016) (2 550) (367 880) (390 446) At 31 March 2014 1 751 366 At 31 March 2015 982 641 3 506 743 930 481 4 969 409 10 389 274 Charge for the year 759 456 Eliminated on disposal - Accumulated depreciation At 31 March 2015 2 510 822 At 1 April 2013 221 435 924 836 396 552 1 790 438 3 333 261 Carrying amount Depreciation for the year 185 833 343 165 105 468 568 036 1 202 502 At 31 March 2014 3 809 673 Disposals - (37 150) (67 371) (88 501) (193 022) At 31 March 2015 3 544 463 At 31 March 2014 407 268 1 230 851 434 649 2 269 973 4 342 741 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 Depreciation for the year 196 528 290 495 187 837 1 268 994 1 943 854 for second hand assets and general availability of these particular assets. The assessment did not indicate a requirement for an adjustment to the Disposals - (3 614) (2 549) (349 639) (355 802) carrying values used in the current or prior year. At 31 March 2015 603 796 1 517 732 619 937 3 189 328 5 930 793

Carrying amount At 31 March 2014 575 373 1 535 399 156 189 1 755 329 4 022 290 At 31 March 2015 378 845 1 989 011 310 544 1 780 081 4 458 481 9. INVESTMENT During the year, the Group reviewed the useful lives of all items used for the purposes of depreciation calculations. The review did not indicate a re- quirement for an adjustment to the carrying values used in the current or prior year. The carrying value of equipment is assessed on an annual basis. IN SUBSIDIARY NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

PERCENTAGE HELD AUTHORITY 2015 2014 2015 2014 % % % % During the year the Authority acquired 100% of the shareholding in Metropol (Pty) Ltd. As at 31 March 2015 the carrying value of this invest- ment was N$42 000 000. Metropol (Pty) Ltd is a property owning company incorporated in Namibia

32 970 ordinary shares of N$2 each 100 - 42 000 000 - Profit / (Loss): (N$40 025) (2014: N$ nil) Total shares at cost 42 000 000 -

152 153 10. OTHER FINANCIAL 11. ACCOUNTS ASSETS RECEIVABLE NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Current Current Non-current Non-current GROUP AUTHORITY AUTHORITY 2015 - N$ 2014 - N$ 2015 - N$ 2014 - N$ 2015 - N$ 2015 - N$ 2014 - N$ Held-to-maturity investments carried at amortised cost Gross levies receivable 53 423 280 53 423 280 46 179 537 Fixed deposits 57 329 564 82 844 975 - - Allowance for doubtful debts (17 254 956) (17 254 956) (14 567 528) 57 329 564 82 844 975 - - Net levies receivable 36 168 324 36 168 324 31 612 009

Prepaid expenses 2 418 335 2 418 335 1 649 955 Available-for-sale investments carried at Staff advances – study loans 1 137 548 1 137 548 947 460 fair value Rent debtors in subsidiary 246 836 - - Unit trusts – opening balance - - 88 766 404 77 364 844 39 971 043 39 724 207 34 209 424 - Invested - - 10 620 296 15 000 000 - Withdrawal - - (42 000 250) (8 000 250) GROUP AND AUTHORITY Capital Life Short Micro Pension Medical Carrying - Dividends received - - 4 392 224 4 401 810 Movement in allowance for Markets Insurance term Lenders Funds Aid Funds Amount - Fair value - - 61 778 674 88 766 404 doubtful debts Insurance 57 329 564 82 844 975 61 778 674 88 766 404 Balance at 1 April 2013 276 526 10 173 623 1 947 822 590 942 591 795 39 345 13 620 053 Unit trusts are classified as non-current financial assets as it is the intention of the Authority to retain these investments for the foreseeable Impairment losses recognised 28 614 500 501 (34 523) (51 182) 507 468 12 547 963 425 future extending over more than 1 year. Amounts written off as uncollectable (10 975) - (4 514) - (461) - (15 950) Balance at 31 March 2014 294 165 10 674 124 1 908 785 539 760 1 098 802 51 892 14 567 528

Impairment losses recognised 87 941 1 655 426 400 420 127 377 468 573 (37 135) 2 702 602 Amounts written off as uncollectable - (13 647) (1 527) - - - (15 174) Balance at 31 March 2015 382 106 12 315 903 2 307 678 667 137 1 567 375 14 757 17 254 956

Of the allowance for doubtful debt amount for the life insurance industry, N$12 315 903 (2014: N$10 674 124) relates to agents and brokers.

2015 - N$ 2014 - N$ Ageing of past due but not impaired More than 180 days: Capital Markets - 150 991 Collective Investments 57 50 Life Insurance 816 088 3 559 421 Pension Funds 852 704 523 759 Medical Aid Funds and Friendly Societies - 35 250 Microlenders 247 413 246 335 Short Terms Insurance 68 951 113 959 1 985 213 4 629 765

Ageing of impaired receivables More than 180 days: Capital Markets 382 107 294 165 Life Insurance 12 315 904 10 674 124 Short-Term Insurance 2 307 678 1 908 786 Microlenders 667 136 539 759 Pension Funds 1 567 374 1 098 802 Medical Aid Funds and Friendly Societies 14 757 51 892 17 254 956 14 567 528

Due to the short term nature of accounts receivable the fair value approximates its book value.

