Wednesday, August 5, 2020

There is something distasteful in the way pension assets are managed

There is something particularly distasteful about the way pension funds and related assets are managed in Botswana.

The current strategy is that up to 70 percent of such national assets are kept and managed offshore, off course, by faceless managers.
The result is that only a paltry 30 percent end up invested inside Botswana, where the need is biggest.

This apportioning would not be so much of an embarrassment to anyone were the money not desperately needed here.

As any business person (foreign or citizen) would attest, Botswana businesses need that money like yesterday.

It is a matter of appalling irony that that very money, which we gleefully send to be invested offshore, could still be invested here with the same if not better returns for Botswana savers.

The very policy of investing disproportionately large volumes of the country’s pension assets offshore when there are opportunities back home presents many complications.

The first and most obvious is that such a strategy smacks of a lack of confidence in ourselves.
Such a strategy also goes a long way to undermine the county’s FDI strategy.

How can it be that we continue to go outside to ask foreign investors to have faith and confidence as to settle in our country when we do not have that confidence in ourselves?

How can it be that we ask foreigners to invest their hard earned money in our country when we take our own across our borders?

The fact that we send so much of our assets to be invested outside our country inevitably creates suspicions among foreign investors that there are some structural defects inherent in our economy that we are hiding from them.
Naturally, foreign investors are very cautions people.

They are always very skeptical.
They observe the situation very carefully before they make decisions to invest their money.
They study the local trends elaborately and comprehensively.

And, as a result, to a foreign investor who is always overly cautious about their money, a situation where we invest our money outside the country an impression (not altogether unfounded) that we are not being candid about the strengths of our economy.

It may not be our intention, but the policy of investing so much money when it is needed back home is actually counterproductive.

Many investors and project promoters in Botswana will tell a story or two of how difficult it is to raise money from within the country nowadays.
The result is that a growing number of Botswana investors now go offshore to borrow money.

It should be a source of shame for those involved at policy level of managing these assets that Botswana-based companies now have to go outside the country to borrow exactly the same money that has been allowed to leave the country in such large quantities when it is, in fact, needed back home.
Perhaps the fact that so much of our national assets have to be kept outside the country notwithstanding the need back home is not altogether surprising when put against the fact that Botswana is still to produce a truly citizen owned assets management company.

It is not a secret that almost all of the companies that were recently given stakes to manage the P30 billion worth of public officers pensions funds are South African controlled.

It is also common knowledge that while domiciled in Botswana, the country managers of these companies actually have no executive powers.
Important executive decisions are taken in Johannesburg.

The reason why the South African Minister of Finance always factors in Botswana’s multi billion Pula funds in his budget as part of his reserves for development projects is because Botswana has no immediate use for such money.

We hope that in their interactions with the Ministry of Finance, the Bank of Botswana will highlight the inherent deformities of the current system of investing up to 70 percent of funds offshore.
Such money should be used to promote the country’s foreign investment strategy.

And, of course, citizen economic empowerment, which we believe we must never tire of talking about.

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Sunday Standard August 2 – 8

Digital copy of Sunday Standard issue of August 2 - 8, 2020.