Over the past two decades the financial services industry has not promoted any meaningful citizen participation, this is according to new entrant in the market Fiducia, a pension fund administration company.
Thapelo Matsheka, Chief Executive of Fiducia said the economy and the country has not sufficiently tapped and mined the significant long term domestic capital generated by the pensions industry as is the case elsewhere within Africa and Europe, in the last 20 years.
Dr. Matsheka is not new to citizen empowerment drive, having been at the helm of government’s entrepreneurship scheme – Citizen Entrepreneurship Development Agency (CEDA) for over six years from 2003 to 2010.
Citing the NBFIRA 2017 Annual Report, Dr. Matsheka highlighted that as at 31 December 2016, pension assets were P75.1 billion, which accounts for 44 percent of GDP at market prices and that 63 percent of the retirement fund assets were invested offshore as at 31 December 2016. He said the data illustrates the general tendency and preference for offshore investments at the expense of local infrastructure development.
“Whilst there is indeed a strong case for diversification across both asset classes and a geographical region, as a risk mitigation strategy, Fiducia is convinced that the offshore exposures are way too high,” said Dr. Matsheka.He bemoaned that the retirement funds industry’s investments in local direct property were less than one percent of total pension assets.
Dr. Matsheka also warns of lack of innovation by the industry in aggressively exploring local alternative investment to spur local economic activity and job creation. “A platform has to be created for the Trustees to influence decisions made by the various asset managers with a core interest to develop and sustain entrepreneurial capacity that exists within Botswana, investigate and fund necessary national programmes, subject to such investments meeting the Fund’s investment criteria on yields and risk in line with the investment policy of each Fund,” he said.
Dr. Matsheka said Fiducia is advocating for a more deliberate and active participation by local institutional investors, through impact driven investment strategies and a more deliberate thrust in supporting citizen entrepreneurship.“We thus believe that we can do more for local citizen empowerment and also for the development of Botswana,” said Dr. Matsheka.
Turning to efficiency and growth of the pension fund administration industry, he said lack of competition has resulted in concentration challenges and lack of choice by boards of trustees leading to entrusting fund administration to two entities.He said this has led to quality of administration service being poor and high error rates, compromising data integrity with huge operational risks as quality of data informs benefit payouts as well as formulation of various policy decisions by the board, investment policy, and actuarial reviews, among others.
Fiducia is the first citizen owned pension fund administration entity now competing with other international companies in the local pension industry where Aon and Alexander Forbes have been offering services.