154 155 12. CASH AND CASH 15. OPERATING LEASE EQUIVALENTS COMMITMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

GROUP AND AUTHORITY Non-current Non-current 2015 - N$ 2014 - N$ 2015 - N$ 2014 - N$ Office buildings: Within one year 7 488 589 7 061 566 Cash and bank balances 36 435 759 30 304 437 In the second to fifth years 5 697 978 12 693 345 Funds received from SIDA - 3 780 299 13 186 567 19 754 911 36 435 759 34 084 736 Office equipment: Within one year 447 545 891 427 In the second to fifth years 210 019 1 271 438 657 564 2 162 865 13 844 131 21 917 776

13. ACCOUNTS PAYABLE In respect of non-cancellable operating leases the following (assets)/ liabilities have been raised: Current 662 129 57 244 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Non-current 989 668 1 644 306 1 651 797 1 701 550 GROUP AND AUTHORITY GROUP AUTHORITY AUTHORITY 2015 - N$ 2015 - N$ 2014 - N$

Unallocated deposits 25 25 514 175 Accrued staff costs 6 472 042 6 472 042 4 070 896 Payables and other accruals 7 164 455 7 003 006 5 621 606 Audit fees 535 305 535 305 254 709 16. RETIREMENT Staff benefits - Leave 4 974 144 4 974 144 3 906 727 Swedish International Development Cooperation Agency (SIDA) - - 2 087 677 19 145 971 18 984 522 16 455 790 BENEFIT PLAN NAMFISA entered into a partner driven cooperation agreement through the SIDA with Finansinspektionen in Sweden. In terms of this agreement, SIDA contributed to the funding of a project aimed at enabling and improving NAMFISA in its development work into a modern NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS supervisory authority for risk based supervision. Technical assistance by an international expert was needed in regard to the Authority’s role for the safeguarding, development and deepening of the financial sector in Namibia. The project was fully supported by the Ministry of Finance, 16.1. Defined contribution provident benefits the Bank of Namibia and the Swedish Riksbank. The project duration was from November 2012 till April 2014. The 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 comprehensive income represents the contributions payable to the Fund at the rate of 16% of pensionable remuneration. Employees contribute to the Fund at a rate of 7% of pensionable remuneration. The fund was last valued as at 31 March 2014 and was found to be sound. 2015 - N$ 2014 - N$ The total value of the contributions to the pension fund during the year amounted to: 14. DEFERRED INCOME Employer contributions 7 557 107 5 569 684 Employee contributions 3 306 234 2 436 737 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Total contributions for the period 10 863 342 8 006 421 2015 - N$ 2014 - N$

Prepaid levies 71 520 6 100 71 520 6 100

156 157 16. RETIREMENT 16. RETIREMENT BENEFIT PLAN BENEFIT PLAN NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 16.2. Post-retirement benefits obligations 2015 - N$ 2014 - N$ Sensitivity Analysis: The effect of 1% movement in the assumed health cost rate is as follows: Post-retirement medical aid benefits 10 380 149 11 057 149 -1% Medical Valuation +1% Medical Severance pay 319 000 242 000 inflation assumption inflation 10 699 149 11 299 149 At 31 March 2015 -Effect on defined benefit obligation 8 332 149 10 380 149 13 065 149 Post-retirement medical aid benefits -Effect on current service cost and Interest cost 1 288 000 1 635 000 2 094 000 NAMFISA provides post-retirement medical aid benefits to all qualifying staff members appointed before August 2009. An actuarial valuation has been performed at 31 March 2015 to determine the present value of the employer’s subsidy towards the post-employment medical scheme At 31 March 2014 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 fair value. The present value of the obligation and the related current service cost and past service cost was -Effect on defined benefit obligation 8 952 000 11 057 149 13 800 000 measured using the projected unit credit method. For the period under review, the current service cost and interest is accounted for as reflected -Effect on current service cost and Interest cost 1 481 000 1 869 000 2 378 000 in the actuarial valuation done at 31 March 2015. 2015 - N$ 2014 - N$ Key assumptions: The amounts recognised in the statement of financial position are as follows: Discount rate 8.35% 8.89% Net liability at beginning of the year 11 057 149 10 559 149 Medical inflation rates 8.53% 8.74% Service cost 848 000 1 258 000 Valuation date 31/03/2015 31/03/2014 Interest cost 1 021 000 999 000 Current service and interest cost in the analysis are based on the valuation assumption for the year following the valuation date. Actuarial gain (2 437 952) (1 605 000) Subsidies paid (108 048) (154 000) Net liability recognised in the statement of financial position 10 380 149 11 057 149 Present value of obligation: 2015 10 380 149 - The amounts recognised in the statement of comprehensive income are as follows: 2014 11 057 149 11 057 149 Current service cost 848 000 1 258 000 2013 10 559 149 10 559 149 2012 7 989 149 7 989 149 Subsidies paid (108 048) (154 000) 739 952 1 104 000 Severance pay Interest on obligation 1 021 000 999 000 In accordance with the Namibian Labour Act of 2007, NAMFISA has an obligation to provide for severance pay benefits to all staff members. Actuarial gain recognised in the year (2 437 952) (1 605 000) An actuarial valuation has been performed at 31 March 2015 to determine the present value of the employer’s obligation in terms of severance Total (677 000) 498 000 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 2015. 2015 - N$ 2014 - N$ The amounts recognised in the statement of financial position are as follows: Net liability at beginning of the year 242 000 261 000 Service cost 59 000 52 000 Interest cost 22 000 22 000 Actuarial loss /(gain) 86 717 (93 000) Benefits paid (90 717) - Net liability recognised in the statement of financial position 319 000 242 000

