Evaluation of Corporate Governance practices at the Namibian Government Institutions Pension Fund (GIPF)

Master's Thesis, 2016

50 Pages







1.1. Background of the Study
1.2. Problem statement
1.3. Purpose Statement
1.4. Research Question
1.5. Delimitations of the Study
1.6. Significance of study
1.7. Preface to the research report

2.1. History and description of Government Institutions Pension Fund
2.1.1. Legal Framework
2.1.2. Governance and Management Structure
2.1.3. GIPF modus operandi
2.2. Risk management process at the Government Institutions Pension Fund
2.3. An introduction to corporate governance
2.3.1. Describing corporate governance
2.3.2. Principles of corporate governance
2.4. The framework Theories of Corporate Governance
2.4.1. Agency theory
2.4.2. Stewardship theory
2.5. The corporate governance code for Namibia (NamCode)
2.5.1. The Corporate Law
2.6. King III Report
2.7. State-owned Enterprises Governance Act, 2006
2.8. Conclusion

3.1. Research Strategy
3.2. Research Design
3.3. Population
3.4. Sample Design
3.5. Research Instruments
3.6. Procedure
3.7. Data analysis
3.8. Validity and Reliability
3.9. Research Ethics
3.10. Conclusion

4.1. Presentation of the findings
4.2. Audit Committee
4.2.1 Composition of the audit committee
4.2.2. Suitable skills and experience of independent non-executive directors
4.2.3. Components of the Integrated Reporting
4.2.4. The provision of summarized information to all stakeholders
4.2.5. The process of risk identification, management, and reporting
4.2.6. Audit committee report to the board and shareholders
4.2.7. Provision of required audit information in the integrated report
4.3. Governance of Risk
4.3.1. Characteristics of governance frameworks and processes to anticipating unpredictable risks
4.3.2. Board risk responses
4.4. Internal Audit function
4.4.1. Positioning of the internal auditing function in the company
4.4.2. Internal audit planning

5.1. Specific conclusions about the research questions




I wish to thank God Almighty, for the strength and successful completion of this dissertation. My appreciation and gratitude go to my supervisors, Dr. Lovemore Matipira and Prof. Peter Clement for their encouragement and excellent guidance throughout the entire dissertation.

I would particularly like to single out Mrs. Sircca Nghitila, for assisting me with the analysis of data in this dissertation. Her patience and support helped me overcome many crunch situations and to finish this dissertation.

I acknowledge my sincerest appreciation to Government Institutions Pension Fund’s Chief Executive Officer, Mr. David Nuyoma, for his patience, enthusiasm and for allowing me to conduct research at the organization and providing me with the required information.

Finally, I must express my profound gratitude to my family; I recognize the love, support encouragement, I received from my partner Rauna and for being there throughout my years of studies. My appreciation goes to my Mom for providing me with unfailing support and continuous encouragement in all my endeavours, and her wise counselling and a sympathetic ear.


The evaluation of Corporate Governance practices at Government Institutions Pension Fund (GIPF) is a qualitative single case study. The study utilized both primary and secondary data to answer the question whether GIPF was in compliance with the criteria relating to audit committee, governance of risk as well internal audit functions as guided by the Namibia Code for Corporate Governance (NamCode).

The study concluded that overall, the Government Institutions Pension Fund is indeed complying with the majority of the aspects assessed regarding requirements for audit committee, governance of risks as well as internal audit functions. It appears that in some cases, the company complies with certain criteria how it is being documented may not be exactly how it is guided by the governance framework as stipulated in the NamCode. In most cases, where the study finds the company to be partially in compliance as opposed to full compliance, it is a question of the style used by the company in documenting how they are applying their corporate governance framework. Considering that only three out of nine principles of corporate were assessed; it is important to document that the survey only provide a snapshot of GIPF compliance to the governance framework and conclusions of this study cannot be taken as a complete view in any way.

The study recommends that the company conform to the style of documenting their application of corporate governance principles to that of the governance framework provided for in NamCode. The adjustment is very important as it will help in ensuring consistency and standards especially when studies of this nature are to be conducted again. Finally, the study recommends that assessment of all nine principles of corporate governance be conducted preferably on an annual basis if GIPF is to keep in touch with the reality in as far as how they are doing regarding compliance.


