Debswana Pension Fund has notified the Competition Authority of its intention to bolster its property portfolio through an increase of its stake in Healthcare Holdings (Pty) Ltd (HCH) and DBN Development Partnership (DBN). The move offers a glimpse into DPF’s investment strategy together with that of Botswana Development Corporation (BDC), with the latter being the seller. DPF has proposed to acquire additional 29.08% shareholding in HCH while the second proposed acquisition is for an additional 33.33% interest in DBN, from NPC Investments which is wholly owned by BDC.
The Debswana Pension Fund (DPF) is the largest private pension fund in Botswana and a major player in the retirement services industry with assets valued at over P6 billion and a total membership of 11 589 inclusive of active, deferred and pensioner members. The DPF is a pension fund secretariat to the Debswana & De Beers family of companies namely; Debswana Diamond Company (Debswana), Diamond Trading Company Botswana (DTCB), De Beers Holding Botswana (DBHB), Morupule Coal Mine (MCM), De Beers Global Sightholder Sales (DBGSS), Anglo Coal Botswana and the DPF itself.
Other than its interest in HCH, DPF’s property portfolio in Botswana boasts of Tala Court, Plot 8842 (Former Barclays House), Carlton House, Debswana House Sitatunga Lodge, both properties in Gaborone. Other properties include Plot 105 in Maun; and Plot 5415 (Teemane Mall) in Jwaneng. Furthermore, DPF has 25% shareholding in Lot 1196 (Engen Maun); 20% in Lot 68 in Palapye; 75% in lot 21928/9 at Francistown; and 33.33% in lot 4933(DBN Partnership) in Gaborone.
In the first transaction, HCH, the target firm, is a property holding company which has healthcare property assets in its portfolio. It owns the property buildings currently occupied by Gaborone Private Hospital as well as the residential property in Gaborone Private Hospital. HCH is directly controlled by Botswana Development Corporation (29.08%), Botswana Insurance Fund Management (29.08%), Debswana Pension Fund (29.08%) and Clinical Developments Botswana (12.77%). In the transaction under consideration, DPF seeks to increase its shareholding by buying out one of the shareholders, Botswana Development Corporation. This will result in DPF having a 58.16% controlling interest in HCH.
The second transaction, DBN, the target entity, is a property development partnership between DPF, Botswana Investment Fund Management (“BIFM”) and NPC. NPC, in turn, is a wholly owned subsidiary of Botswana Development Corporation (“BDC”). BIFM is an asset management company wholly owned by Botswana Insurance Holdings Limited (“BIHL”); whereas NPC is a special purpose vehicle set up by BDC particularly for the purposes of investing in DBN. BDC is a development finance Institution founded to promote and facilitate the development of industrial, commercial, and agricultural enterprises within the framework of the Government of Botswana's plan for economic development.
In 2014, DPF revised its investment strategy to increase domestic property investment exposure to 12.5% of assets over the next 3 years while also developing a strategy to take advantage of local and African investment opportunities. The DPF in its quest to fulfil its investment strategy has found a willing seller in BDC which has also implemented its 5 year strategy that has seen the corporation scaling back on certain investments to focus on high value investments. The Bashi Gaetsaloe led BDC has been disinvesting from businesses that do not fit in with its new strategy, in the process freeing up cash to be used in large scale projects. The proposed acquisitions will likely not face any stiff resistance as none of the parties have a firm control on the property market in Botswana.
According to the latest publicly available DPF’s annual report, for the year ending 2014, the Debswana Pension Fund grew by 10.84% to a total Fund size of P 5,541 billion. Still in the same period, the Fund had 58% of its assets invested offshore with 42% invested locally, with the local assets split between local balanced funds (36%), local property (5%) and private equity (1%). In 2014, the DPF property portfolio returned 20.57% against an IPF Botswana Property index benchmark return of 21.40%. The slight underperformance was driven by the Fund’s high exposure to residential and commercial properties relative to the IPD index. “The Fund also has no exposure to industrial property which is a sector that is yielding high returns.
The income and capital appreciation of the portfolio have remained strong despite challenges with general oversupply in the Gaborone Office sector,” read part of the annual report. While the 2015 annual report is yet to be made public, the latest proposed acquisitions by DPF could signal that 2015 was a good year for them and it reaffirms their continued appetite for local assets, particularly in the lucrative property market.
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.
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.
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”