The amounts recognised in the statement of comprehensive income are as follows: Current service cost 59 000 52 000 Interest on obligation 22 000 22 000 Actuarial loss / (gain) recognised in the year 86 717 (93 000) Benefits paid (90 717) - Total 77 000 (19 000)

158 159 16. RETIREMENT 17. CAPITAL BENEFIT PLAN COMMITMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Severance pay (continued) 2015 - N$ 2014 - N$ Sensitivity Analysis: Capital commitments up to 31 March 2015 The effect of 1% movement in the assumed salary inflation rate is as follows: -1% Salary Valuation +1% Salary Commitments for acquisition of software – authorised but not contracted 8 681 000 9 000 000 inflation assumption inflation Commitments for acquisition of property – authorised but not contracted 54 000 000 53 760 000 At 31 March 2015 62 681 000 62 760 000 -Effect on defined benefit obligation 287 000 319 000 357 000 -Effect on current service cost and Interest cost 95 000 108 000 124 000 Part of the Authority’s strategic imperative is to have its own office space to enhance operational efficiency and institutional capacity to execute its mandate. In this respect provision is made for the commencement of the office building project costs which will be financed from existing cash reserves. At 31 March 2014 -Effect on defined benefit obligation 217 000 242 000 270 000 -Effect on current service cost and Interest cost 71 000 81 000 92 000

The effect of 20% movement in the assumed employee mortality rate is as -20% Valuation +20% follows: Mortality rate assumption Mortality rate 18. RELATED PARTY At 31 March 2015 -Effect on defined benefit obligation 258 000 319 000 379 000 -Effect on current service cost and Interest cost 88 000 108 000 129 000

At 31 March 2014 TRANSACTIONS -Effect on defined benefit obligation 196 000 242 000 287 000 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS -Effect on current service cost and Interest cost 66 000 81 000 96 000 18.1. Government of Namibia Key assumptions: NAMFISA regards the Ministry of Finance and other parastatals falling under the same ministry as related parties as well as board members Investment return 7.33% 8.18% and key management who can exercise control and influence over the affairs of the Authority. During the year, the Authority did not enter into Salary inflation rate 6.50% 7.36% any material transactions with the Government of Namibia and/or any parastatals. Valuation date 31/03/2015 31/03/2014 18.2. Subsidiary Current service and interest cost in the analysis are based on the valuation assumption for the year following the valuation date. Refer to note 9 regarding the investment in subsidiary Present value of obligation: 2015 319 000 - 18.3. Related party balances 2014 242 000 242 000 2015 - N$ 2013 261 000 261 000 Loan to subsidiary 2012 126 000 126 000 Metropol (Pty) Ltd 125 412

The loan to the subsidiary is unsecured, interest free and repayable on demand.

160 161 18. RELATED PARTY 19. CRITICAL TRANSACTIONS ACCOUNTING NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 18.4. Compensation of board members and Short Term Post Retirement Total - N$ key management personnel benefits - N$ benefits - N$ ESTIMATES AND At 31 March 2015 Board member’s fees 794 498 - 794 498 Other key management 13 049 936 1 158 241 14 208 177 13 844 434 1 158 241 15 002 675 JUDGEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS At 31 March 2014 Board member’s fees 698 750 - 698 750 The 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 Other key management 10 750 891 1 065 022 11 815 913 are believed to be reasonable under the circumstances. 11 449 641 1 065 022 12 514 663 The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of In July 2011, NAMFISA was exempted from certain provisions of the State Owned Enterprises Act 2 of 2006. causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

In August 2011 the Minister of Finance approved the remuneration of NAMFISA board members to be aligned at the upper quartile of the 19.1. Impairment of accounts receivables gazetted State Owned Enterprises remuneration framework.

At reporting date the Authority considered the recoverability of levies outstanding through individual assessment of outstanding balances. Past 18.5. Loans to key management personnel experience such as payment history and current business activities were taken into account in determining classification of accounts receivable as doubtful debts and the calculation of the impairment to be raised against these doubtful accounts. Receivable balances outstanding for more The loans granted to key management constitutes study loans granted in terms of the Authority’s study loan policy. The loans are repayable over than 180 days have been fully provided for. A total impairment of N$17 254 956 (2014: N$14 567 528) exists at the end of the current year. a maximum period of 60 months. On successful completion of studies, the balance remaining is fully written off and 80% of the amount repaid is reimbursed to the staff member. 19.2. Levy estimates

2015 - N$ 2014 - N$ NAMFISA has included in the revenue figure, an estimate of levies amounting to N$21 130 679 (2014: N$789 977). 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 submit- Opening balance 130 010 110 698 ted during the year. Loans granted - 46 550 Repayments (36 537) (27 238) 19.3. Post-retirement benefits Closing balance 93 473 130 010 Post-retirement medical aid benefits are provided for certain existing and former employees. 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. Pro- -Current 36 537 36 536 visions were raised and management determined an estimate based on the information available. Additional disclosures of these estimates are -Non-current 56 936 93 474 included in note 17 – Post retirement benefit obligations. 93 473 130 010