Table 1: Composition of GIPF Audit Committee

Table 2: Basic skills and experience required for audit committee

Table 3: Contents of an integrated report

Table 4: Provisions of summarized information in addition to the complete integrated report

Table 5: The process of identifying, managing and reporting risks

Table 6: Contents of the audit committee on how it performed its duties

Table 7: Provision of required audit committee information on the integrated report

Table 8: Characteristics of governance framework and methodologies for unpredicted risks

Table 9: Board risk responses

Table 10: Strategic positioning of internal audit function

Table 11: Considerations made in planning for internal audit function


Figure 1: Three principles of corporate governances assessed in this study

Figure 2: Colour coding used to denote the scores

Figure 3: GIPF governance structure


1.1. Background of the Study

Corporate Governance remains a serious challenge in Namibia, particularly in the public sector. The public sector in Namibia comprises of government entities including the Government Institution Pension Fund (GIPF) which is the largest pension fund and institutional investor in the Namibian economy and as such owns shares in numerous publicity traded companies around the world. Government Institutions Pension Fund (GIPF) was registered under the Pension Fund Act No. 24 of 1956. Corporate governance is considered as the structure of the Fund, and it ensures the effectiveness and the appropriate practices (GIPF Annual Report, 2013).

GIPF was established in October 1989 in terms of the Pension Fund Act of 1956 with the primary objective of providing pension benefits to employees in the public service of Namibia and a few other public institutions established by the Acts of Parliament. GIPF utilizes contributions from employees and employers as the primary source of funding to provide benefits to employees regarding the rules of the Fund. The Fund provides full pension benefits at normal retirement age of 60 or early retirement at 55; however should the employee leave the public services due to, resignation, dismissal, retrenchment such employee also get a pay-out albeit not using the same formula for normal retirement. The Fund also provides other benefits such as disability, ill-health retirement and death benefits.

The Fund operates from its head offices in Windhoek and to take services nearer to the people, there are seven regional offices in Ondangwa, Oshakati, Swakopmund, Katima Mulilo, Keetmanshoop, and Rundu. Further, to facilitate the coordination of members’ information, all regional offices are connected to the pension administration system.

While the Government of the Republic of Namibia owns 100% shares, the Fund is governed by the board of trustees appointed in accordance with the corporate governance framework. The board of trustee provides policy guidance to management who run the day-to-day operations of the Fund. Moreover, the Fund operates under the context of the State-owned Enterprise Act, Act No.02 of 2006 which was promulgated to specifically to amongst others, provide for the efficient governance of state-owned enterprises and monitoring of their performances. The said Act also provides for the establishment of the State-owned Enterprise Governance Council, which among other things establishes the acceptable common principles of corporate governance and good practices of state-owned enterprises in Namibia (Government of the Republic of Namibia, 2006).

1.2. Problem statement

Corporate Governance remains a serious challenge in Namibia, particularly in the public sector. An established expectation is placed on all Namibian state-owned enterprises to run their affairs in line with the established accepted common principles of corporate governance and good practice governing State-owned enterprises as prescribed in section 40 of the State-owned Enterprise Act (Government of the Republic of Namibia, 2006). Meanwhile, the Namibian Code which was developed in 2014 based on the international best practices and the King Code on Governance for South Africa provides a governance compliance framework. In line with the King Committee (NXS & IoDSA, 2014), NamCode provides for a code of principles and practices on a non-legislated basis, which proves persuasive enough to be included in future legislation.

GIPF is no exception to the established expectation to carry out its mandates in line with the established principles corporate governance and good practices albeit on a non-legislated basis. It is almost ten years since the promulgation of the Act and over two years after the effective introduction of the NamCode, yet no study has been conducted to evaluate how the Fund is operating in relations to the principles of corporate governance and accepted good practices. A study is, therefore, necessary to determine whether the Fund is run in accordance with the prescription of the State-owned Enterprise Act. The outcome of such study would help GIPF, first of all, to understand where it stands as far as its corporate governance practices are as well as making the necessary adjustment to ensure the Fund is complying with the governance compliance framework which is in line with the prescription of section 40 the State-owned Enterprise Act.

GIPF is a financial institution in which public funds are invested as part of pension funds that deducted from both employers and employees in government offices, ministries and agencies as well as some parastatals and mission hospitals. Doing business as a financial institution carries many risks, and such there is a need to have effective risk management and governance measure in place as well as regularly assessed to keep with emerging risks.

