Under amendments to the Retirement Funds Act, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) mandates 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, pension funds aimed to retain at least 38% of their assets by value in the local market.
The latest Bank of Botswana data indicates that the top-performing asset class for pension funds last year was domestic equities, growing nearly 21% to P19.4 billion as at December. Another high-earning asset class was offshore equities, which saw growth of almost 11%, reaching P63.7 billion over the same period.
Pula cash holdings by pension funds also significantly increased during the year from P9.9 billion to P13.9 billion, a situation some analysts are concerned about, suggesting a lack of investment opportunities amid rising liquidity levels from the PFR2.
Despite the strong performance of pension funds in 2023, investments in property and infrastructure lagged behind other asset classes, despite promises by asset managers and fund principles to inject more funds into this area.
Speaking to BusinessWeek last year, Moemedi Malindah, CEO of Botswana's largest pension fund, the Botswana Public Officers Pension Fund, expressed plans to target repatriated assets towards infrastructure to maintain stable returns over time and contribute to the country's development aspirations.
He, however, cautioned that infrastructure was a challenging asset class to break into.
"Infrastructure is a very difficult asset class to penetrate because it takes a long time, it’s contract-based, and there are a whole lot of things that need to happen," he said.
The BPOPF has appointed an asset manager focused on infrastructure opportunities. The Debswana Pension Fund, the country’s second-largest pension fund, is also considering investments in infrastructure as its offshore assets are repatriated.
