BPOPF hands P1.5bn to start-up fund managers
Brian Benza | Friday August 25, 2017 16:06
Under its incubation programme, mooted last year, the BPOPF has identified three greenfield companies to be financed from its P55 billion kitty with two involved in private equity while the other will trade in the listed equity space.
Addressing the media in Gaborone this week, the Fund’s chief executive officer, Boitumelo Molefe said the three companies will each get P500 million to be invested only in Botswana.
“The companies were selected after a rigorous tender process that attracted 36 bids at the beginning. We see this as a positive move towards investing in local talent, which will lead to boosting economic diversification efforts as well as stimulate growth. “The programme is open to all asset classes and the eventual aim is that the businesses can stand on their own and compete in the big league while also transferring skills to locals,” she said.
Besides being 100% citizen-owned, Molefe said to qualify for the incubation programme, a company had to be a completely greenfield startup or an arranged partnership between skilled members. The companies must also have a 50% senior management composition of citizens and maximum assets under management of P1 billion, in cases of existing small companies.
“There is scope for further investments beyond the initial seed capital but portfolio for the incubation programme will not exceed five percent of our total fund. We also have an exit policy in place in case of an eventuality in which the incubation does not work out,” she said.
The awarding of mandates to two new private equity managers is in addition to the Fund’s pioneering private equity fund handed to Capital Management Botswana (CMB) a few years ago. From the initial tranche of P500 million, CMB’s mandate has been increased to P830 million with investments in companies such as Bona Life, Flo Tek and Wilderness Safaris.
In a development that shook up the status quo in the local capital markets, the BPOPF last year ushered in a new set of guidelines to bolster citizen empowerment amongst local fund managers that handle the Fund’s P55 billion assets.
From this year, BPOPF said it will only hand new mandates to managers that have a 25% citizen shareholding, 50% local representation on the board and 70% citizen participation in executive management.
From its P55 billion assets under management, the BPOPF have about 40% invested in Botswana’s stocks, bonds and property through different asset managers.
Because of the size of the Fund, clinching mandates from BPOPF has proved to be a cash cow and the main sustenance for the bulk of the local fund managers with their management fees ranging between 0.8 – 1% of their mandate’s size. But with the kicking in of the new rules, it is no longer business as usual in the industry, where most of the players are majority owned by foreign entities.
Although she said about 80% of the managers were already in compliance with the new guidelines, Molefe explained that the 25% was just the starting point in the pursuit to see more Batswana involved in the industry through either direct shareholding or management control.
“The 25% is just the starting point, going forward the plan is to continuously review the threshold upwards. The intention is not to discriminate against anyone, but to empower citizens.
We have a lot of talented citizens that are doing most of the work for fund managers, but they are not appropriately remunerated. In the end we see most of the profits from BPOPF funds being taken outside the country,” she said.
Mandates for the bulk of BPOPF’s fund managers end around February 2018 and the expectation, according to Molefe, is to have them comply before they can be reengaged.
“If a newly mandated fund manager doesn’t comply in the first year, we will reduce the size of their mandate by 10% and if non-compliance stretches to the second year, then the BPOPF will withdraw the mandate entirely,” she said.
Some of the current biggest beneficiaries of BPOPF funds include; BIFM, Investec, African Alliance and Kgori Capital, which stands out as the beacon of what BPOPF is trying to achieve as the company is now 100% citizen owned.