162 163 20. RECONCILIATION 22. FINANCIAL OF SURPLUS/ DEFICIT INSTRUMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 22.1. Categories of financial instruments GROUP AUTHORITY AUTHORITY TO CASH GENERATED 2015 - N$ 2015 - N$ 2014 - N$ Financial assets Held-to-maturity investments 57 329 564 57 329 564 82 844 975 Loans and receivables 39 971 043 39 724 207 34 209 424 Cash and cash equivalents 36 435 759 36 435 759 34 084 736 BY OPERATIONS Available-for-sale financial assets 61 778 674 61 778 674 88 766 404 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Financial liabilities GROUP AUTHORITY AUTHORITY Amortised cost 14 243 347 14 081 898 12 555 163 2015 - N$ 2015 - N$ 2014 - N$ 22.2. Market risk (Loss) / Income for the year before taxation (4 375 118) (4 335 093) 24 329 953 The Authority’s exposure to market risk is principally with regard to interest rates on cash placed with banks and investment houses. Adjusted for: Depreciation and amortisation 2 703 310 2 703 310 1 824 220 22.3. Significant accounting policies Interest received (6 851 528) (6 851 528) (6 442 232) (Profit) / loss on disposal of equipment and intangibles (1 687) (1 687) 24 274 Details of the accounting policies and methods adopted (including the criteria for recognition, the basis of measurement, and the basis of recog- Increase in bad debts impairment net of write off 2 705 766 2 705 766 963 425 nition of income and expenses) for each class of financial asset and financial liability are disclosed in note 1.10. (Decrease) / Increase in post-retirement benefit obligations (600 000) (600 000) 479 000 Dividends received (4 392 224) (4 392 224) (4 401810) 22.4. Capital risk management Operating income before working capital changes (10 811 481) (10 771 456) 16 776 830 The Authority’s objective in managing its capital is to safeguard the Authority’s ability to continue as a going concern by ensuring a sufficient Working capital changes (5 711 784) (5 626 397) 2 171 308 cushion against unexpected deficits. There is no statutory capital adequacy requirements imposed upon the Authority and capital comprises of accumulated income.

Increase in accounts receivable (8 467 385) (8 220 549) (3 648 632) Increase in accounts payable 2 690 181 2 528 732 8 512 666 22.5. Interest rate risk management Decrease in deferred income 65 420 65 420 (2 692 726) As part of the process of managing the Authority’s interest rate risk, interest rate characteristics of new investments and the refinancing of exist- ing investments are positioned according to expected movements in interest rates. Cash (utilized) / generated by operations (16 523 265) (16 397 853) 18 948 138 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 2015 would increase/ decrease by N$930 972 (2014: N$980 531). This is mainly attributable to the Authority’s exposure to interest rates on 21. CREDIT FACILITIES variable rate financial assets. NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

The 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. 2015 - N$ 2014 - N$ The following is a summary of facilities maintained: Fleet management 10 000 6 000 Credit cards 200 000 150 000 210 000 156 000

164 165 22. FINANCIAL 22. FINANCIAL INSTRUMENTS INSTRUMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

22.6. Credit risk management 22.6. Credit risk management (Continued)

The Authority is exposed to credit risk through its cash surpluses that it places with banks and investment houses as well as the defaulting of The table below indicates the exposure in other financial assets spread among banks and other investment houses: 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% for any given institution. Levy receivables are spread across industry Institution Fixed deposits Unit trusts Total segments. The Authority does not have any significant credit risk exposure to any single counterparty. Concentration of credit risk did not N$ N$ N$ exceed 5% 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. Bank Windhoek - 33 112 378 33 112 378 Old Mutual - 25 231 579 25 231 579 The table below shows the maximum exposure to credit risk relating to receivable, before and after taking allowance for doubtful debts into account: First National Bank - - - Simonis Storm Securities 5 130 103 3 434 717 8 564 820 2015 - N$ 2014 - N$ Namibia Equity Brokers - - - Maximum credit risk Standard Bank - - - Exposure per industry segment: 53 423 280 46 179 537 Nedbank 15 370 568 - 15 370 568 Nampost Bank 21 081 082 - 21 081 082 Ebank 5 126 693 - 5 126 693 Capital Markets 10 824 383 9 451 411 IJG 10 621 118 - 10 621 118 Collective Investments 8 044 828 7 471 985 Balance as at 31 March 2015: 57 329 564 61 778 674 119 108 238 Life Insurance 16 060 046 17 981 356 Short term insurance 11 503 337 5 864 941 Microlenders 4 800 350 2 589 574 Bank Windhoek 15 461 974 31 058 254 46 520 228 Pension Funds 2 010 078 2 432 089 Old Mutual - 34 854 636 34 854 636 Medical Aid Funds and Friendly Societies 180 258 388 181 First National Bank 10 518 027 - 10 518 027 53 423 280 46 179 537 Simonis Storm Securities - 22 853 514 22 853 514 Namibia Equity Brokers 10 554 438 - 10 554 438 Standard Bank 20 466 363 - 20 466 363 Age analysis: Nedbank 15 317 214 - 15 317 214 Older than 180 days 16 539 751 14 562 519 Nampost Bank 10 526 959 - 10 526 959 60 to 180 days (262 078) (493 981) Ebank - - - Less than 60 days 37 145 607 32 110 999 IJG - - - 53 423 280 46 179 537 Balance as at 31 March 2014: 82 844 975 88 766 404 171 611 379 Provision for doubtful debts (17 254 956) (14 567 528) Net exposure 36 168 324 31 612 009

At year-end the Authority did not consider there to be any significant concentration of credit risk which has not been adequately provided for.

