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BPOPF talks to recent contracts manoeuvres

The Botswana Public Officers Pension Fund (BPOPF) on Tuesday tackled issues resulting from the latest developments at one of the biggest pension funds in Africa. Precipitating the BPOPF intervention was the recent decision to amicably end ties with Novare, ending their more than four years relationship with the asset consultant.

At a press briefing, Ms. Boitumelo Molefe, BPOPF CEO, explained that they part on good terms with Novare, insisting that there was no termination. “Novare was engaged by BPOPF on the 1st February 2013 to provide asset consulting services. The contract was for an initial period of two years and was thereafter re-awarded for another two years after a tender process. The current contract ended on the 31st January 2017. At the moment Novare are on a month- by- month extension while we undergo a formal tendering process. The new contract is expected to be awarded by the 31st May 2017,” she said.

Ms. Molefe said the role of an asset consultant is critical to the operations of the fund as they advise primarily on investment matters. “A Fund that functions without an assert consultant or does it in-house with unskilled personnel is taking unnecessary risks with members’ retirement benefits.”

She added that an asset consultant plays a very important role and the fund will do everything in its power to select and appoint the right partner. In her parting shot to Novare and an assurance to stakeholders, the BPOPF CEO, said: “Novare has so far worked well with the Fund on developing robust investment strategies that we are currently implementing. It is our belief that there will be no risk to the operations of the Fund in the event of change.”

On other unfolding events at BPOPF, Ms. Molefe said the Hilton project is within budget despite hiccups. The hiccups she referred to were first experienced when the Fund terminated its contract with Flemming Asset Management over allegations of impropriety and clashes over the running of the Hilton project.

BPOPF had contracted Flemming to manage the P300 million worth Hilton Project. But after the showdown, Flemming was left bruised after losing over P4 billion in mandates from BPOPF. Now the Fund says it has been working with Fleming on transitioning the development of the Hilton to its Property Manager Messidor, adding that given the magnitude of the project, it was critical that the transition is as smooth as possible.

Ms. Molefe said the Hilton mandate could not be terminated right away as due processes had to be followed since it involved various parties including the Hilton Group, and various contractors. She explained that abrupt decisions could result in misunderstandings and missed milestones; therefore they needed to do it carefully. Ms Molefe said she was satisfied with progression of the project despite the recent rains that might have halted construction.

“The project team has exciting events ahead, such as the artwork competition, which has been opened to local artists as well as a future viewing of a mock-up room to show the press what a typical room will look like. The project team currently in place will not change; the only change will be the transition from Fleming to Messidor as a result of our termination of the Fleming mandates.” Asked if the fund was not worried about the intense competition from other hotels, Ms. Molefe said the Hilton Hotel was conceived after a robust market research that indicated that there is a shortage of bed spaces in Gaborone, the nation’s capital.

She said the country has missed out on hosting major international conferences because of shortage of lodging facilities. Furthermore, she said the Hilton Hotel will be a 3-4 star hotel targeting the travelling businessman who requires convenience in a well-placed hotel at the hub of the CBD.

BPOPF, with more than P60 billion in assets under management, says it has made progress in investing in alternative investments to listed equities, bonds, property and other listed investments. The fund says it is currently drawing up the regulations that will define the detailed processes.

“The local economy has recently shown positive movement as a result of stimulation of the economy by Government. The private sector now needs to continue leading by coming up with innovative investments, especially in the infrastructure space. With like-minded entities we believe that we can generate profitable projects for our members.”

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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