Botswana holds the highest pension fund assets per working-age person in Africa, boasting $6,289 per individual—a figure that far surpasses peers across 29 surveyed economies in the 2025 Absa Africa Financial Markets Index (AFMI).
This underscores Botswana’s strong institutional savings base, anchored by a well-regulated pension system that supports long-term capital formation, according to James Nthoyi, Head of Markets at Absa Bank. Yet, despite this advantage, structural constraints within domestic capital markets limit the sector’s ability to fully convert these savings into broad-based economic development and diversification.
“This metric reflects a well-developed pension system with robust regulatory oversight, offering potential for long-term capital formation and economic resilience,” Nthoyi told The Business Weekly & Review.
However, he highlighted that while Botswana’s pension funds have steadily increased their domestic holdings—particularly in equities and government bonds—they remain constrained by structural market limitations. The local financial markets are characterized by relatively low liquidity and a narrow spectrum of asset classes, which restricts pension funds’ ability to diversify into higher-impact alternative investments such as infrastructure projects, private equity, or innovative structured financial products.
Furthermore, pension coverage remains largely confined to the formal employment sector, leaving the majority of Botswana’s workforce, engaged in the informal economy, excluded from retirement savings schemes. The AFMI report identifies this as a common challenge across African markets, where traditional pension frameworks are ill-suited to informal sector dynamics, even though most of the continent’s workforce operates in that sector. Expanding pension coverage beyond formal employment, Nthoyi noted, will ensure more inclusive financial security.
“The pension fund sector plays a pivotal role in Botswana’s capital market development, acting as a stable source of long-term capital. Yet, its impact is tempered by structural limitations in the local market,” Nthoyi said.
He pointed out that recent policy reforms, notably the Pension Fund Regulations 2 (PFR2) mandating a minimum of 50 percent domestic investment by 2027, aim to address these challenges by encouraging greater local investment without compromising the security of retirement savings. According to the Bank of Botswana (BoB), pension funds currently hold 45 percent of their assets domestically, already surpassing the 44 percent target set by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) for December 2025. The regulator requires pension funds to reach 47 percent domestic investment by December 2026 and achieve full compliance with a minimum of 50 percent by December 2027.
To unlock the full potential of the country’s pension funds, Nthoyi recommends a comprehensive approach focused on expanding coverage to the informal sector, diversifying investment options, improving governance, and fostering market development.
While Botswana enjoys significant advantages with high pension assets per capita, risks related to asset concentration and vulnerability to domestic market volatility remain pressing concerns.
“These must be managed carefully to sustain both retirement security and economic development,” Nthoyi said.
