Can pension funds come to the party?

Mmegi Editor | Friday March 5, 2021 15:13

The P21 billion deficit projected for the current financial year and the P6 billion expected next year, clearly tell the story of a government in a dire financial position.

The increased taxes and levies, as well as plans to cut the public service make it clear that fiscal authorities are feeling the pinch, and with them, more than two million Batswana hard hit by COVID-19 and still looking to government for protection.

In the midst of this, local pension funds are reporting that their collective assets last November passed P100 billion for the first time in history, their returns helped by COVID-19 defying gains in global markets.

This performance by the pension funds, a sector that is anchored by the Botswana Public Officers Pension Fund, a public service fund, certainly raises questions about the contribution of the local pension fund sector to local development aspirations.

An analysis of their investments shows that about 63% of local pension funds’ assets are held offshore and those that are invested locally are largely in financial products such as equities and bonds. These investments are considered not only more liquid, but also reliable in terms of returns thus protecting pensioners’ savings. Very little has been invested in infrastructure, for instance, despite the huge gaps that exist locally and government’s declining ability to single-handedly finance all the requirements. Indirectly, through the capital markets, local pension funds are invested in local entities that are engaged in areas such as property, but there is grossly insufficient when key needs such as water, sanitation, electricity, healthcare, roads, education and others are considered.

Asset managers who handle these pension funds have explained that they have strict guidelines and policies to protect pensioners’ assets, as well as the duty to beneficiary profiles. It is however unconscionable that government would find itself struggling for funds, even reaching outside borders to borrow for vaccines, while pension funds, whose members are sadly most vulnerable to COVID-19, sit on more than P100 billion, most of this in foreign lands creating wealth for others. Government has opened the door for Private Public Partnerships (PPP), but it appears either the pension funds or those charged with managing them, expect to be invited to the party, rather than developing innovative arrangements to help the country’s aspirations.

This is not about charity. Any PPP involves long term returns for the private sector party through various methods, including tariffs, tax exemptions and others. The Government of Botswana is rated as Africa’s best borrower and while there are rising concerns over public finance wastage and corruption, it arguably has a long track record of prudent fiscal management, certainly better than some of the jurisdictions local pension funds are currently invested in.

We therefore challenge the pension funds and their asset managers to come to the party and assist Batswana in this time of need.

Today’s thought

“Without investment there will not be growth, and without growth there will not be employment”

– Muhtar Kent