Courtesy of the global economic recession, public officers who are members of the Botswana Public Officers’ Pension Fund retiring presently stand to lose 9 percent of their pension benefits. It is being cautioned that now would not be a good time to retire voluntarily from the public service.
“In view of this unpleasant situation, we advise those of our members that wish to retire voluntarily to consider postponing such decisions until the markets have stabilised,” says BPOPF’s chief executive officer, Ephraim Letebele.
However, no such escape route is available for officers who have reached the compulsory retirement age. Letebele says that those in this group will be affected by the negative performance that the fund has experienced so far. Such sluggish performance, he adds, will inevitably reduce their cumulative benefits, as they will be calculated “using a negative interim interest rate declared for the quarter they will be retiring from the service.” The interim interest rate is reviewed on a quarterly basis relative to the quarter under review.
Letebele further reveals that as a result of the financial crisis in the global markets, the Fund has suffered for the six month returns to end of September 2008.
If it is any consolation, Letebele points out that there is scope for recovery as most BPOPF members have a long-term investment horizon and as markets will not remain depressed indefinitely.
“The corrective efforts being taken by governments and international financial institutions around the world are aimed at stemming the crisis which gives some comfort that the situation will improve,” he says.
As regards the organisation that he heads, Letebele says that they have in place an investment strategy that provides a disciplined approach in both good and bad times.
“The Fund’s assets are held in well-diversified assets and predominantly in equities. However, equities markets can be very volatile. That means the price of the underlying share can change and as a consequence, the equity market as a whole can change dramatically from one day to the next, either positively or negatively,” he says.
This is the second time since inception that the Fund has had to deal with this challenge. The first time the Fund strayed into negative territory was in 2003 when it lost 14.74 percent as a result of the burst of the dotcom bubble. The latter was a result of stock markers in the west seeing their value increase rapidly from growth in the new Internet sector and related fields. Analysts suggest that a combination of rapidly increasing stock prices, individual speculation in stocks and widely available venture capital created an exuberant environment in which many Internet-based companies (the so-called dotcoms) disregarded standard business models and focused on increasing market share at the expense of the bottom line. Africa’s most famous “dotcommer’ was Mark Shuttleworth who made so much money (US$575 million) that he was able to not only give his employees a golden handshake ÔÇô R1 million – when he sold his digital certificate and Internet security company, but was also able to become the second self-funded space tourist.
Other than the two speed bumps, the Fund has been running smoothly. Letebele says that the Active and Deferred Member Portfolio has been making positive returns that were driven by the buoyancy of equity markets: 7.5 percent in 2002, 17.1 percent in 2004, 13.3 percent in 2005, 29.6 in 2006, 33 percent in 2007 and 11.25 in 2008.
Every step of the way, BPOPF has kept its members (95 662) informed about the performance of the Fund through the print media. Letebele says that upon receipt and review of the investment performance for the quarter ended December 2008, members will be duly informed. Last year, BPOPF took advantage of annual conferences of trade unions held at different places across Botswana to update members about the performance of the Fund. Information has also been published in the 2007/08 Trustee Report as well as on BPOPF’s website (www.bpopf.co.bw).