Ninety-One eyes private debt for pension inflows
Mbongeni Mguni | Thursday June 6, 2024 11:41
Ninety-One Botswana managing director, Martinus Seboni, told BusinessWeek that more businesses were moving away from the traditional funding sources for the expansion. The asset manager is part of a global group with assets under management of about $160 billion.
“We think the next growth area is private debt and in particular credit that is not listed,” he said on the sidelines of a recent stakeholder update by the asset manager. “So what we are seeing is that a lot of mid-sized companies are looking to expand and grow their businesses. “Traditionally, they go to the banks to borrow that money because they have had that relationship and are more comfortable going there. “We are saying they are beginning to open up their balance sheets to allow other capital to come in. “And so for that, we think there’s an opportunity.”
Under amendments to the Retirement Funds Act, the Non-Bank Financial Institutions Regulatory Authority requires pension funds to raise their domestic holdings to a minimum of 50% of their total assets, progressively between 2023 and 2027.
Formally known as Pension Fund Rule 2 or PFR2, the NBFIRA statute previously mandated pension funds to invest a minimum of 30% of their assets locally.
By December 2023, local pension funds had 40.6% of their total P139 billion invested locally, higher than the 38% target.
Seboni said opportunities were already emerging in the private market for the pension funds.
“Without putting out names, there is an unlisted company that is on a massive expansion drive. “They’re opening up stores here and there and these are the opportunities. “There are opportunities for them to augment the traditional source of funding for their growth with private capital such as money from pension funds. “We can work together with the banks to co-finance,” he said.
The financial markets veteran said the returning pension funds could also boost infrastructure credit in the country, powering massive projects that will support economic expansion. He said while the pension fund inflows could also attract debt listings from outside the country, it was important that these instruments be pula-denominated and firstly target the local market.
“I think the market does present opportunities and we have seen a few of those including some multilateral organisations, African Development Bank for example, who have issued a bond. “What we are looking for is pula-denominated debt and the first prize would be for that money to be used locally. “Globally, there’s no shortage of opportunities, but what we are looking for is how to deploy local pula-denominated capital in the Botswana economy,” he said.
Seboni added; “Let’s say, for example, a railway between here and Namibia, two governments and two countries. “So the capital from the two countries can work together in that sense. “So, first prize is Botswana, then the next step is to look regionally and deploy Botswana capital in a regional sense that still benefits Botswana.”