The dissolution of the Botswana Public Officers Pension Fund (BPOPF) board of trustees this week could throw major investment projects in the pipeline into disarray due to delays resultant thereof.
BPOPF acting Chief Executive Officer, Lesedi Moakofhi last month announced that they are about to enter the private equity market and set up an infrastructure fund, as new investment projects estimated at around P1.6 billion. In the absence of the board of trustees the awarding of tenders for the roll out of the projects may be stalled.
On Monday, Justice Tshepo Motswagole ordered the suspension of the board from making any decision until the dispute over representation from the employee party has been resolved. The order was made after the Amalgamated Local and Central Government and Parastatal Workers Union (manual workers) dragged the fund and its trustees to court demanding a slot in the board as employee representatives.
"The employees’ trustees shall forthwith vacate their offices and no further business of the board of trustees of BPOPF shall be carried out until the terms of this settlement agreement have been complied with," the order reads. The employee associations and trade unions are to submit a list of nine different public officers for nomination to the board, which will be reviewed on October 20.
BPOPF Communications Manager, Devilliers Nage had not responded to questions.
Some critics have dismissed the foray into the private equity market announced last month by the BPOPF as part of their new investment strategy as a gamble with public officers pension funds. They argue that the equity market in Botswana is oversubscribed, hence the reason why asset managers are against the revision of the investment formula to 50 per cent offshore and 50 per cent in Botswana. In the current scenario of 70 per cent offshore and 30 per cent in Botswana most asset managers are struggling to find areas of investment in Botswana. "That is why when Bank of Botswana stopped them buying BOB certificates they started buying shares at Mascom and investing in shopping malls," says an economic analyst.
Another said there are only so few places one can invest in Botswana, that's why everybody rushes for BOB certificates. The return on them is around 7.5 per cent, bad for commercial banks because it makes them lazy and they have no need to lend ordinary members of the public money and good for fund managers because they have been mandated to invest 30 per cent onshore. But Moakofhi is adamant that contrary to such perceptions they believe "there are a lot of great quality opportunities in the unlisted space that need a true private equity partner to unlock".
Some have praised the decision saying most pension funds invest most of their funds in equity markets with the main choice being the ratio of domestic to international. They said while property and infrastructure assets are alternatives, in Botswana those sectors are over-subscribed if one looks at the number of new shopping centers and hotels-and considering the already bursting commercial property bubble. The remaining alternative investments are debt, interest rate, foreign exchange products and cash but these are not good for a stable sustained income that you look for in a pension, they argued.
On the contrary critics counter that all these instruments have proven to be excellent investment vehicles in other countries especially in South Africa where most of benchmarking takes place. "But South Africa for all its faults have fairly good corporate governance and checks and balances to prevent wholesale looting of public funds. In Botswana there is too much political interference...," said another critic.
The critics suggest that BPOPF should fix the money in bank accounts. "Go the safe route, 5.5 per cent is better than nothing. Private equity is not for Botswana. In 2013 BPOPF declared 12.25 per cent profit and the previous year was 19 per cent. Looking at the appreciation of the US dollar vs the pula they said if BPOPF had invested in a dollar denominated fixed account returns would've been around 15 per cent. Asset managers previously engaged by BPOPF also used to invest the funds in the BOB Certificates which also provided a fixed return like the fixed account. The difference only being that BOB certificates were for a longer term of five years. All commercial banks make most of their money from the BOB certificates as they are a safer mode of investing," they said. But those in support of the recent decision insist that such would have been a risky investment because currency fluctuations are not a long term investment strategy.
Notwithstanding the criticism BPOPF has been applauded for the decision to start funds to finance public infrastructure projects through bonds which is much safer since government will never default. "But whether government will take advantage of their bonds instead of borrowing overseas that remains to be seen," a source said. One of the critics said with an acute shortage of accommodation throughout the country BPOPF should have long had a property company the size of BHC where a minimum return on investment of 10 per cent is possible if they were to rent out their properties, more than 25 per cent if they were to sell them.
BPOPF was registered in 2001. The establishment of the Fund came as a result of government decision to change the Public Officer’s Pension arrangement from a Defined Benefit Pension Scheme to a Defined Contribution Pension Scheme. The Fund has experienced phenomenal growth since inception owing to the overwhelming positive response from the entire public service as public servants exercised their option to join the fund. As is required by the Pensions and Provident Funds Act, the BPOPF has management structures. A Board of trustees is the supreme body that manages the Fund and is comprised of nine (9) Employer Trustees, nine (9) Employees Trustees, one (1) Pensioner Trustee and one (1) Independent Trustee appointed by the Board of Trustees. In total there are 21 Trustees including the Principal Officer.
The Board of Trustees has five main sub committees :
• Finance And Investment Committee
Oversees functions of the Board of Trustees over investment matters relating to the fund.
• Benefits Committee
Oversees functions of the Board of Trustees of the Fund over matters relating to the retirement, withdrawal, distribution of benefits and ill health retirement benefits in the Fund.
• Audit Committee
Oversees functions of the Board of Trustees of the fund over audit matters relating to the fund.
• Marketing And Communications Committee
Oversees functions of the Board of Trustees of the Fund over communications matters relating to the Fund.
• Human Resources And Remuneration Committee
Oversees functions of the Board of Trustees of the Fund over matters relating to the management of the staff of the Fun