166 167 22. FINANCIAL 22. FINANCIAL INSTRUMENTS INSTRUMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 22.7. Liquidity risk management 22.9. Fair value measurements 22.9.1. Valuation The Authority has minimised its liquidity risk by ensuring adequate cash balances and maintaining adequate reserves. Summary of exposure to interest rate risk: In 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. GROUP AUTHORITY AUTHORITY 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 2015 - N$ 2015 - N$ 2014 - N$ participants at the measurement date i.e. an exit price. Fair value is therefore a market based measurement and when measuring fair value the Financial liabilities Group uses the assumptions that market participants would use when pricing an asset or liability under current market conditions, including Non-interest bearing - less than 1 month - - - 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 - 1 to 3 months 7 538 311 7 538 311 5 876 315 amount that represents a forced transaction, involuntary liquidation or a distressed sale. - 3 months to 1 year 6 705 036 6 543 587 4 591 171 Fair value measurements are determined by the group on both a recurring and non-recurring basis. 14 243 347 14 081 898 10 467 486 Interest bearing - 1 to 3 months - - 2 117 291 Recurring fair value measurements Recurring 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 Financial assets the Group measures at fair value at the end of each reporting period. The 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. Financial instruments When determining the fair value of a financial instrument, where the financial instrument has a bid or ask price (for example in a dealer Variable interest rate instruments: market), the Group uses the price within the bid-ask spread that is most representative of fair value in the circumstances. Although not a Less than 1 month 36 435 759 36 435 759 34 084 736 requirement, the group uses the bid price for financial assets or the ask/offer price for financial liabilities where this best represents fair value. 1 to 3 months - - - 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 3 months – to 1 year - - - 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 1+ years 61 778 674 61 778 674 88 766 404 available, or using observable inputs (such as the quoted price in an inactive market for the identical item) or using another valuation technique. 98 214 433 98 214 433 122 851 140 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. Fixed interest rate instruments: Non-financial assets Less than 1 month - - - When determining the fair value of a non-financial asset, a market participant’s ability to generate economic benefits by using the assets in its 1 to 3 months - - - 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 3 months to 1 year 57 329 564 57 329 564 82 844 975 includes the use of the asset that is physically possible, legally permissible and financially feasible. 1+ years - - - Non-recurring fair value measurements 57 329 564 57 329 564 82 844 975 Non-recurring fair value measurements are those triggered by particular circumstances and include the classification of assets and liabilities as Weighted average return 6.23% 6.23% 5.65% 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 of assets 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 within each Non-interest bearing instruments: reporting period. Less than 1 month - - - 1 to 3 months 2 418 335 2 418 335 1 649 955 Other fair value measurements 3 months to 1 year 37 552 708 37 305 872 32 559 469 Other fair value measurements include assets and liabilities not measured at fair value but for which fair value disclosures are required under 39 971 043 39 724 207 34 209 424 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. 22.8. Foreign currency risk management

The Authority does not incur currency risk as it does not have significant transactions in foreign currencies.

