BPOPF, one of the richest pension funds on the continent pumps hundreds of millions of Pula in management fees into the financial services sector. It has developed an industry where money is not a problem and anything goes, staff writers TSHIRELETSO MOTLOGELWA and KEABETSWE NEWEL looks at the bigger picture
Money ain’t a thing for the men and women of Fairgrounds. Every Friday at lunchtime, the full belly of this place called Fairgrounds bursts open and unleashes these men and women of the financial services sector. Hungry for hard partying post hard working they pour onto the streets and into the restaurants of Gaborone.
You can find them at glitzy city restaurants sipping the finest reddish liquids from the best Cape vineyards. As the night wears on you can see them in their tailored suits, ties loosened in a picture of casualised formality, conversations loud amid the thud of house music.
Later in the evening, as the moneyed herd prepares to leave the restaurants and board their metallic mobile homes enroute to clubs or occasional house parties, one could yell out and make a signing motion to the waiter. Before that the bill had arrived and was perused with dismissive consideration. The meals – medium rare 300g rump steak, two, one with salad, another with chips, Sex-On-Beach, five of them for the ladies, carbonated water, five bottles, Scotch, Merlot … etc. The tally is P2 300. Leather wallet is fished out, card licks the machine and the waiter nods in satisfaction and disappears into the smoky hallways of partying, sweaty dancing, loud laughter and giggles.
The pensioner and the pension manager may be far apart but they could have never been closer.
It is a world far from the pensioner’s – stuck somewhere between Mahetlwe and Hatsalatladi awaiting assistance on the Toyota Hilux ’99 model with a carburetor issues.
The pensioner and the pension manager may be far apart but they could have never been closer. The relationship between the pensioner and pension fund manager is sacrosanct to the financial system, the very foundation upon which the rest of the financial services sector rests.
To understand this relationship, you have to start with the pensioner. Pension contributions are an act in trust. By paying his/her contribution, the future pensioner expresses ultimate trust on the pension system, which is passed from pension fund to pension manager. To understand the importance of the public officers’ pension fund to the economy of Botswana, you need to compare the value of the pension fund to the Gross Domestic Product (GDP) of Botswana.
According to World Bank figures, Botswana’s GDP stands at $15.3 billion or roughly P170 billion at the most. The total value of the BPOPF stands at roughly P60 billion, nearly half of the country’s GDP. It is a hefty sum, and in the last decades a growing school of thought has been developing that seeks to bring as much of that value back on shore.
In 2013 BPOPF commissioned a study by Novare Actuaries & Consultancies on how one of the continent’s biggest pension funds can maximise value for the pensioners, the fund and most importantly for the rest of the diamond-dependent economy.
The two main findings of the Novare probe were that: the BPOPF was spending too much in management fees as a result of its convoluted management structure with layers and sub-layers of managers mostly abroad. Secondly the reports concluded that the rich pension funds were having little effect in the economy of the country.
Roughly 65 percent of the funds are still invested offshore in vehicles such as equities, bonds and alternatives
The report further urged for the development of a local investment industry through the involvement of the pension funds. The tome that emerged from that enquiry set in motion some of the developments that led to vast amounts of pension funds being brought home to be managed by local fund managers. Some of the major beneficiaries of that exercise were Allan Gray, Investec, Stanlib, Coronation, Afena Capital and Capital Management Botswana.
While roughly 65 percent of the funds are still invested offshore in vehicles such as equities, bonds and alternatives, it is true that the continued efforts of the BPOPF to return as much of the funds as possible and inject that into the local economy have given birth to a vast industry in the sector.
Last year, a few months into her seat, BPOPF CEO Boitumelo Molefe told Mmegi’s Brian Benza: “We cannot keep saying we will bring back the money in the long-term because in the end that could just end up looking like it’s an excuse. We don’t want that to be the mantra where we keep saying there is no suitable local home for the money. We can develop the capital markets and we are working with other partners. Countries such as Mauritius have really developed their capital markets quite well and we can do the same.”
The bias towards localising funds, management and fund investment brought with it cash, lots of it. By the end of 2014 BPOPF had assets under management – Investec Asset Management had a portfolio valued at P9.577 billion which increased to P9, 559 billion in 2015. Allan Gray now manages assets valued at P4. 456 billion (2014: P4. 359 billion), African Alliance P3. 828 billion (2014: P0.00) while BIFM now manages funds valued at P2. 057 billion, down from P7.350 billion in 2014.
The men and women in the business of the financial services sector are accustomed to cash, lots of it
But as BPOPF looked to localise asset management, it increasingly turned to citizen-owned and controlled fund managers. Allan Gray, Coronation and BIFM lost their contracts in the last two years while locally-owned managers such as African Alliance, Fleming and the upstart Afena Capital became the beneficiaries. Early last year African Alliance and Afena Capital won a total of P4 billion in management funds. BPOPF awarded African Alliance P4 billion in management funds. Previously, African Alliance managed P4 billion while Afena walked away with a P1-billion in funds to manage on behalf of the BPOPF.
This followed the year before when asset management firm, Capital Management Botswana (CMB), had clinched the fund’s private equity fund totalling P500 million. The fund is in the process of determining another contract worth P300 million of equity fund management. Of course the management mandate comes with fees for services rendered. As early as 2013, according to BPOPF’s financial results for the year, as much as P230 million was shared among seven companies in management fees.
It is important to note, however, that while the Novare Report ushered in a new phase in the financial services sector based around the localisation of management services the writers warned of a need to conduct further investigations on past operations of asset managers.
The men and women in the business of the financial services sector are accustomed to cash, lots of it. Sometime in December one employee of Stanbic Bank (known to this publication) found an amount of P900 000 credited to his account. It was not by mistake. Only his superiors did not know, but him and his team knew that there was almost a million Pula in the account. The amount, now called “unsolicited payment for 10 years of good service”, was from a partner in one of the country’s major pension fund managers, Fleming Asset Management.
It was meant to be a little parting gift to sweeten the festive mood, and it could have but for the nosy interest of Stanbic Bank officials. It was supposed to be another day in the life of the Wolf of Fairgrounds. Except this one was not to be.