1.3. Purpose Statement

The purpose of this study is to examine the corporate governance practices at GIPF with specific reference to governance compliance framework provided for by the NamCode. First, we review the literature to understand and propose a theory of change for this intervention. Secondly, the study we construct and present a robust result chain showing the link between inputs, activities, outputs, outcome and impacts. Third, we propose a research strategy, research design, research procedures and methods appropriate to evaluate the GIPF’s compliance with governance framework as established in NamCode. Fourth, we collect and analyze data to determine if corporate governance practices at GIPF are anywhere near to the resulting chain that can yield the intended outputs and outcome. Lastly, based on the results of the study, we will determine whether GIPF’s compliance with the governance framework will yield the desired impact.

1.4. Research Question

The key issues for this study are compliance and challenges associated with non-compliance. Thus, the study will answer the following question:

- Is GIPF complying with the three of the eight principles of governance framework as stipulated by NamCode?

1.5. Delimitations of the Study

The study focuses solely on the corporate governance practices at GIPF with specific reference to the governance compliance framework provided for in NamCode. NamCode establishes eight governance compliance framework comprised of eight principles. These are ethical leadership and corporate citizenship, board and directors, audit committees, the governance of risk, the governance of information technology (IT), compliance with laws, rules, codes and standards, internal audit, governing stakeholder relationships, and integrated reporting and disclosure (NXS & IoDSA, 2014). Due to time and resource constraints, the study will only focus on the three of the eight principles of corporate governance; namely: the governance of risks, compliance with laws, rules, codes and standards as well as internal audit.

1.6. Significance of study

According to (Stewart, 2014), the importance of proper risk systems, controlling investment and other risks, has only been highlighted by the current financial and economic turmoil. Some of the declines in assets recently experienced by pension funds around the world may well have been avoided through stronger risk. GIPF as a state-owned enterprise is a publicly funded institution. Therefore, there is an obvious expectation that the Fund should be administered in a risk-free manner and that the board should adhere to the laws, rules, codes and standards and ensure effective risk based internal auditing at all times. Thus, the importance of this study which attempts to examine the corporate governance practices of GIPF can never be overemphasized. The findings of the study will go a long way in establishing whether or not the Pension Fund is meeting the set standards of good corporate performance in as far the three above stated principles are concerned. Moreover, the study will reveal issues and challenges which inhibit the public enterprise from complying with the governance framework which is deemed to be effective in ensuring good governance. Thus, the outcome of the study will assist GIPF in adhering to the principles of corporate governance and accepted good practices.

1.7. Preface to the research report

To this end, the report has five chapters. Following this introductory chapter, Chapter 2 provides a literature review covering the problem, the past studies, the explanatory framework and the conceptual framework. Chapter 3 discusses the research strategy, design, procedures, reliability and validity measures as well as limitations. Chapter 4 presents and discusses the findings, respectively, to interrogating our research questions while Chapter 5 summarizes and concludes the research.


The purpose of this chapter is to provide a framework for establishing the importance of this study as well as benchmarking for comparing the results of the study to other findings. Thus, this chapter will provide a history and description of the Government Institutions Pension Fund, in term of how the company started, how it is governed and managed, and what modus operandi is followed. A literature review is critical to help us contextualize our study. The chapter further provides some insight on legal framework guiding the Fund’s operations, defining corporate governance as the field of study under which our research is based as well as providing the principles of corporate governance.

2.1. History and description of Government Institutions Pension Fund

Before independence Namibia on 21st March 1990, the South West African as it was known before, was colonized by South Africa and as such the country governed by the laws of the South African Government. Before 1969, the South African Government had in place the Pension Fund, which provided for pension benefits for white civil servants only working in South Africa and the South West Africa, now Namibia. The Pension Fund Act was then amended by the South African Government in 1969 which resulted in the provision of pension benefits to non-white civil servants but was however not same as compared to those for white civil servants. Moreover, the amendment of the Act was followed by the introduction of by the Blacks Authorities’ Service Pension of 1971 which made provisions for pension benefits for black civil servants working for various Bantustans (Government Institutions Pension Fund, 2014).

