Repatriation of P13bn in Pension Funds to be Phased

BPOPF and DPF are sources of the funds NBFIRA emphasises prudence in repatriation of the funds Minister Serame has underscored the need to fund projects and create jobs The journey towards the 50 percent threshold for domestic investment of pension funds will be done in phases beginning April next year, NBFIRA has disclosed. This follows a decision by the government to increase the domestic investment limit of pension funds for which legislation has been prepared. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] Onshore investment levels for the retirement funds industry as a whole stood at approximately 38 percent as at June 2022, which is above the current stipulated investment minimum of 30 percent, according to the Non-Bank Financial Institutions Regulatory Authority. According to new rules released to the market, the total domestic investment limit will be increased to 41 percent by April 2023. It will then be increased to a total domestic investment limit of 43 percent by December 2023. The total investment limit will be increased to 45 percent by December 2024 and full compliance with the target 50 percent will be achieved not later than April 2025. According to industry players, on average between P13 billion and P14 billion will be repatriated by the biggest two pension funds in the country, the Botswana Public Officers Pension Fund (BPOPF) and the Debswana Pension Fund (DPF). The prudent approach by NBFIRA follows an outcry by certain experts that P13 billion being repatriated at once may have adverse effects in an environment of limited investment opportunities. Some of the experts have warned that it may have unintended consequences like inflating asset bubbles and suppressing bond prices when too much money chases few assets. Alexander Forbes recently cited a Bank of Botswana report that indicated that about P10 billion is lying idle already. In the course of the kerfuffle, Bifm led the argument for a phased approach to repatriation of pension funds towards the 50 percent threshold. NBFIRA has told The Business Weekly & Review that it is mindful of the possible effect that reducing offshore investments may have on the local economy. In this context, Boa Ntebele, the Regulator’s Head, Communications & International Affairs, has emphasised that the change will be implemented and monitored in a prudent manner, through the planned transitional arrangements and consultations with relevant key stakeholders in order to enable the domestic market time to adjust accordingly. NBFIRA shared the Rules with the market last week in line with normal practice for comments and suggestions that flowed from industry players until the deadline on Monday this week. The new investment rules will take effect on 1 st November 2022. Motivating for the change, finance minister Peggy Serame has said the aim is to make funds held by pension funds available for purposes of development in Botswana, contribute to boosting the local economy and create much-needed sustainable jobs. Although offshore investments are generally offer higher returns than onshore investments, Ntebele told The Business Weekly & Review that fund managers are guided by their respective investment strategies which are designed to attain the most favourable return on investment for their clients while simultaneously contributing to achievement of some of the government’s national development priorities. [/ihc-hide-content][ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ][/ihc-hide-content]

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