Friday, October 30, 2020

The good and bad news of BPOPF

The good news from a Brookings Institution study is that the Botswana Pension Officers Pension Fund (BPOPF) is one of the best performing pension funds in Africa.

“Available data indicate that a few pension funds in Africa are relatively large. When ranked by their assets as a share of GDP, pension funds in South Africa (87.1 percent), Namibia (76.6 percent), and Botswana (47.3 percent) rank among the four largest in a sample of 38 emerging economies. 

Kenya (18.3 percent), which has the fourth largest African pension system compares well with the average sample size of 17.0 percent of GDP,” says Brookings, adding that apart from these countries and a few others, “pension assets as a share of GDP are low as pension funds are relatively small and dominated by often poorly performing pay-as-you-go (PAYG) schemes for public sector employees.”

The bad news is that with the country facing a huge infrastructure deficit, BPOPF’s funds are not being invested in infrastructural projects. Sub-Saharan African countries alone spent nearly US$60 billion from their national budgets on infrastructure development in 2012. 

Brookings says that while significant, this sum falls short of the estimated $93 billion needed to close the region’s infrastructure gap completely, and explains the continuing bottlenecks in the region. It suggests that African governments should get the necessary funding to carry out these projects from their pension funds.

“Botswana and Namibia also have large pension systems but invest less in infrastructure, in part because of more constraining regulations,” says Brookings, a leading Washington-based think tank.

As the BPOPF’s Chief Executive Officer, Boitumelo Molefe reveals, that situation is about to change. Molefe says that a key focus of the Fund’s 2017-2022 corporate strategy is to leverage its asset base.

“Amongst other things, this includes using the Fund’s asset base to seek opportunities to participate in infrastructure opportunities that develop the local economy whilst delivering higher investment returns of the funds allocated,” she adds.

Last year, the Board of Trustees approved the Fund’s “Local Infrastructure Investment Policy” which Molefe says has been designed to assist the Fund achieve its long-term investment objectives by identifying and participating in infrastructure investments that are expected to provide stable returns that escalate with inflation and diversification benefits at the total Fund level. 

“The objective of the Policy is to develop a diversified infrastructure portfolio capable of achieving investment returns commensurate with our investment targets. 

“Infrastructure investments are expected to achieve attractive risk-adjusted returns and possess a higher degree of risk with a higher return potential than traditional investments. Accordingly, total rates of return from infrastructure investments are expected to be greater than those that might be obtained from conventional public equity or debt investments,” Molefe says.

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