- Says they raise capital to support start-ups and expand businesses
- P12bn invested in local businesses of less than P50m turnover in each of the last three years
- Kanye North legislator Letsholo had asked what asset managers do to support local businesses
GAZETTE REPORTER
Asset management firms contribute to a country’s financial ecosystem by selecting investment strategies that align with their clients’ objectives and foster local business growth through their support for small and medium-sized enterprises (SMEs), the Minister of Finance, Peggy Serame, has said.
Responding to question from the MP for Kanye North, Thapelo Letsholo, Serame stated: “Asset managers are legal entities entrusted with managing assets on behalf of another party, whether through investment or a contractual agreement.
“These firms employ various investment strategies, diversifying across asset classes to optimise returns while balancing risk levels suitable for their clients.”
Crucial mechanism
The minister highlighted the critical function of capital-raising, which she described as a “crucial mechanism supporting start-ups and expanding businesses, enabling them to secure the necessary funds for pursuing new ventures or scaling existing operations”.
Letsholo’s question sought clarification regarding the role of asset managers in supporting local businesses, specifically focusing on investment and capital-raising over the past three years.
He also asked about the potential for regulatory measures to stimulate SME growth over the past three years, capital invested by asset managers in businesses with annual turnovers of under P50 million and how many small enterprises with turnovers of below P20 million were denied funding each year.
Rejected
In response, Serame said an average of P12 billion was invested annually in local businesses with turnovers of less than P50 million and disclosed that asset managers rejected funding proposals from an average of eight such businesses per year during the same period.
Addressing Letsholo’s concern about potential regulatory measures to bolster SME investments, Serame pointed to the government’s recent policy changes aimed at enhancing domestic economic activity.
“The government has taken decisive steps to reduce the exposure of pension assets to global markets, thereby increasing support for local economic initiatives,” she said.
A cornerstone of this strategy is the Pension Fund Investment Rule 2 (PFR2), which came into effect in June 2023. This rule has raised the cap on domestic investments from 30 percent to 50 percent over a five-year period.
Infrastructure Funds
To align with this policy shift, she added, the Retirement Funds Act was reviewed in 2022 with specific adjustments made to accommodate PFR2. A key feature of the new rule is introduction of a new asset class, Infrastructure Funds, in which the cap is 5 percent.
“So far, two such funds have been licensed,” said the minister, underscoring the government’s commitment to infrastructure development in sectors such as transport and communications.
Serame said another significant change under PFR2 is the increased investment limit for local private equity funds from 5 percent to 10 percent in order to channel more capital into SMEs, providing them with the resources needed for expansion and innovation.
“The potential benefits to Botswana’s economy, particularly for SMEs, are evident in the increased limits under PFR2, which is already in place,” she said.
Private equity
“This framework enables all asset managers to allocate a portion of their funds into private equity and alternative investments, thereby fostering SME growth and contributing to the country’s broader economic development.”
In her detailed response, Serame also stated that the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has so far licensed six specialised asset managers and one general asset manager, all of which include private equity in their portfolios.
The finance minister said the inclusion of private equity in asset managers’ portfolios is seen as a vital step in ensuring that SMEs have access to the financial support they need to thrive.