Following the political against the South African Government the Civil Pension Fund Act and the Blacks Authorities’ Service Pension were joined to form a Temporary Employees Pension Act of 1979. Further, a non-discriminatory arrangement was made, and that resulted in the General Pension Act, which was brought into effect to provide equal benefits for all civil servants irrespective of their racial differences. The General Pension Act was then repealed to make way for the Statutory Pension Fund, and that paved the way for the established of the Government Institutions Pension Fund in 1989 just before Namibia’s independence.

The Government Institutions Pension Fund (GIPF) is a state-owned enterprise financial entity established in terms of the Pension Fund Act, Act No. 24 of 1956 to provide pension benefits to all civil servants in government offices, ministries and agencies as well as some parastatals and mission hospitals in Namibia. To date, the Fund is the main public pension fund in Namibia with increased assets from N$844 070 million in 1990 to N$6 894 084 billion in 1999.

2.1.1. Legal Framework

Apart from the establishing Pension Fund Act, Act No. 24 of 1956 and the applicable rules, the Fund is further regulated under the following legal framework:

- Financial Institutions (Investment of Funds) Act No. 39 of 1984 which provides regulations on how funds should be invested;
- State-owned Enterprises Governance Act, No. 02 of 2006 which guides the all state-owned enterprises in Namibia on issues of corporate governance; and many legal instruments.

2.1.2. Governance and Management Structure

Moreover, the Fund is governed by a unitary board of trustees which permits for interaction among all members of the decision-making process in terms of the company’s strategy, planning, performance, investments, business ethics and communication with stakeholders. Like other corporate entity, the board of trustees is the custodian of corporate governance in Namibia. It consists of nine members of equal representation of the Government of the Republic of Namibia, the labour unions as well as a representative from the Public Service Commission of Namibia and their remain in office for a period of three years.

Apart from the main board, there are four well-structured sub-committees delegated by the board to perform certain functions but without abdicating the board’s responsibilities. The committees include the Audit committee, investment committee, technical committee as well as executive management committee (Government Institutions Pension Fund, 2014). Five functional departments are consisting are supporting the chief executive officer to manage the Fund on a day-to-day basis. These functional departments include operations department marketing and communications department, human resources department, management of information system and investment department.

2.1.3. GIPF modus operandi

The Government of the Republic of Namibia is the sole shareholder of the company. However, the monthly contributions made by participating employers and employees make up the primary source of funding for both the pension benefits as well as the operational costs associated with the Fund. The Fund manages different type of benefits ranging from pension benefits applicable to retirement age of 60 years as well as at an early retirement at the age of 55 years. Other benefits from the Fund include resignation and dismissal, ill-health retirement, disability, death and funeral benefits. The management of the Fund is entrusted to the board of trustees. According to their legislated duties, they have to ensure that the interest of members is protected, act with due care, diligence and in good faith avoid conflict of interest and ensure proper control systems are in place as well as carrying out their fiduciary duties in relations to investments.

2.2. Risk management process at the Government Institutions Pension Fund

GIPF board of trustees are entrusted with the responsibility establishing and provide oversight of the Fund’s risk management policies (Government Institutions Pension Fund, 2014). Accordingly, the Fund’s risk management policies are established to identify and analyze the risk faced by the Fund and to set up control mechanism including monitoring and adherence to the limits. As part of the risk management policy, nine type of risks were identified as solvency, credit, legal, cash flow, market, currency, fair value interest rate, price and liquidity risks that that the company is guarding against. Despite the fact that the board of trustee is entrusted with the overall responsibilities of establishing and provision of Fund’s risk management policies, the duty to ensure that a sound system of risk and internal control is maintained to protect and safeguard the assets of the Fund lies with the audit committee of the board. It reviews the activities of the Internal Audit Department and the effectiveness thereof.

2.3. An introduction to corporate governance

Corporate Governance mainly involves the establishment of structures and processes that need to be applied by SOEs, which is the principal of effective sound leadership and sustainability of the growth of the country. Sustainability is the primary role and economic imperatives of the modern State Owned Enterprise. The proliferation of enterprises, tools, and strategies for sustainability is the greatest evidence of corporate governance. Governance concept is a set of processes, policies, and laws that institutions is directed and administered. Corporate governance embraces the relationships among stakeholders and to principal agents, ultimately, is to strengthen the economy and henceforth good governance.

