The financial sector manages the savings of the nation in the form of households, corporates and government. To this effect, major decision makers are those who manage the banks, pension funds, provident funds, insurance money and retirement annuities.
Digging deeper, the investment management industry typically has two types of investors or asset owners: institutional and retail investors. As indicated in the last column, Non Bank Financial Institutions Regulatory Authority has it that the total assets under management of retirement funds are in the region of P113 billion as at December 2018. That is a little over a tenth of a trillion, and that is significant.
The financial services industry is an essential element in the development of economies worldwide. As an intermediary between asset owners and those with ventures into which to invest, the sector has become an indispensable agent in the allocation of capital.
Accordingly, it is imperative that a conversation between government and its major players be commenced to focus on these assets being invested with the view not only to seek the highest returns for the shareholders, but to ensure the creation of value for retirees.
Retirement assets must support our country’s development needs to enable a better environment to which our retirees can retire and for the overall benefit of the national economy.
And who is better placed to have these conversations with government than Batswana managers and investment professionals? The reality that the best fraction of Botswana retirement money is not being invested in Botswana needs to be confronted.
We have a de facto investment boycott of our economy by foreign firms managing Batswana money. This must stop.
Botswana retirement funds need to be directed to the massive infrastructure deficit we currently have, to industrial manufacturing involving the value-addition to our mineral products, agriculture processing especially in beef, ICT, SMME development, job creation and skills development in so far as all that can be sustainably achieved.
Botswana Public Officers Pensions Fund (BPOPF) has the best opportunity in that regard, and thankfully seem inclined towards reversing that tide. They control the allocation of at least 65% or so of the retirement industry of Botswana and their influence is largely via their use of the asset consulting function they utilise. BPOPF therefore has an opportunity to basically turn our economy around, get our retirement money working in Botswana for Batswana and deliver on the retirees entitlements and expectations.
I am greatly encouraged to learn from some of my sources how BPOPF has confronted this challenge and has revamped its citizen empowerment policies to incubate and grow the number of local asset managers, private equity players and alternative managers. But the change should spread to controversy ridden Bank of Botswana (BoB). We must allow local firms to manage our very foreign reserves.
BoB is the single biggest example of a nation’s lack of confidence in its own people. If we don’t have confidence in ourselves, who do we expect to have confidence on us? With this change, one would expect that product pushing will be replaced by the effort of managers to understand the needs of the Botswana retiree.
Maximising profits for shareholders will play second fiddle to maximising returns for retirement funds members. The asset consulting space must reform to attend to the needs of the country. Asset consultants are the ones that have the last word on asset allocation irrespective of our country’s citizen empowerment trajectory.
The AU Commission report led by former president of South Africa, Thabo Mbeki on the number of African remittances to global markets was scandalous. It is significant that the World Economic Forum and the World Bank, inter alia, have expressed concern on Africa’s poverty being caused, inter alia, by the continent’s failure to use its resources for its betterment of the lives of its people.
We need to start using our retirement funds symbiotically for the benefit of retirees, and to address the country’s developmental needs. To achieve that, we need citizens first to be given an opportunity in their own country of birth. They need to be provided with access to economic opportunities in their very country.
We need to deracialise the ownership and control of our wealth, management and professions of the finance industry. Just as we have demonstrated able leadership by locals in key industry sectors including BPOPF, we can be confident the same talents can work in the asset management and consulting space.
We need to massively increase our investment locally. Lobatse can be resuscitated. Selebi-Phikwe and SPEDU need private equity ventures to create new, sustainable jobs that reverse the job losses of BCL. Kasane and Maun need pension investments to turn them into world-class tourist centres.
Secondary industries, that involve value-addition to our mineral products in Orapa and Jwaneng need to be developed. The list is not exhaustive. And yet, we are exporting the best fraction of capital to foreign markets to sustain their flourishing economies and to create jobs for their citizens.
These are the conversations the political leadership must lead, not vindictive, stupid and selective prosecutions intended to push locals out of industries reserved for foreigners. The Office of the President must start realising that the economy cannot be built without the citizens being at the forefront. Batswana should not just be downstream beneficiaries of wealth but wealth managers and creators as well.