168 169 22. FINANCIAL GLOSSARY Accountable institution A person or institution referred to in Schedule 1 of the Financial Intelligence Act, including branches, associates or subsidiaries outside of that (money laundering) person or institution and a person employed or contracted by such person or institution Annuity A long-term insurance product or fund which provides single or modular payments to the holder at specified intervals, usually when retirement is reached or when the policy holder is disabled Available-for-sale financial assets Assets that can be disposed of at any time, e.g. unit trusts and call deposits INSTRUMENTS Beneficial owner (a) A natural person who owns or effectively controls a client, including the natural person on whose behalf a transaction is conducted; or (money laundering) (b) A natural person who exercises effective control over a legal person or trust, and a natural person who is deemed to own or effectively NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS control a client when the person: (i) Owns or controls, directly or indirectly, including through trusts or bearer shareholdings for any legal person, 20% or more of the 22.9. Fair value measurements (continued) shares or voting rights of the entity; (ii) Together with a connected person owns or controls, directly or indirectly, including through trusts or bearer shareholdings for any 22.9.2. Fair value hierarchy and measurements legal person, 20% or more of the shares or voting rights of the entity; (iii) Despite a less than 20% shareholding or voting rights, receives a large percentage of the person’s declared dividends; or (iv) Otherwise exercises control over the management of the person in his/her other capacity as executive officer, non-executive direc- The Group classifies assets and liabilities measured at fair value using a fair value hierarchy that reflects whether observable or unobservable inputs tor, independent non-executive director, director, manager or partner. Beneficiary A person or persons nominated by a policyholder to receive the benefits under the policy 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 Business relationship (money laundering) An arrangement between a client and an accountable or reporting institution for the purpose of concluding transactions on a regular basis maximises the use of relevant observable inputs and minimises the use of unobservable inputs. The valuation techniques employed by the Company Cancellation notice A written notice issued to cancel the licence of a registered entity or registered person 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, Capital adequacy retirement Excess capital required to be held by an insurer in order to be able to absorb losses adjusted prices from recent arm’s length transactions, option-pricing models, and discounted cash flow techniques. Capital appreciation An increase in the market value of an asset Cash (money laundering) (a) Coin and paper money of Namibia or of another country, which coin or paper money is designated as legal tender and which circulates as, Level 1 and is customarily used and accepted as, a medium of exchange in the country of issue (b) Travellers’ cheques Fair value is determined using unadjusted quoted prices in active markets for identical assets or liabilities where this is readily available and the (c) Cheques, but only in respect of payments made by a person who carries on the business of a casino or gambling price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume (d) A payment instrument, but only in respect of stored value and frequency to provide pricing information on an on-going basis. Client/customer (money laundering) A person who has entered into a business relationship or a single transaction with an accountable or reporting institution Closed fund A retirement fund whose membership enrolment is restricted, e.g. where a particular employer, profession, trade, industry, calling, association or union has established a fund exclusively for its employees or members Level 2 Common Monetary Area A country grouping consisting of Lesotho, Namibia, South Africa and Swaziland with a coordinated monetary policy in which the currencies are Fair value is determined using inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly such as pegged 1:1 to the South African Rand quoted prices for similar items in an active market or for an identical item in an inactive market, or valuation models using observable inputs Competent authority Any supervisory authority, the Namibian Police, the Anti-corruption Commission, the Namibia Central Intelligence Service, the Prosecutor-Gen- (money laundering) eral, the Financial Intelligence Centre and any other authority that is duly empowered, in terms of any law, to investigate unlawful activities or inputs derived from observable market data. Consent to judgement When a debtor consents in writing to judgement in favour of the creditor of the amount of the debt and costs, in the event the debtor does not meet their obligation to the creditor Level 3 Consolidation (microlending) The process of taking several outstanding debts and consolidating them into a single loan; i.e. the borrower takes out a new loan and uses that loan Fair value is determined using a valuation technique and significant inputs that are not based on observable market data (i.e. unobservable to pay off his/her other debts Cooling-off period (insurance) A duration of time (as specified in a policy’s terms and conditions, which vary per insurer) during which a policyholder of a new insurance inputs) such as an entity’s own assumptions about what market participants would assume in pricing assets and liabilities. product may cancel the insurance policy contract secured directly or through an intermediary in exchange for a refund in premium(s) paid, i.e. without any financial loss The table below sets out the valuation techniques applied by the Group for recurring fair value measurements of assets and liabilities Cooling-off period (microlending) In terms of the provisions of the agreement entered into with the borrower, a microlender is obliged to allow the borrower to terminate the micro- loan agreement within a period of three business days after the date of signing the agreement and, if the loan amount has already been advanced, categorised as Level 1 and Level 2 in the fair value hierarchy: to simultaneously repay the loan amount advanced to the microlender. In such instances, the borrower is entitled to pay only pro rata charges at the annual finance charge rate applicable to the agreement, and not the full charge Credit life insurance A term life insurance policy taken out on the life of the borrower with the lender as beneficiary in order to pay off the borrower’s debt should s/ Instrument Fair value Valuation technique Description of valuation Observable inputs Significant he pass away before full repayment of the loan. The face value of a credit life insurance policy decreases proportionately with an outstanding loan amount as the loan is paid off over time until both reach zero value. hierarchy level technique and main unobservable inputs Cross-border listed securities Securities that are listed on different exchanges in two or more countries assumptions of Level 3 items Customer/client (money laundering) A person who has entered into a business relationship or a single transaction with an accountable or reporting institution Fixed Deposits Level 1 Market price The listed market price in an Market price Not applicable Customer due diligence (money laundering) A process which involves establishing the identity of a client, the identity of the client’s beneficial owners in respect of legal persons, and monitor- active market is used. ing all transactions of the client against the client’s profile Debt instrument A medium (e.g. a loan) for raising money Unit Trusts Level 2 Discounted cash flows The future cash flows Market interest rates Not applicable Defined Benefit Fund A retirement fund where the benefit to be paid to the member at retirement is predetermined and guaranteed are discounted using a and curves Defined Contribution Fund A retirement fund where the member receives the total of the employer’s as well as his/her own employee contributions plus the investment market related interest rate. earning Inputs to these models Equity An ownership interest possessed by shareholders in a company include information that Exclusion clause (insurance) A provision within an insurance policy that eliminates coverage for certain acts, property, types of damage or locations. An event or situation that is excluded, i.e. not included, in an insurance agreement as something for which the insurance company will pay money, meaning that insurers can is consistent with similar legitimately turn claims down. An exclusion clause is therefore a provision in an insurance policy that indicates what is denied coverage. Common market quoted instruments, exclusions are hazards deemed so catastrophic in nature that they are uninsurable, such as war; wear and tear, since these are expected through the use of a product; and property covered by other insurance, in order to eliminate duplication that would profit the insured. where available. Financial institution (a) A registered beneficiary fund (money laundering) (b) A registered central securities depository (c) A collective investment scheme of a registered manager During the year there were no changes in the valuation techniques used by the Group or changes in the Level 1- 2 classifications. (d) A registered exchange (e) A registered friendly society (f) A registered insurer (g) A registered medical aid fund 23. CONTINGENT LIABILITY (h) A registered reinsurer (i) A registered retirement fund (j) A registered securities clearing house The Authority is involved in a number of litigation cases related to the fulfillment of its regulatory mandates. The Authority is addressing these (k) An entity declared by the Minister to be a financial institution by a notice published in the Gazette cases in conjunction with its legal advisors. It is management’s assessment that the outcome of these cases will not have a material effect on the Financial services law (a) Financial Institutions and Markets Bill (money laundering) (b) Public Accountants and Auditors Act financial position of the Authority. (c) Financial Intelligence Act (d) Financial Services Adjudicator Bill (e) NAMFISA Bill 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 (f) Microlending Bill 2012 claiming a total amount of N$105 million. NAMFISA filed Exceptions to the Particulars of Claim prior to 31 March 2013. The Exceptions (g) Any other law that declares itself to be a financial services law for the purposes of this definition were heard on 8 October 2013 and were upheld in terms of the judgement and order of 31 January 2014. The Plaintiffs filed an Appeal against the Financing of terrorism This phrase has the meaning ascribed to it by an Act of Parliament promulgated by the Republic of Namibia which criminalises the conduct of (money laundering) terrorist financing and includes acts which is aimed at directly or indirectly providing or collecting funds with the intention that such funds should judgement and order. At the date of issue of the financial statements the Appeal has lapsed due to the Plaintiffs’ non-compliance with the Rules of be used, or with the knowledge that such funds are to be used, in full or in part, to carry out any act of terrorism as defined in the Organisation the Supreme Court. The Plaintiffs have however filed an application for condonation of their non-compliance and for reinstatement of the lapsed for African Unity (OAU) Convention on the Prevention and Combating of Terrorism of 1999, irrespective of whether or not the funds are actually used for such purpose or to carry out such acts Appeal. The Registrar of the Supreme Court must still provide a date for the hearing of the application and the Appeal, if the Plaintiffs are successful with the application. NAMFISA opposed the application and the Appeal and intends to continue contesting the claim and apply for its dismissal.