2.3.1. Describing corporate governance

According to (King II Report , 2016), defines corporate governance as a widely encompassing, to encourage the efficient use of resources and accountability for stewardship of those resources. King further elaborated that corporate governance is a system that strains on the balance between economic and social goals of individual, corporations and society. Corporate governance is mostly concerned with the duties and responsibilities of the board of directors in the managing of the firm and the carried out relationship with the shareholders of the company and stakeholders interest (Pass, 2004).

Corporate governance is defined as the system of rules, regulations, and practices by which managers and owners are held accountable and responsible for whatever performance society expects (Haspeslagh, 2010). Haspeslagh highlighted that accountability and responsibility are not for shareholder value only, nevertheless the roles that the stakeholders play to ensure the practices at the company. According to (Maharaj, 2009), the formal system of good governance, which comprise regulations and the provisions of corporate governance codes, are equally as important as the informal system of governance. An informal system of governance is the knowledge and experience of directors, the level of contributions by board members as well the standard of education acquired by board members and what the can share with the entire management and directors (Maharaj, 2009).

Also, (Solomon, 2007), defines corporate governance as a process of supervision and control intended to ensure that the company‘s management acts by the interest of shareholders. In light of this definition, he is only referring to the benefit of shareholders. Corporate governance, however, ensures that all multiple stakeholders should benefit.

Corporate governance should both the structures and processes of public corporations enhance the agency problem of the entries (Echanis, 2002). Corporate governance structure according to the OECD (2008:9) stipulates the rights and responsibilities of different participants and stakeholders in the corporation. These various participants in the corporate governance system are the company’s board of directors, managers, shareholders and other stakeholders. The system stipulates the rules and procedures for the decision making and should provide a structure that would meet the corporates objectives and the Mechanisms for performance monitoring (OECD, 2008). OECD (2008), emphasizes that the enhancement of transparency and accountability be central to improving corporate governance of state-owned enterprises. Though acknowledging that it entails complex challenges, it highlights that transparency and accountability is an expert opinion to improve the State Owned Enterprise governance transformations.

2.3.2. Principles of corporate governance

The principles of corporate governance were first developed by the Organisation for Economic Co-operation and Development (OECD) in 1999 and then updated in 2004 to provide indispensable and globally recognized benchmark for assessing and improving corporate governance (OECD, 2016). In Namibia, corporate governance is guided by the Corporate Governance Code (NamCode) which is based on the international best practices and the 2009 King Code on Governance of South Africa (NXS & IoDSA, 2014) which in turn also based on the OECD codes and ethics of good corporate governance.

While the number of principles differs from the context of application to the other, the NamCode provides for at least nine principles of corporate governance which are followed on the basis of applying or explain approach. These are ethical leadership and corporate citizenship, boards and directors, audit committees, the governance of risk, the governance of information technology, compliance with laws, codes, and standards, internal audit, governing stakeholder relationship as well as integrated reporting and disclosure. The main objectives of the principles are to provide

The issue of corporate governance is the main problem for economic transition and reformation. This has been referred to the set of rules and incentives that companies look into the management and governance. It reflects the way responsibilities are being distributed in the corporation and how this decision is affecting the shareholders and stakeholders. However, policies and documentations are undeniable essential to ensure good governance is practiced in the State-owned Enterprises. More specifically it should promote transparency and accountability.

2.4. The framework Theories of Corporate Governance

The two theories of corporate governance noted in the section are essential Eurocentric theories.

2.4.1. Agency theory

Agency theory resolves issues that exist in the corporate world, whereby we have the principal (shareholders) and the agents (directors) this two are agency relationship. Most problems arise when the objectives of the principal and the agents of principal are incapable of reviewing the activities elaborate in the corporation. This delinquent that have occurred may have different attitudes towards the organizational policies of risk and the application of solving the problem.

This kind of conflicts may have a different perception of the State Owned Enterprise where the state the owner, CEO does not manage the organization in the best interest of the owners (Davis J.H., 1997).

