ipumbu shiimi : regulating competition in the namibian banking sector welcoming and special remarks by mr ipumbu shiimi, governor of the bank of namibia, at the signing of the memorandum of agreement between the bank of namibia and the namibia competition commission, windhoek, 1 february 2012. * * * introduction the chairperson of namibia competition commission – mr lucius murorua, the secretary to the competition commission – mr mihe gaomab, members of the media, ladies and gentlemen, on this occasion when the two regulatory authorities are going to sign a historical agreement, i am delighted to welcome first and foremost the chairman of the namibia competition commission, the secretary and indeed every one present here today on this “ terrific weatherful day ”. it is indeed a good omen and fortunate coincidence that this important event takes place today. allow me, now to briefly reflect on some of the developments over the years, with particular emphasis on those that brought both the competition commission and the bank of namibia to the point where these authorities are signing an agreement. as we all know, the competition law has a short history in namibia. the first attempts in namibia on matters of competition were made with the promulgation of the namibia competition legislation in 2003, which only became effective in 2008. you will also agree with me that, the competition law is an essential tool that does not only recognise the importance of guiding the market conduct on competition matters, but, it also acknowledges that competition provides the incentive for businesses to become more innovative, highly productive, and efficient in their operations, thus, contributing to improvement in socio economic development of our country. at the same time, the bank of namibia as the regulator of banking institutions has the mandate to administer agreements between banking institutions that may restrict competition or that may be anti - competitive. effectively, this means that the bank of namibia has the power to regulate matters of competition in the banking sector. in the past, the mergers and acquisitions provision in section 54 of the banking institutions act of 1998, as amended fulfilled an important role in preserving the effectiveness of the competitive process by preventing mergers and acquisitions, which may substantially lessen competition in banking sector, while at the same time allowing mergers that do not lessen competition to go ahead. however, with the introduction of an effective regulatory framework, namely the competition act of 2003 that will guard against anti - competitive behaviour and restrain banking institutions from engaging in restrictive business practices, the bank of namibia recognised the broader mandate of the competition commission

example, a fund may invest up to 75 percent of assets in shares, debentures and unit trusts in namibia and the rest of the cma. also, investment in property and property - based instruments, as well as equity investments, which are known for their volatility, are not given lower priority ranking than less volatile investment avenues. in this context, the large equity exposure of retirement funds in namibia is a concern and this has also been amplified by the imf article iv mission to namibia late in 2004. the mission concluded that there is a need to introduce prudential investment limits by type of assets, including specific limitations on the equity risk in line with international best practices. the mission further notes that this should apply especially to defined benefits plans which have 60 percent of their assets invested in equity. as far as the local investment requirement is concerned, it is interesting to note that retirement funds in developed countries have shown a clear “ home bias ” in their investment allocations and have usually stayed well within officially imposed limits. even retirement funds operating in countries that have adopted the “ prudent person ” approach have also exhibited a strong “ home bias ”. let me state, however, that the local investment requirement only makes sense if sufficient, safe and well - performing assets are available. if the local investment requirement is used as a captive source of funds for unproductive purposes, its benefit is lost. let me not dwell further on the regulatory issues, as namfisa, i believe, will address you on this specialist subject matter this afternoon. suffice me to say that i expect a greater namibian content in investment decision with regard to local savings directed towards retirement funds. equally, i expect the key industry participants starting to put up local systems to be able to link up to the national payment system that is provided to them. conclusion ladies and gentlemen, let me conclude by restating the fact that retirement funds will continue to play a very important role in our economy where the twin problems of unemployment and poverty constitute major development challenges. i hope that you will agree with me that well - targeted and pragmatic government intervention in this sector remains indispensable for the time being. these are serious challenges. finally, of equal importance to the development of retirement funds are sound macroeconomic policies and financial stability. retirement funds and other institutional investors cannot function properly in an environment of high inflation, unstable monetary developments and unsustainable fiscal conditions. in this respect, i believe,