Credit crunch creams off P2 billion from pension funds

WANETSHA MOSINYI
Staff Writer | Friday November 14, 2008 00:00

 

Speaking at the Annual Retirement Fund Conference at Boipuso Hall on Wednesday, a committee member of the Botswana Pensions Society, Peter Hikhwa, said expectations of members often differed from those of trustees.

'Education is very important,' Hikhwa said, 'so go out there and understand members' expectations and explain to them what is going on with their life savings. All decisions that you (trustees and pension fund managers) take need to be communicated to members. Otherwise you will always receive complaints from members.'

Hikhwa, who is a Senior Accounting Executive at Aon Botswana, said pension funds in Botswana had received negative returns due the US credit crunch crisis and the local market correction that happened early this year.

As of September 2008, the total asset base of pension funds stood at around P32 billion as compared to P34.29 billion in December 2007.

But the Society appealed for calm among members and trustees. 'There is no need to panic,' Hikhwa said. 'Let's look at the long-term view because this crisis will pass and things will get back to normal.'

The call for calm was also repeated by the Chairman of the Society, Paul Masie, who said history had shown that such crises did happen but did not last forever.

'These things will happen and are beyond our control. The best we can do is minimise losses,' said Masie, who is the CEO of Alexander Forbes Financial Services Botswana.

According to Forbes's Asset Managers Watch of September 2008, funds held by asset managers in Botswana lost marginally in the third quarter.

In the quarter under review, the average performance of large funds (greater than P150 million) was negative 4.77 percent, for medium funds (between P50 million and P150 million) it was negative 1.95 percent, while for small Funds (less than P50 million) it was negative 2.23 percent.

On average, most Botswana pension funds have invested between 53 percent and 65 percent of their total assets in offshore markets. Of that, between 50 percent and 70 percent is invested in equity markets.

Meanwhile, analysts at the conference said pension funds had a key role to play in the future development of Botswana and that the larger part of them - in billions - should be invested locally.

The Fixed Income Strategist of Bifm, Dr Zoumana Kone, said notwithstanding the aim of pension funds to provide competitive returns for their members, they could help in infrastructure development, reduce the costs of financial services and improve the robustness of Botswana's financial system. He said projects in which pension funds could play a developmental role included the construction of roads, dams, bridges, universities, land servicing, as well as tourism and leisure.

Kone said a prime example was the successful involvement of Bifm in public-private partnership (PPP) projects like Plot 21 and SADC headquarters.

(Plot 21 is a recently completed modern office block on the corner of Khama Crescent and Queens Road in Gaborone that already houses the Office of the Ombudsman and the Lands Tribunal; a new SADC headquarters is currently being built at the new Gaborone CBD west of Nelson Mandela Drive, also in the capital).

The guest speaker at this year's Annual Retirement Fund Conference was the Registrar of the Pensions and Insurance Authority Board of Zambia, Chris Mapipo, who shared his country's experiences.