170 171 GLOSSARY GLOSSARY Fraudulent non-disclosure Also referred to as fraudulent concealment or suppression of information; meaning the deliberate hiding, non-disclosure or suppression of a Regulatory body (money laundering) A functionary or institution as defined in Schedule 4 of the Financial Intelligence Act material fact or circumstance (which one is legally or morally bound to reveal) with the intent to deceive or defraud in a contractual arrangement. Reinsurance An insurance that an insurer buys for its own protection Customers deliberately mislead the insurer if they dishonestly provide information they know to be untrue or incomplete. If the dishonesty is intended to deceive the insurer into giving them an advantage to which they are not entitled, then this is also fraud and, strictly speaking, the Reporting institution (money laundering) A person or institution as defined in Schedule 3 of the Financial Intelligence Act insurance premium does not have to be returned. Reserve level (medical aid funds) The minimum accumulated funds expressed as a percentage of gross annual contributions Funding ratio The ratio of a retirement fund’s assets to its liabilities Retirement annuity fund Any retirement fund (other than a pension fund, provident fund or benefit fund) that is established solely for the purpose of providing life annu- Funds (pl.) (money laundering) Assets of every kind, whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired, and legal documents or ities for the members of the fund after retirement instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets. Retirement fund A fund established to provide retirement benefits to members Government Payroll Deduction Code Codes allocated to financial service providers by the Government, enabling them to deduct premiums/instalments for financial services and Risk (money laundering) The risk of money laundering and/or terrorist financing. This definition should be read in conjunction with the Interpretive Note to Recommen- products directly from the salaries of Government employees dation 1 Gross contribution income The total premium income received by an entity before any deduction Risk client (money laundering) Any person, natural or legal, whose activities pose a risk for money laundering or financing of terrorism activities Held-to-maturity financial instrument Non-derivative financial asset with fixed or determinable payments and a fixed maturity Risk management system (money laundering) Policies, procedures and controls that enable an accountable institution to establish the risk indicators used to characterise clients, products and Identification data (money laundering) Reliable, independent source documents, data or information services to different categories of risk (low, medium or high risk) with the aim of applying proportionate mitigating measures in relation to the potential risk of money laundering or terrorist financing in each category of risk established Indemnity insurance An insurance policy that aims to protect business owners and employees when they are found to be at fault for a specific event such as misjudge- ment; typical examples of indemnity insurance include professional insurance policies such as malpractice insurance, and errors and omissions Risk transfer fees/arrangement A contractual arrangement where a third party undertakes to indemnify a medical aid fund against all or part of the loss that such fund may suffer insurance, which indemnify professionals against claims made in the workplace. (medical aid funds) as a result of carrying on its business Investigating authority (money laundering) An authority that, in terms of legislation, is empowered to investigate unlawful activities Secondary market The market in which issued securities are traded by investors Key person (with respect to a legal person or trust) A director, controlling officer, principal officer, partner or any person who is concerned with the management of the affairs of a legal person or Section 14 transfers A transaction executed in terms of section 14 of the Pension Funds Act, 1956 (No. 24 of 1956) involving the amalgamation or transfer of any (money laundering) trust business carried on by a registered retirement fund with any business carried on by any other person Legal person (money laundering) Any entity other than a natural person that can establish a permanent customer relationship with a financial institution or otherwise own property. Securities Tradable assets such as shares, stock, debentures and bonds This can include companies, bodies corporate, foundations, partnerships, or associations and other relevantly similar entities Senior management (with respect to a legal person or trust) A director, controlling officer, partner or any person who is concerned with the management of the affairs of a legal person or trust Liquidity The ability of an asset to be converted into cash quickly (money laundering) Listed securities Assets that are listed and traded on an exchange Single transaction (money laundering) A transaction other than a transaction concluded in the course of a business relationship Listing The placing of shares on the stock exchange so they can be traded S-referenced agent Long-term insurance agents that are found guilty of non-compliance, e.g., fraud. Such agents are not allowed to operate in the industry. Local Index The measure of the prices of security listed or quoted locally, e.g. in Namibia on the Namibian Stock Exchange Stockbroker A registered member of an exchange who is permitted to buy and sell securities on behalf of clients on a stock exchange Market capitalisation Market value of shares, i.e. the number of shares multiplied by their market price Supervision Active analysis of the business of registered entities by a regulator to verify their compliance with given regulations Market conduct standards Promulgated standards of conduct with which registered entities/persons need to comply Supervisory body (money laundering) A functionary or institution as defined in Schedule 2 of the Financial Intelligence Act Maturity value (investments) The amount that will be received at the time when a security is redeemed, i.e. at its maturity. For most securities, maturity value equals par value. Surrender value (investments) The amount available in cash upon cancellation of a policy (in this case an investment policy) before it becomes payable upon death or maturity Merit of claim In the legal context, merit refers to a claim which has a valid basis, setting forth sufficient facts from which the court can find a valid claim of Terrorist (money laundering) Any natural person who: deprivation of a legal right (a) Commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and wilfully; (b) Participates as an accomplice in terrorist acts; Microlender A person or entity providing small loans to the public based on specific requirements (c) Organises or directs others to commit terrorist acts; or Money laundering or (a) The act of a person who: (d) Contributes to the commission