Over the last year pension funds’ assets grew by 12.9 percent from P93.1 billion in the last quarter of 2019 to P105.2 billion in the last quarter of 2020 (P106.1 billion in February 2021), a Financial Stability Report (FSR) of May 2021 released by the Financial Stability Council shows.
The FSR is prepared by the Bank of Botswana (BoB) in collaboration with the Ministry of Finance and Economic Development (MFED), Non-Bank Financial Institutions Regulatory Authority (NBFIRA) and Financial Intelligence Agency (FIA).
According to the aforementioned financial agencies in the report, the local pensions investment in equities increased from P59.8 billion in the last quarter of 2019 to P68.7 billion in the last quarter of 2020 (P69.5 billion in February 2021) and accounted for the biggest share (66 percent) in the portfolio investment allocation of pension funds.
“Furthermore, 63.5 percent of the funds were invested offshore in December 2020, compared to 59.8 percent in December 2019 (64.4 percent in February 2021),” the report reads. “Generally, the investment allocation of pension funds remained broadly unchanged with an average of 60 percent invested offshore since 2009. This is in line with the retirement funds prudential regulations that require that at least 30 percent of assets should be invested locally. The regulations also require that annuities must be purchased exclusively from insurance providers operating in Botswana; potentially restricting costumer choices due to limited competition and shortage of annuity-related products.”
With that, the FSR also stated that more than 80 percent of total industry pension funds are accounted for by or attributed to the Botswana Public Officers Pensions Fund (BPOPF). “Measured in relation to the size of the domestic economy (GDP), total assets of pension funds were 58.6 percent of GDP in the 2020 compared to 47.2 percent in December 2019,” the report states.
Meanwhile, the FSR states that at the end of 2020, there were 29 asset managers and management companies in Botswana. “Total Assets Under Management (AUM) increased by to P51.1 billion in 2020 from P49.9 billion in 2019,” states the report. “In December 2020, 80.7 percent of the AUM were for pensions funds. Other AUM belonged to retail investors, insurance companies and other professional investors. As such, the asset management sub-sector is highly interconnected with other parts of the financial system through ownership linkages, common asset exposures and the provision of wholesale funding to banks.”