Papua New Guinea’s largest superannuation fund, Nambawan Super, is a major domestic investor across the economy. CEO Paul Sayer talks with Business Advantage PNG about the impact of the COVID-19 pandemic on its investments, and its future plans.

Credit: Nambawan/Linkedin

BAPNG: How has Nambawan Super’s investment portfolio been impacted in the past year?

Paul Sayer: Obviously, the share markets did not look very healthy early on last year. If you remember, big crashes were occurring across the world, so our international portfolio had a very volatile year. It started to come back in the later half.

Just under 50 per cent of the portfolio is invested in what we would call the government fixed-interest securities – treasury bills and government inscribed stock. That provides a good yield for us. During the year, the government did some quantitative easing, where we were able to sell some short-dated securities for longer-dated securities.

That increases the yield, but it also increases our exposure to the government. So, it’s a balancing act

BAPNG: Let’s look at some of those businesses that you have a substantial shareholding in. How are they faring?

Nambawan’s Paul Sayer.

Sayer: SP Brewery is probably the most dramatic business in portfolio. It had a poorer year. The previous year, the government introduced an excise increase. Well, you put that up, it pushes your price up. The price goes up, demand drops. But you’ve also got demand dropping because there is a lockdown. Nightclubs, venues, pubs are all reduced, and purchasing beer is lowered. So, pure earnings drop.

Now, would you say that SP Brewery is a good investment long-term? We think so. However, we will write that decrease down.

We also have other businesses, such as Westpac, which is going through the process around its potential sale. We hold Toyota (Ela Motors), Paradise Foods and Laga Industries. For each of those, you’re seeing the impact of an economy that had a hard year.

If we look at the domestic equities, both unlisted and listed: BSP’s share price has held pretty much flat. Their dividends were down last year, so again, the return we get is also down.

‘Our message to members is that we’re here for 30, 40 years. We’re looking for long-term investment.’

BAPNG: The return to your members at the end of last year was just one percent. Did that match your expectations?

Sayer: I think that we started last year with a very negative view. During the year, we have worked hard, but it wasn’t necessarily reflected in the final result.

BAPNG: One of the indicators for how well the economy is traveling is whether your members are calling on you for cash advances or to draw down on their balances. Are your outflows increasing?

Sayer: At the start of last year, I would have expected that the outflows would have been higher than the previous year, but in actual fact, they weren’t. That’s a positive. And members have still been continuing to look to come into the fund. So, we have seen growth of voluntary members, voluntary contributions, and just normal contributions coming into the fund. We have seen cashflow being strong.

And it’s important, that cashflow. If you’re going to pick a time to invest, then when things are down is probably a better time to invest. Our message to members is that we’re here for 30, 40 years. We’re looking for long-term investment.

BAPNG: Is the fund investing in more property?

OPH Tower at night

Sayer: Rangeview Heights is a joint development between Nambawan Super, Lamana Development and the National Capital District Commission. It comprises residential components and a shopping centre across the road from Vision City. That’s ahead of track. We have strong pre-leasing for the supermarkets and the retail aspect. It’s due to complete in the second half of this year.

We have made an announcement that we will build a new building in the space across the road from the government buildings down in Waigani, next door to the TISA building. That will become the new headquarters for Nambawan Super and for another client.

‘If the government pays us our arrears, 40 per cent to 50 per cent goes back to them as an investment into government bonds.’

BAPNG: There was a time when the fund was owed a lot of money by government. How’s that now?

Sayer: The State is honouring the payment to the super funds for fortnightly salaries. The State has also been quite good at paying what we would call its pre-2009 unfunded superannuation obligations, as and when they’re required.

However, there is a challenge on the payment to Nambawan Super and other entities associated with Nambawan Super in regard to rentals. Rental arrears from the State are certainly growing. I don’t think that we’re alone with that.

We hear across the marketplace that the government has been looking to clear arrears. We understand that they’ve just received a billion kina from Japan. We hope that’s going to be released to clear arrears.

The interesting thing with us is that, if the State pays us our arrears, 40 per cent to 50 per cent goes back to them as an investment into government bonds!

BAPNG: What are your expectations for the next 12 months?

Sayer: Internationally, you’d expect things to be more positive in 2021, as the COVID-19 vaccine gets rolled through the major economies. Closer to home, I think that the implications of COVID and relaxation are going to be tied to the rollout of the vaccine. Unfortunately, I think that PNG will be behind the rest of the world with that rollout.

For us, we need to think for a long haul. And that’s what we’re saying to our teams.

This year, there will also be a movement towards the pre-election period. We’re thinking about what that will mean for government decisions and for the longer term. We’d like to think that government focuses on meeting its requirements to fund its current obligations rather than focusing too much on new expenditure.

In 2024/25, we’re expecting the PNG LNG project to become a river of gold back into the country once the debt has been paid off. Longer term, if the new resources projects such as Papua LNG and Wafi-Golpu are given the green light, then you should have that lift coming through.

BAPNG: Aside from the resources projects, do you see any developments in the economy that you find encouraging?

Sayer: PNG has a good opportunity to provide food into Asian markets – Singapore, for example. You’re seeing, potentially, some big developments in the Sepik Plains with large production agriculture. That’s a model that would be worthwhile looking at. We have a lot of small-scale farms but, to go out into the world, you typically need to get bigger lots and get the farm, the cold chain, the transportation, everything lined up to ensure reliable supply. There are some opportunities there that are worthwhile looking at.