The agency theory holds that most businesses operate under conditions of incomplete information and uncertainty. Such conditions expose businesses to two agency problems, namely adverse selection and moral hazard. Adverse selection occurs when a principal cannot ascertain whether an agent accurately represents his or her ability to do the work for which he or she is paid (Eisenhardt, 1989) Similarly, the board members should possess ‘integrity, competence, reliability, good judgment, independence of mind, and dedication to the cause’ (Bowen, 2008). The ambition of corporate governance is to bring into line, the interests of individuals, corporations, and society. Endeavouring to achieve that objective raises a conflict of interest within the relationships, among the different parties identified above. This conflict is acknowledged as the principal-agency problem. The primary goal of most corporations is to retain wealth.

2.4.2. Stewardship theory

Stewardship theory is a framework that argues on behalf of the shareholders interest and the maximization of incumbency of the roles shared. Results of an empirical test fail to support agency theory and provide some support for stewardship theory. It argues that people are collective minded and pro-organizational rather than individualistic and, therefore, work toward the attainment of organizational, group, or societal goals because doing so gives them a higher level of satisfaction. Stewardship theory, therefore, provides one framework for characterizing the motivations of organizational behaviour in various types of organizations.

According to (Davis J.H., 1997), Stewardship is to root in psychology and sociology on company’s executives and managers, acting as principal stewards of shareholders interest in the making of profits. These theoretical considerations argue a view of managerial motivation alternative to agency theory and which may be termed stewardship theory (Donaldson L. , 1990).

(Davis J.H., 1997), developed the stewardship theory of management as a security strategy to the agency theory. According to (Oslon, 2008) the stewardship theory of management and the agency theory have mutually focused on the leadership philosophies adopted by the owners of an organization. He elaborates that in nearly all organizations, an owner or principal runs and manages the business and eventually passes the responsibility of the organization to a manager or agent who looks after and runs the organization. Olson arguments that critical decision the owner should go in hand with the authorities’ framework and safeguard the control issued to his/her managers.

The agency and stewardship theory of management explore this decision and examines the set of assumptions that the owner has regarding the manager, as well as, the effect those assumptions have on their decision making. (Oslon, 2008) highlighted the lack of focus on the competence of the manager in the agency theory and the need to invest in training and coaching to improve the skills set of the manager. While the agency theory has its origins in economics, the stewardship theory has emerged from the fields of psychology and sociology. The stewardship theory is based on the assumption that the manager will make decisions in the best interest of the organization, putting collectivist options above self-servicing options. This type of person is motivated by doing what‘s right for the organization because he/she believes that he/she will ultimately benefit when the organization thrives. The stewardship theory attests to the fact that the steward manager maximizes the performance of the organization, working under the premise that both the steward and the principal benefit of a strong organization (Oslon, 2008).

According to (Oslon, 2008) in compared to the controls put in place by the agency theory, the principal who adopts the stewardship theory will empower the steward with the information, the tools and the authority to make right decisions for the organization. The principal will fully enable the steward to act in the best interest of the organization, trusting that the steward will make choices that maximize the long-term return for the organization. In fact, putting control structures on stewards will significantly de-motivate the steward and be counter-productive for both the steward and the organization. Given this potential of the stewardship theory, the reason owners have not applied the stewardship theory approach is due to the risk tolerance and the typical assumptions of the principal.

2.5. The corporate governance code for Namibia (NamCode)

Since 1990, Namibia was using the King Reports on Corporate Governance for South Africa, respectful King I and King II. This has become an indispensable guide on Corporate Governance to directors and regulators in various jurisdictions. Recently, the Namibian Stock Exchange (NSX), in partnership with First National Bank (FNB), published a local governance code entitled “The Corporate Governance Code for Namibia”, NamCode, which will be used as a requirement for the listed companies. This Code on Corporate Governance is based on international best practices, especially on South Africa’s King III Report. It details the importance of corporate governance in achieving financial objectives and sustainability requirements (Deloitte & Touche, 2014).

The establishment of the NamCode became necessary when the Companies Act no 28 of 2004 and the changes in governance international could meet the legislative acts of the country. The change was caused by the formation of King III in 2009 and the newly amended South African Companies Act which applied in the legislative of the South African law. The Namibian Stock Exchange (NSX) in particular and Namibia business, in general, could not adopt the King III code, as previously with King II. Therefore, a need arose to create a code, based on the principles contained in King II and other international best practices, NamCode was developed to facility best governance for SOEs and private businesses, to protect Namibian’s macro-economy interest and to build pride in Namibia’s sovereignty.

