Batswana deserve a foothold in the finance industry - part 1

The continued persecution of Kgori Capital (Pty) Ltd by the Directorate of Public Prosecutions (DPP), in spite of the Court of Appeal (CoA) ruling, bears the hallmarks of not only a malicious prosecution but also, a modern-day economic hit.

It is significant that Kgori Capital seized territory which was, until its arrival, an exclusive reserve of foreign asset managers.  The company became the fastest growing asset manager in Botswana and a formidable threat to other managers.  The malicious prosecution is in part an attempt to keep the company away from the honeypot kept for foreign firms.  Shutting Batswana out of their own economy, by use of malicious prosecution, is completely immoral, and treasonous.   And it is high time we address this decade old problem.

Statistics as regard Batswana’s participation in the finance industry are shocking and downright embarrassing.  After fifty plus years of independence, Botswana has no indigenous Bank; either commercial or investment.  Only recently, did we reluctantly warm up to indigenous asset management firms like Kgori and thereafter the Morula’s of this world. 

The attempted money laundering case before the courts implicating Kgori founders is not going to help the situation.   It will have the effect of dampening our confidence as a country in developing our own institutions. It is shocking to discover that indigenous local asset managers manage less than 5% of assets under management out of an industry of about P110 billion if you factor in pension and insurance funds. 

Add foreign reserve assets, which are of a relatively similar size, and the numbers become so small that the situation calls for a commission of enquiry.   By indigenous, I mean a firm founded in Botswana without some international affiliation or subsidiary status.

Three foreign entities, I have come to learn, control the allocation of approximately 90% of the Botswana retirement (pensions) industry assets. These are Riscura, Alexander Forbes and AON. Their influence is largely via the asset consulting function utilized by most Botswana pension funds. Their dominance in market share, renders the four entities the de facto kingmakers in the Botswana investment management space.  

They hold the levers as regards who survives, and who thrives. This is compounded by the relative degree of disempowerment that trustees (employee and employer representatives in pension boards) feel in the space of these foreign asset consultants.  Could that not be the reason why the majority of our investments go offshore, depriving the country of insignificant investments needed to create jobs and support growing the economy.

We must ask whether the investment orientation or philosophy of the dominant players aforesaid is inward or outward looking? That should not be difficult to determine.

Shockingly, none of the manifestos for the political parties contesting this year’s general election picked on this open and hidden exclusion of Batswana in the running of the affairs of the finance industry.  None of the manifestos called a stop on this regrettable financial state of affairs. 

None have said how they will frog march Bank of Botswana in having a first 100% Botswana Bank within a year after the general elections.  None of the manifestos have said how we are going to allow Batswana investment firms an opportunity to manage our foreign reserves so as to allow for job creation, skills development and better growth of our banking and finance industry. 

This is what I had hoped could be one of the talking points in this year’s general election debates. Instead we are discussing senseless diatribe and invectives.

Every country deserves a thriving economy in order to provide for its people. To that end, its structure should reflect its natural endowments.  For Botswana, diamonds, tourism, beef and the financial services sector should be the basis in which we develop further so that we have cutting edge technology, labour absorbing industries, thriving SMMEs that all provide for job creation and economic development.

This will require the involvement of all, and the citizenry to be on the forefront of wealth creation by deploying capital, ownership, management and by Batswana leading all professions.   If we are to deliver the promise of poverty eradication and job creation, the economic growth needs to be accelerated and investment needs to be massively increased.

The finance industry, as a key economic sector must be scrutinised to ascertain the extent to which, just like in the diamond industry, we have been bleeding jobs and exporting same to foreign jurisdictions. There is benefit in changing the financial sector in the country. That is where the major decisions about investments are made. 

Latest statistics have it that the Financial Services sector is 15.3% of the Botswana GDP.   But beyond the GDP contribution, the Financial Services sector has influence on financing of the other different sectors, and invariably the number of services and jobs created. 

That is why this sector deserves special focus at national policy level and why downward pressure for citizen participation is essential. The obvious dilemma is with regards to the extent to which policy makers can influence the sector regard being heard to the private nature of the assets under discussion.

Even then, that is a totally different issue to whether the field of play is sufficiently open to permit indigenous players a foothold in the sector. That is undoubtedly a legitimate matter warranting a deliberate policy initiative by government.

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