of terrorist acts by a group of persons acting with a common purpose where the contribution is made money-laundering activity (i) Engages, directly or indirectly, in a transaction that involves proceeds of any unlawful activity; intentionally and with the aim of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act. (ii) Acquires, possesses or uses or removes from or brings into Namibia proceeds of any unlawful activity; or Terrorist financing (money laundering) The provision of financial resources for terrorist acts, and of terrorists and terrorist organisations (iii) Conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of any unlawful activity, where: Transaction (money laundering) A transaction concluded between a client and an accountable or reporting institution in accordance with the type of business carried on by that (aa) As may be inferred from objective factual circumstances, the person knows or has reason to believe, that the property is institution, which includes attempted transactions proceeds from any unlawful activity; or Umbrella fund A retirement fund in which different employers and/or members participate under different conditions (bb) In respect of the conduct of a person, the person without reasonable excuse fails to take reasonable steps to ascertain wheth- Unlawful activity (money laundering) (For a definition, see section 1 of the Prevention of Organised Crime Act.) er or not the property is proceeds from any unlawful activity; and (b) Any activity that constitutes an offence as defined in section 4, 5 or 6 of the Prevention of Organised Crime Act. Unregistered microlender A person/entity that conducts microloan business without being registered (in this case, with NAMFISA) National payment system A payment system to facilitate interbank clearing and settlement resulting from various financial transactions within a country or between coun- Vesting scale The portion of an employer’s contribution which is paid to a contributing member of a retirement fund as an employee if that member ceases to be tries, and ensuring the circulation of money within a country part of such fund Net premium income The gross or total premium income earned by an insurer, less reinsurance outflow Voluntary deregistration The deregistration of a registered entity at its own request Non-disclosure of information Non-disclosure refers to a situation where a customer fails to reveal a relevant fact when applying for or renewing an insurance contract. It is Waiting period (insurance) A duration of time that must expire before some legal right or remedy can be enjoyed or enforced. A waiting period can also be defined as the (insurance) widely recognised that, in some situations involving non-disclosure, applying the strict legal position can result in an unduly harsh outcome for required delay between the date of the inception of a claim and the date on which the indemnity becomes payable. In terms of health insurance, the customer. For this reason, when insurance cases involving non-disclosure or misrepresentation (an incorrect statement made by a customer), a waiting period can be defined as the duration of time specified in a health insurance policy that must pass before some or all of a provision for NAMFISA takes into account both the law and good industry practice. healthcare coverage begins to apply. Generally, there are three types of waiting periods: employer waiting periods, affiliation periods, and pre-exist- ing condition exclusion periods. Open fund Retirement fund whose membership enrolment is not restricted to an employer, industry, association, trade or profession Yield The annual rate of return on an investment, expressed as a percentage Outstanding claims provision A provision made for the estimated cost of claims occurred before the end of the accounting period but had not been reported by that date Over-the-counter Characterising a decentralised market of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of at a physical trading place or exchange Overall Index The measure of the prices of all securities listed or quoted on a stock exchange Par value (investments) The stated value or face value of a security Pension fund A long-term retirement savings plan where a member can withdraw one third of their benefit at retirement, tax-free, while the remaining two thirds have to be used to pay a monthly/quarterly/annual pension Person a natural or legal person Policy lapse A situation where all benefits to the policyholder cease and are terminated due to continued non-payment of premium amounts on the due date or after the grace period However, a lapsed policy may be revived by fulfilling the terms and conditions as per the policy statement. To avoid losses to all parties, generally the revival and reinstatement are encouraged and facilitated. Politically exposed person/PEP A foreign PEP is an individual who is or has been entrusted with prominent public functions by a foreign country, e.g. heads of state or govern- (money laundering) ment; senior politicians; senior government, judicial or military officials; senior executives of state-owned corporations; or important political party officials Premium income The income earned by an insurance company from premiums received from policyholders Premiums written A stream of income received from policyholders registered on the books of an insurer or reinsurer at the time a policy is issued Preservation fund Any retirement fund (other than a pension fund, provident fund, benefit fund or retirement annuity fund) that is established solely for the purpose of preserving any amount derived by the member from any pension fund or provident fund Primary market The market in which securities are initially issued and sold to investors Proceeds of unlawful activities This term has the meaning attributed to it in section 1 of the Prevention of Organised Crime Act. (money laundering) Projected value (investments) The quantitative estimate of a future economic or financial performance value Property (money laundering) (For a definition, see section 1 of the Prevention of Organised Crime Act.) Prospective client (money laundering) A person seeking to conclude a business relationship or a single transaction with an accountable institution Provident fund A retirement fund where a member can draw his/her entire benefit at retirement for a cash lump sum. One third of the benefit is tax-free. Prudential regulation The supervision of the conduct of entities by setting down legal requirements to ensure the safety of policyholders’ funds as well as the soundness of the financial system Record (money laundering) Any material on which information is recorded or marked and which is capable of being read or understood by a person, or by an electronic system or other device Regulation A law, rule or other order prescribed by the authorities to regulate conduct

172 173 There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder. Ronald Reagan

174 175 CONTACT DETAILS:

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