Experts have called for the review of pension fund regulations to allow new thresholds under which asset managers would have to hold 60% of their portfolio locally and the balance offshore.
Currently, the regulations direct asset managers to hold not more than 70% offshore and the balance onshore. By March 2017, the date for which latest figures are available, local pension fund assets amounted to P77.5 billion of which 62.1% was held offshore.
The latest push for a review follows a botched attempt by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) seven years ago, where it wanted 70% of the pension funds moved onshore by 2030 in order to develop local capital markets.
The attempt failed due largely to resistance from the market, particularly fund managers who cited a lack of investment opportunities locally.
Rand Merchant Bank (RMB) research manager, (treasury) Moatlhodi Sebabole, told a Retirement Fund conference recently that a review of the regulations was needed.
“There is a need for a drive to change the threshold of the funds kept offshore and onshore. There has been an increase in offshore investment by asset managers,” he said.
Sebabole said average monthly proportion of offshore investments has increased from P44 billion in March last year to P48 billion in March 2017.
The industry is also contributing about 44% of the country’s gross domestic product. Locally the total number of pension funds amounts to P77 billion with the Botswana Public Officers Pension Fund (BPOPF) being the biggest contributor
Only around P750 million is invested in the private equity.
In 2014, pension funds assets invested on onshore equities amounted to 22.7%, 47.1% offshore equities, Botswana Properties accounted to 0.5%, offshore bonds 9.2%, local government bonds 12.6%, cash pula 3.8% and cash offshore 3.6%.
Two years ago, Parliament approved the Retirement Funds Bill of 2014, which currently regulates pension funds in Botswana.
The Bill repealed the Pension and Provident Funds Act and re-enacted it under a new name, the Retirement Funds Act that came into effect in April this year.
The Bill empowers NBFIRA to exercise better supervision over retirement funds in terms of risk-based oversight, investment of fund assets, transparency of funds to members, participation by members in the affairs of the funds and clear requirements for trustees and management of fund contributions.
The objectives of the Bill include the provision of a framework, which outlines the governance of administrators of funders and ensures that investments are approved and guarded by the NBFIRA in a modus that protects members’ interests.
The Bill also prescribes the requirements for licensing, issuance of licences and the amendment of the fund rules.
There is also a special provision relating to multi-employer retirement fund, beneficiary fund and preservation fund.