2.5.1. The Corporate Law

There is no statutory obligation on companies to comply with the NamCode. The underlying intention of the NamCode is not to force companies to comply with recommended practice, but rather for companies to ‘apply or explain.' Directors are accountable to shareholders and other stakeholders, and where directors opt not to implement the recommended practices as set out in the NamCode, they should be able to explain their reasoning and motivation to the shareholders. Having been drafted by the Namibian Stock Exchange, this code is of particular relevance to listed entities and SOEs.

As directors are accountable for compliance with their duties towards the company (including the fiduciary duty and the duty of due care and skill), they need to ensure that each and every decision is taken with care. Indeed, every decision counts (Deloitte & Touche, 2014).

Most, if not all of the recommended best practice principles set out in the NamCode relate to the legal duties of a director to exercise their powers and perform their functions in good faith; and for a proper purpose in the best interest of the company, and with the degree of care, skill and diligence that may reasonably be expected of a director. As such, the NamCode constitutes a valuable guide to directors and other office bearers to ensure compliance with the corporate law. It is recommended that directors pay close attention to the enumerated principles, and aim to apply all such principles. Of course, where they choose not to apply or to apply a particular principle differently, they should be able to explain that decision to shareholders.

2.6. King III Report

The King Report on Corporate Governance, developed by a special committee (the King Committee) led by Judge Mervyn King, is South Africa’s groundbreaking code of corporate governance. To date, three versions of King Reports have been issued. King I in 1994, King II in 2002 and the latest one is King III, published in 2009. Compliance with the King Reports is recommended by South African governance bodies, and it is a requirement for companies listed on the Johannesburg Stock Exchange.

According to the Centre for Professional and Business Ethics (2005) at the University of Pretoria, the King Report on Corporate Governance is the most useful summary of the best international practices in corporate governance. The King Report’s first edition, King Report I, was rather a tentative edition compared to the others. It established recommended principles of conduct for boards and directors of JSE-listed companies, banks, and certain state-owned enterprises. It was not only exclusive to financial and regulatory aspects but also promoted an integrated method that involved all stakeholders. However, it fell short on the inclusion of the auditing function, risk management and integrated sustainability reporting (Institute of Directors in Southern Africa (IoDSA), 2016).

Published in 2002, the King Report II came with the additional emphasis on sustainability, and the defined roles of corporate board members, and risk management functions. In addition to the types of companies focused on in King I, King II was also applicable to departments of state or national, provincial and local authority administration falling under the Local Government: Municipal Finance Management Act, as well public institutions (Institute of Directors in Southern Africa (IoDSA), 2016).

The latest is King III, which was published in 2009, became fully effective in 2010, and is responsive to shortcomings in the predecessor reports. Mervyn King, however, conceded that it was wrong to include sustainability as a chapter on its own, leading to companies reporting on it separately from other principles and not in an integrated approach. In the King III report, sustainability was integrated into governance and strategy. The report recommends that, on behalf of regular annual reports, organizations need to produce an integrated report which includes sustainability reports, and that those sustainability reports must be based on the Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines. King III applies to all entities, public, private and non-profit, including regulatory organizations (Institute of Directors in Southern Africa, 2009)

Additionally, King III incorporates some global emerging corporate governance trends such as alternative dispute resolutions, risk-based internal audits, remuneration for boards of directors and evaluations of board performance.

The first King Report was published in 1994 and the second King Report was made public on 26 March 2002 (Wixley, 2010). From 2005, listed companies were required to comply with the King Report recommendations or indicate the extent to which they have deviated from them (Wixley, 2010). The King III Report was releas ed on 1 September 2009 with an effective date of 1 March 2010 (Wixley, 2010). At first glance, King III appears to be similar to the King II Report. However, there are significant differences, which will have practical implications for boards, directors, management, assurance providers and stakeholders (KPMG, 2009).

