BPOPF: a keen institutional investor with a conscience

He explains that pension funds pool financial resources which are then deployed as capital to support economic development through increased investments and financial stimuli in economies. Primarily, pension fund capital is invested in financial instruments and such investments should make the accrued funds available to real sectors, thereby directly affecting economic performance.

Malindah says pension funds ultimately contribute to fixed capital, for example, through the development of infrastructure, eventually contributing to economic growth. “A case in point for BPOPF, which was covered in the Tlou Energy ground-breaking ceremony, was the Fund’s commitment to supporting such initiatives,” he says, adding that BPOPF owns just under 8 percent of Tlou Energy in equity, making it the single largest investor in the ambitious power development and supply company. Besides the core mandate of the project, Tlou Energy has also played a role in employment, which is another economic activity driver.

According to Malindah, financial markets are a key player in the transmission of capital toward productive usage. He notes that the funds are institutional investors who help develop these financial markets in different ways, the most important one being the supply of capital into the financial markets. “As investors, pension funds also ultimately enhance the development of stock markets by, among others, promoting strong governance practices. Pension funds also promote capital markets deepening,” he adds.

BPOPF is the single largest investor on the Botswana Stock Exchange. Moreover, has employed several investment firms locally, thus helping support employment across the financial services sector, banking included. According to the CEO of BPOPF, the capital deployed by the Fund goes into different aspects of the economy, primarily through listed companies as required by regulation, including funding government through a significant uptake of government bonds. The unlisted investments are primarily in the form of infrastructure development, which is an increasing area of focus for the Fund, although the more prevalent is its investments in physical properties across the country. All these initiatives are fundamental to supporting economic activity, says Malindah.

BPOPF is guided by its investment policy, which was crafted with regulation and diversification principles in mind. Although the Fund is one of the largest institutional investors in Botswana, Malindah says it believes an opportunity does exist to actually increase the role it plays in promoting economic development in the country. This is so, he says, particularly given that the majority of infrastructure projects are currently financed by the government. It goes without saying then that the country does need infrastructure development, according to Malindah, which he says BPOPF is ready to invest in.

Like other local pension funds, BPOPF invests most of its money outside Botswana. Asked whether that does not rob Botswana of potential investment opportunities, Malindah responds that this is because like most emerging markets, domestic markets tend to be shallow in investable opportunities, especially given the size of the pension fund industry in Botswana. There is, however, scope to improve these ratios over time. Malindah says as already indicated, the government has traditionally played a big role in opportunities that pension funds, for example, could have financed. “Take, for instance, infrastructure,” he points out. “As the market deepens, there will be more opportunities to deploy the funds locally. Legislation and other regulations also need to be accommodative of such developments,” he says.

He states that the Fund is continuously looking for opportunities to generate returns for its members and for making responsible investments. This is the reason that BPOPF is endlessly in discussions to explore opportunities to partner with the government to advance the country’s economy and develop financial markets. As a matter of policy, the Fund endeavours to make responsible investments, and this is emphasised in its Investment policy statement. Malindah says part of this responsibility extends to the consideration being made to the environment, under which clean energy falls. The consideration goes beyond the energy sector, and covers the clean agenda, which is also in consideration of the environment.

“We believe that investment cases need to take into consideration possible risks to the environment and measures taken to contain these,” he explains. “It’s not only for sustainability of the environment but is for the investment case as well. If the environment is destroyed in the process, the investment case will also be compromised and probably become unsustainable,” he explains, noting: “We are increasingly seeking for opportunities to further this agenda not only locally but globally where we invest as well.”