Debswana Pension Fund, Botswana second largest and the country’s leading private sector pension fund continues to deliver upward trajectories as it pursues its quest of diversifying its investment portfolio and cultivating wealth for its members.
Information from the fund, released late last year mirrors impressive performance for the Fund’s major investment portfolios in the first three quarters of 2019 amid the year’s challenging economic circumstances. The third quarter of 2019, ending September 2019 presented a third consecutive quarterly positive investment performance by the Fund’s assets. Performance for the quarter was characterized by satisfactory returns in the Market, Conservative, Pensioner and Contingency Channels.
The Fund’s Net Total Assets increased 2.96 percent from BWP 7.861 billion in Quarter 2 2019 to BWP 8.103 billion in Quarter 3. The positive returns according to DPF were partially driven by the continued rally in international markets led by Developed Market equities. Furthermore the Fund experienced positive performance in the third quarter of the year, with the Market Channel increasing 3.02 percent, the Conservative Channel rising 2.79 percent and the Pensioner Channel returning 2.92 percent.
On a twelve-month basis, the Fund generated positive returns net of investment fees, the Market Channel reporting a return of 6.43 percent followed by the Pensioner Channel at 7.64 percent while the Conservative Channel returned 7.20 percent. Executives at Debswana Pension Fund say decelerating global growth and lower inflation forecasts across developed markets have resulted in key interest rate cuts and supportive monetary policy by major central banks, which has underpinned global stocks and bonds. In addition, the local equity market marginally contributed to the positive performance as the domestic listed equity managers posted flat returns.
The top performing asset class for the Fund was property, which returned 6.31 percent (in BWP). The next top performing asset class for Quarter 3 was private equity, which returned 6.03 percent, followed by global bonds, which returned 4.14 percent. Foreign equities extended their gains as the appetite for listed stocks surged, in anticipation of further interest rate cuts and elevated corporate earnings in certain sectors of the economy. Global equities returned 4.10 percent while the Domestic Companies Index decreased 1.03 percent on a total return basis. Emerging Market equities gained 1.70 percent.
In an environment of positive performances by global equity managers, Veritas was the Fund’s outperforming manager for Quarter 3 with a return of 5.27 percent. Marathon was the second best performing manager returning 4.81 percent. The least performing global equity manager was Southeastern, posting a modest 0.55 percent. Local equities returned an above benchmark return.
The Botswana Stock Exchange Domestic Company Index, which declined 1.03 percent over the quarter, underperformed Allan Gray which returned -0.16 percent and Investec which remained flat at 0.01 percent. Of the two Local Bond managers, BIFM was the top performer, posting a return of 1.39 percent for the quarter, ahead of Investec’s gain of 1.00 percent. In 2018 Debswana Pension Fund, established a subsidiary fund administration company to which it outsources benefit administration functions, bearing the name Mmila Fund Administrators.
In her 2019 end of year message Debswana Pension Fund Chief Executive Officer, Gosego January revealed that Mmila has been granted a license as a response to regulatory changes in the Pension Fund industry, which came into effect in April 2017. “Against this background, I am pleased to advise that Mmila Fund Administrators is now fully operational and there has been a seamless transition between the two entities,” she said.
January explained that Global Markets have remained somewhat challenged largely due to the US-China Trade War that brought about market uncertainty and volatility consequently leading to loosening of monetary and fiscal policy in markets such as the US and EU. “We are however pleased that despite these market headwinds, the fund performance has been strong and grew quarter by quarter, crossing the BWP 8 Billion mark at the end of Quarter 3 2019, Growing Returns for our members is a top priority for the fund and in so doing, we continue to identify areas of investment and pay close attention to global emerging trends.”
In 2019 The Fund commenced roll out of its 2019-2023 strategy, according to January the strategy will deliver even more returns to its members in 2020. “There are potential market challenges as has been speculated, however, I believe that DPF is poised to attain greatness in 2020 and beyond,” she said.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.
In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.
Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.
The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.
In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.
The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.
On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.
Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.
He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.