NSL Radio Interview_Paul Sayer & Vere Arava

Written: 6 March 2023

NSL expects 2023 to be another tough year for the Fund’s off-shore and local investments due to the continued unfavourable state of the global economy.

NSL CEO Mr. Paul Sayer said in a radio interview last week that “this year is appearing to present more of the same struggles not only for the Fund but also with both the private and public sectors as we all manage the impact of a potential global recession on our investments in the global markets”.

“In addition, we forecast that inflation will remain quite high in 2023, both locally and globally affecting households directly as well as businesses while several Countries move closer to realising a recession. NSL is also expecting to have returns from our investments in the Banking Sector, through the BSP Financial Group Limited and Westpac PNG, reduced as all Banks now have to contend with the newly increased 45% Banking Sector Corporate Tax Rate.”

“The BSP Financial Group Limited (BSP) recently declared an underlying net profit of K859 million, however, this net profit was reduced to K805 million due to the effect of the Additional Company Tax applied by the State in 2022. The difference lost to tax was K54 million.”

“Nambawan Super owns 11% of BSP so our share of the K54 million tax loss is at K6 million. It’s important to note that the K54 million hole created by the tax is a combination of the K190 million tax previously imposed netted against the new Banking Sector Tax rate of 45% and the accounting treatment of each of the taxes.

“We expect the tax losses to be larger next year when BSP’s accounting adjustments reverse out and with the addition of lower returns from Westpac if the corporate tax rate remains at 45% and does not revert back to 30%.”

“This means reduced dividends for the Fund as a major shareholder, which results in reduced interest income for the Fund and will negatively affect our returns to Members.”

“Although 2023 is looking to be another tough year for the Fund, as the Trustee for over 214,000 hard-working Papua New Guineans, NSL continues to work on mitigating the adverse effects of the current economic state to ensure that we are protecting the savings of our Members now and into the future.”

“A year or two with lower returns should not worry members as superannuation is a long-term investment that members contribute to throughout their whole working life, which on average is about 40 years. There will always be better returns when economic conditions pick up and in the long-term the average crediting rate evens out and Members’ savings will continue to grow.”

“NSL is a long-term investor utilising a strong investment strategy that aims to produce good returns over many years. Over the long term, we are optimistic that the global markets will recover and the Fund will continue generating good returns from our international and domestic investments, for now, we need to weather the storm.”

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