The Botswana Public Officers Pension Fund (BPOPF) has set aside P3 billion to be invested in local infrastructure in the next two years, as a way of diversifying its holdings, Mmegi’s BusinessWeek has established.
The BPOPF’s assets of more than P70 billion are invested in various classes of domestic and offshore instruments, mainly equities, bonds, property and others. The pension fund, through its asset managers, holds about 60% of these assets offshore and the balance locally. The BPOPF has previously invested in infrastructure outside Botswana, placing $10 million with the Pan African Development Infrastructure Fund in South Africa in 2014. However, the P3 billion allocation will be its first effort to target local opportunities.
“Infrastructure drives the economy and we want to focus on it in Botswana, which will boost employment and opportunities,” BPOPF acting CEO, Moemedi Malindah told BusinessWeek recently.
“We are thinking of all types, from roads to others. A company can come to partner for electricity, the transmission of electricity, roads, water and others.
“Take Gaborone for example. We don’t know what the council’s plans are, but they may have big ideas and may package that and say this is how we think it can be funded and you can participate.”
“For many years, we wanted to invest in infrastructure but struggled. We wanted to do it through a manager but we could not find one when we went to market.”
The push towards infrastructure is also driven by the BPOPF’s hunt for returns. The pension fund recently revised its targeted annual returns from 7% to 6.5% for the two years remaining in its strategic plan. Due to fluctuations in returns since the beginning of the strategic plan in 2017, the BPOPF is now required to achieve 9% growth this year and the next, to achieve 6.6% average growth over the 5-year strategic period.
“You look at where you can get some of those returns and how you can diversify your investments,” Malindah said.
“As a fund, we are lacking in infrastructure but it’s a very tough environment to pursue.
“Infrastructure involves a lot of related parties, all of whom need to get to a certain point for deals to happen.
“These are more contractual long-term investments, but we are working with various parties in the country.”
He added: “You have the capital and there’s an expected return on it. If someone can give you that return without the risk, definitely you go for that.
“The Government has the best credit rating compared to others and so you come to the table and negotiate.
“There are discussions around some of the projects that we can do together.”
The Finance and Economic Development Ministry has projected a P13 billion deficit for the current fiscal year, which will be largely funded through local capital market borrowings and ‘domestic resource mobilisation’ – a term that includes raising public service levies and fees, while cutting subsidies.
The BPOPF, as the single largest fund in the country, has previously been criticised for failing to invest meaningfully in local infrastructure. The P3 billion allocation will help position the pension fund well for a planned policy shift by regulators, which will require local funds to hold at least 70% of their assets domestically and the balance offshore. Currently, investment funds can hold up to 70% of their assets offshore and the balance locally.