King III sets an international benchmark for an “apply or explain” approach, which means that entities need not comply with the Code when they can justify their non-compliance. Where an entity has applied the Code and the best practice recommendations contained in the report, a positive statement to this effect should be made to stakeholders. Where a specific principle or recommendation is not applied, this should be explained fully to stakeholders (Cliffe, 2016)

In South Africa, under King III, corporations are required to provide a statement to show if they comply or not with the governance principles and if they do not comply they have to explain their practices. It is relevant, and to that King III states that each principle is of equal importance, consequently ‘substantial’ application of this Code and Report does not achieve compliance. Regarding board composition, King III requires boards to be comprised of a majority of the board that should consist of non-executive directors of which the majority must be independent. Every year the directors who are classified as independent should have their independence assessed by the board, particularly those that have been on the board for longer than nine years. The results should be reported (KPMG, 2013).

2.7. State-owned Enterprises Governance Act, 2006

The government is a majority shareholder of almost all SOEs and as such the State is responsible for ensuring that frameworks exist that set out the corporate governance of all entities. The State-owned Enterprises Governance Act makes provision for the efficient governance of State-owned enterprises and the monitoring of their performances. The Act makes provision for the restructuring of State-owned enterprises and has established the State-owned enterprises Governance Council by defining its powers, duties and functions and to making provision for incidental matters, (Government of the Republic of Namibia, 2006).

The Act is divided into eight parts and has established a State-owned Enterprises Governance Council (SOGC), whose functions are to establish an accepted common principle of corporate governance and good governing of SOEs as well as common policy frameworks for the operations of public enterprises. The Act includes structuring of policy on issues relating to human resources, assets, and finance. The Council is also responsible for determining the criteria for the performance measurement and evaluation of State-owned enterprises by developing appropriate means for monitoring public companies ‘performance. The Council also should determine directives about the governance agreements to be entered into by a portfolio Minister on the board of a State-owned enterprise.

The State Owned Enterprises Act of 2006, further guides that the State-owned Governance Council is tasked with the setting up of the remuneration levels of board members, chief executive officers and other senior management staff of State-owned enterprises; and benefits for employees of State-owned enterprises. It determines the number of members to be appointed to the boards of State-owned enterprises and advises the portfolio Ministers on the appointment of such members by sections 14 and 15 of the Act. The Council is there to facilitate the provision of programs for the training and development of members of the board and management staff of State-owned enterprises on corporate governance and efficient management practices. It has to receive and consider, for approval, submissions made by State-owned enterprises in the annual distribution of profits and the declaration of dividends regarding section 25 of the Act. Council will then submit to Cabinet, for decision any proposed.

2.8. Conclusion

This chapter reviewed literature related to corporate governance and its impact on corporate performance in state-owned enterprises. The chapter covered the definitions of corporate governance, theories of corporate governance, Namibian Act applying to SOEs and the corporate governance codes of best practices. The next chapter will discuss in detail on research methodology of this study.


This chapter discusses the methodology that was used to obtain the information required for the study. It gives details of the research strategy and research design and gives justification for the utilization of the case study, and discusses the data collection and data analysis methods or techniques. This study will help to draw the realistic results that will contribute to the future studies and also the available literature on the current field of the study.

3.1. Research Strategy

In research there two main strategies that are employed, namely: quantitative and qualitative research. While quantitative research studies focus collecting data in forms of numbers and aim to test the hypothesis, qualitative research concentrates on theories and barely test theories. Each research strategy serves a different purpose, thus, in selecting a strategy consideration is made about the purpose of the study. In some cases, the purpose of the study dictates that the two research strategy be combined to answer properly respond to the research question adequately. When both quantitative and qualitative are combined, the research strategy used is called mixed-method approach.

The purpose of this study is to examine the corporate governance practices at GIPF with specific reference to governance compliance framework provided for by the NamCode. In this case, the study will seek to explain how corporate governance is implemented at GIPF and not interested in any numbers. Thus, qualitative research strategy is the best strategy for this study as it permits us to answer the research question at hand.

The study is qualitative research which evaluated corporate governance practices at GIPF. The research adopts a qualitative, which will be an emphasis on the framework on governance used by GIPF. The aim is to develop a governance framework and make sure that the Fund adheres to NamCode. The study was conducted by the secondary research method of data collection, using available published information. Annual reports, integrated reports, and company websites were used as the primary source of information.


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Evaluation of Corporate Governance practices at the Namibian Government Institutions Pension Fund (GIPF)
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Joseph Ilonga (Author), 2016, Evaluation of Corporate Governance practices at the Namibian Government Institutions Pension Fund (GIPF), Munich, GRIN Verlag, https://www.grin.com/document/342289


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