Lack of robust economic activity on the local front is keeping a tight leash on the filthy rich Botswana Public Officers Pension Fund (BPOPF) from spreading tentacles and making money spinning investments to diversify and revive the economy. With an investment of just 45 percent (about P24.7) billion of its total assets under management in different sectors in Botswana, BPOPF is running out of options as even the miniscule BSE has limitations. BPOPF remains a key contributor to the economy and in particular non-bank financial institutions sector, wherein total assets increased by 17 percent to P113 billion in 2015 from only P97 billion in 2014, mainly boosted by retirement funds which registered a 25.4 percent increase. Pensions’ regulator NBFIRA reports that in 2015 the NBFI sector held 78 percent of the GDP, representing a 10 percent jump from the previous year. The impact of BPOPF on the local economy is best captured by a sharp drop in the assets under management of the NBFI sector when the fund externalised the management of a portion of its assets. The total assets of NBFIs declined from P62 billion to P50 billion in that period between 2014/15. With a no-nonsense Chief Executive Boitumelo Molefe at the helm, the Fund looks set on a trajectory to greatness as shown by bold decisions she has been making, barely over a year in office. By restructuring BPOPF and launching a fresh spruced up image of the Fund last week Molefe was announcing her arrival and shedding off tags of yesteryears. Not only is the rebranding designed to give greater value to members and stakeholders, it is meant to reflect a new phase the Fund has entered, which follows the new strategy to insource the fund administration mandate precipitated the need to restructure the organisation.
Soon after taking over in 2015, Molefe hit the ground running driving a new strategy that called for the full insourcing of administration of services, which necessitated terminating an existing contract with Alexander Forbes. With the support of the BPOPF board she investigated fraudulent conduct at one their asset managers – Fleming Asset Management. That investigation led to the termination of the relationship with Fleming, with assets managed by the latter handed over to Messidor to manage the entire property portfolio, gaining an extra P1.5 billion worth of assets. Under private equity, the Fund has launched Botswana Opportunities Fund (BOP) valued at P500 million and currently managed by Capital Management Botswana (CMB) led by Rapula Okaile. In November 2016, CMB was allocated an additional P380 million raising the BOP to P880 million. Meanwhile Germany-based Moravia Capital was appointed as new Private Equity Fund managers for BPOPF’s offshore investments. Moravia identifies fund managers abroad, and advises BPOPF on specific investment. Molefe has also vowed to enforce compliance with a new citizen empowerment policy approved by the Board of Trustees in the current financial year. Going forward BPOPF will procure goods and services from local suppliers. The policy makes it mandatory for a minimum of 25 percent shareholding by citizens on submission of proposals, tenders and contract renewals. The policy also requires 50 percent Botswana citizens at board level and 70 percent at Executive Management. Companies awarded tenders should also have an employment equity policy, which shall see citizen employees empowered by equity in the long run. The fund will also implement the incubation policy, which is aimed at providing support and accelerating the development of fledgling asset managers. Molefe said BPOPF is willing to provide seeding initial capital since the eventual aim is that the businesses can stand on their own and compete in the big league. The programme, which is open to all asset classes, will only receive mandates under the active member and deferred pensioner portfolios. However, companies must be 100 percent owned by citizens while 50 percent of senior management should be Batswana. It must also have less than P1 billion AUM. BPOPF has also set up two private equity Funds to support the growth of the Small Medium Enterprises in Botswana and an Infrastructure Fund. The ongoing P300 million Pula Hilton Garden Inn Hotel project in the Gaborone CBD is part of the latter and is strategic to drive citizen economic empowerment by engaging locals at all the stages of the project. The hotel is scheduled for operation in early 2018. BPOPF has also boosted its property portfolio by buying two properties in Francistown from PrimeTime for P71 million last year. Other investment alternatives, pointed out by Molefe, include listed equities, bonds, property and other listed investments are progressing well.
The four segments making up the Fund are an Active Member Portfolio for members who are still in active employment; Deferred Member Portfolio for members who used to work for but are not yet pensioners; the With–Profit Portfolio for retired members whose earnings add profit; and the Non-Profit Members Portfolio for active members who are yet to reach a retirement age and their pension has a standard rate. All four portfolios experienced slow growth and shrinking returns for the financial year March 2015 to March 2016. Assets under management for Active & Deferred Members grew from P45.6 billion by March 2015 to P48.2 billion by March 2016. Net returns were bigger in 2015 at 13.7 percent, dropping to only 4.25 percent in 2016. The Profit Members portfolio grew marginally from P4.6 billion to P4.7 billion in 2016, a period - 2015/16 -which also saw returns slow down from 10.2 percent to 4.2 percent. The Non-Profit portfolio jumped from P1.4 billion to P1.6 billion during the 2015/16 financial year while on the other hand total returns fell from 6 to just 3 percent. All the depressed performance was caused by illiquidity in local equities at Botswana Stock Exchange (BSE) when investors held back stock without trading, coupled with underdeveloped industries in property and private equity, which curtailed progress in infrastructure and private equity portfolios. In the her first financial year at the helm, Molefe achieved a P3.8 billion growth in assets under management from P51.7 billion in 2015 to P55.5 billion in March 2016. With such 'modest gains' Molefe is on track to achieve a dizzying target of P90 billion, which she has set for the next five years starting now (April 2017). This, she will achieve by aggressively pursuing a minimum 7 percent annual growth going forward by intensifying investment while cutting operational costs.