Minister of Finance and Economic Development Dr Thapelo Matsheka says pension funds industry has shown some growth for the year ending December 2019. Answering a question from Member of Parliament for Selibe Phikwe West Dithapelo Keorapetse in Parliament, Dr Matsheka said the latest audited figures show that total assets of Pension Funds represent approximately 47% of the GDP.
“In 2018, the ratio was 42 percent, which confirms the growth of the Pension Funds industry,” he said.
On the number of the stand-alone Funds in Botswana, Matsheka said that they are 75 and six umbrella Funds with 320 sub-Funds. “The income of the Funds in 2019 amounted to P11.8 billion, of which P7 billion was investment income and P4.6 billion was both employer and employee contributions. The total expenditure for the Funds for the corresponding period was P3.7 billion, of which P3 billion was benefit payments,” he informed parliament.
On the assets of the Pension Funds, Matsheka said that they were P93 billion and made up of P57 billion for offshore investments which translates into 61% while P36 billion for domestic investments making 39%.
On the listed equities and bonds, he revealed that they make up 61% and 17% of the investments of the funds respectively.
“In the past 10 years, Pension Funds experienced a growth of 171 percent, which is nearly a doubling in size. Such growth was achieved through contribution inflows and investment returns,” said Matsheka.
There has been some concerns that Pension Funds are investing little locally thus not helping to boost the economy and Keorapetse wanted to know what is been done to encourage them to invest locally.
In response Matsheka said Pensions Funds are currently mandated to invest a minimum of 30% locally but indicated that of late they have been investing an average of 40% of their assets locally. "This confirms that Pension Funds are free to invest more locally. Therefore, Mr. Speaker, such allocation has so far not deprived the domestic economy of the resources required for local investment. However, my Ministry is currently doing some work, with the view to reviewing the 30/70 guideline in line with the prevailing and prospective economic and financial conditions in the country,” he said.
Regarding returns, Matsheka revealed that in the last six years Pension Funds have earned decent returns averaging 7% annually adding that the offshore investments contributed the largest portion of the returns recorded by Pension Funds.
One of the thorny issues facing Pension Funds has been on governance and Matsheka admitted that they require improvement in terms of timely submission of reports to the regulator and up-to-date members’ records to enable efficient and timely distribution of benefits and member statements.
“In this regard, NBFIRA’s latest Directive on minimum standards for Trustees is an effort to enhance governance and management of Pension Funds,” he said.
The Selibe Phikwe West MP also wanted to know the preliminary observation of 2020 in terms of the effect of the Covid-19 associated economic problems.
In answering, Matsheka said that during the period February to April 2020 markets experienced extreme pressure but ray of hope was exhibited by the Covid-19 vaccine trials, markets have started to rebound.
He said that it is expected that Pension Funds will not be materially affected.