Africa-Press – Eswatini. The Eswatini National Provident Fund’s (ENPF) total assets under management has reflected a year-on-year increase of 13 per cent largely driven by new equity investments together with reinvested earnings.
According to a Ministry of Labour and Social Security annual report, as at the end of the third quarter, ENPF’s total assets had grown to E5.86 billion. “The corporate strategy target is to reach a E6 billion mark by the year 2024-2025,” read the report in part. In the quarter under review, the following activities were undertaken; finalisation of shareholders agreement and the transfer of the final trench of payment for the purchase of 22.5 per cent shareholding in Unifoods – a local food distributing and manufacturing company. The ENPC Board further approved a 4.46 per cent investment in First National Bank Eswatini for E88.02 million. These investments were meant to broaden the fund’s investment portfolio further and act as a cushion to the volatility being experienced within formal indexed markets in the South African listing space.
According to the report, an operating loss of E 3.9 million was made in the first quarter largely driven by volatility in financial markets in the first quarter, with growth prospects being continually weighed down by load shedding. The bonds and equity markets were also hard hit by a hard sell-off of South African bonds and banking shares amid rumours that South Africa was selling weapons to Russia. This prompted fears of retaliation by the West, leading to elevated investor risk perceptions for local investments, hence the low equity valuations and subsequent reported unrealised losses.
Equity
Investment income only started picking up in the month of November, where it peaked significantly as valuations began improving as economic activity hiked in the months leading to the festive season-which are traditionally favourable months for equity performance given the expected hike in consumer spending around the festive season. This therefore explains the rise in quarterly operating profit earned during the quarter under review compared to the previous quarter. A slight cool-off in inflation has been reported in the period under review compared to the first quarter. This cooling off in inflation is expected to continue into the year, with positive spin-offs for consumer spending and economic activity as well as equity valuations and forecasted profits and their distribution thereof.
It is worth noting that 37 per cent of the portfolio was local equity investments into various industries-managed in-house through board representation in the companies. The balance is managed through various Fund managers as below:
* 20 per cent is held in a domestic (South Africa) multi-asset class portfolio with Allan Gray
* 9 per cent is held in a balanced global equity fund with Stanlib.
* 6 per cent is held in a domestic (South Africa) multi-asset class portfolio with Ninety-one.
* 9 per cent is held in a blended global asset portfolio fund with Balondolozi.
* 11 per cent is held in Old Mutual’s absolute growth portfolio.
* 8 per cent is held collectively by local Fund managers in various local money market products.
Thirty four per cent of the fund’s investment was held outside the country whilst 66 per cent was held locally. During the quarter under review, the Fund concluded its annual external audit conducted by SNG Grant Thornton Eswatini and obtained an unqualified audit opinion. Subsequent to the approval of the audited financial statements, the Board approved the declaration of members’ interest at 6.5 per cent, compared to 4.5 per cent in the prior year, resulting in a year-on-year increase of 2.5 per cent.
Performance
The increase in the interest rate declared is largely driven by the improved financial performance of the Fund as reflected in the increase in operating profit from E192.8 million in 2022 to E446.3 million in the year under review. The increase in operating profit led to a rise in the Fund cumulative surplus from E31 million in 2022 to E144 million in 2023 after the declaration of the 6.5 per cent member’s interest. It is worth noting that as at the end of the 2021/22 financial year, the overall performance of the ENPF saw a decline when compared to the previous year, as such operating surplus for the year was E192.9 million compared to E398.1 million recorded in the previous year. The decline in surplus was largely attributable to concerns arising from the invasion of Russia on Ukraine and the material rise of inflation which negatively affected investments, in particular listed equities. Local investments continued to outweigh foreign investments by 20 per cent, as a percentage of the total investment portfolio of the fund. Local investments accounted for 60 per cent of the total portfolio, while foreign investment accounted for 40 per cent.
Investments
This spread has contributed to the achievement of the vision, because the fund through its local investments has been able to contribute to the socio-economic conditions in the country.
The return on investment for the period ended was 3.3 per cent above average inflation for the year. Total assets grew by 8 per cent from E4.577 billion in 2021 to E4.962 billion. It is worth noting that the financial security of the fund remained healthy as benefits paid to members were 56 per cent of contributions received from the membership, thus making funds available for fresh investment. In the operational space, the ENPF has been able to reduce its administrative expenses from E134.6 million to E131.5 million during the year under review.
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