Before Molefe was head-hunted to occupy the top seat, BPOPF was a troubled institution. Political intervention with respect to crucial appointments that had no regard for a candidates credentials, were common practice. Prior to Molefe’s appointment, the board had operated for two years without a substantial CEO, not as a result of lack of suitable candidates, but due to the internal disputes within the boardroom wars of the wealthy fund.
July 2015 marked a significant shift in BPOPF policy with Molefe assuming the stewardship of the fund. Under her guidance, fund made bold decisions. Immediately taking office she undertook a restructuring exercise that was aimed at creating efficiency and shedding, less useful personnel and systems.
The lip service of her predecessors on the high cost of management fees paid to fund managers were finally put into effect and steps were actually taken to address the challenge. As a fairly new CEO Molefe was quick to react to a scandal this year, by one of the asset managers which saw her terminating all its contracts, something which could have not happened under the old BPOPF. She impresses as a result-driven professional who seems to play it by the book. What is more interesting is that she seems also to have interests in growing the fund as well, to the benefit of the members. This week, she invited a group of business journalists to her boardroom, where she wanted to give an update on her progress and plans.
She acknowledges that the past reporting period was a hash trading environment which subdued returns on the assets under management, but she is resilient and determined nonetheless.
The fund’s portfolio has four segments. There is an Active Member Portfolio, which consists of members who are currently working for government. Deferred Member Portfolio which consists of members who used to work for government and the With –Profit Portfolio which consists of retired members whose earnings add profit, the Non-Profit Members Portfolio belongs to active members who are yet to reach a retirement age and their pension has a standard rate.
According to Molefe, all these pensioner portfolios had a slow growth for the financial year ending March 2016, as compared to March 2015. A peek into the finances of the fund shows that for Active & Deferred Members, assets under management (AUM) grew from P45.6 billion by March 2015 to P48.2 billion by March 2016. However, net returns were only bigger in 2015, at 13.7 percent, while in 2015 they were at only 4.25 percent.
The Profit Members Portfolio has P4.7 billion as AUM in 2016, having grown marginally from P4.6 billion seen during the previous corresponding period. Returns also slowed down from 10.2 percent (2015) to 4.2 percent (2016). The non-profit pensioners’ portfolio saw an increase in AUM to P1.6 billion during the 2016 period, while previously P1.4 billion was experienced. Like all other portfolios, total returns fell by half, to 3 percent. Molefe said the decelerated performance was a result of the illiquidity, mostly in local equities at Botswana Stock Exchange (BSE) and the international market “Investors buy and hold, they do not trade, leading to illiquidity,” she said. She also spoke of the infancy of some industries in property and private equity, which delayed progress in infrastructure and private equity portfolios.
During the period under review, the fund closed the year with AUM totaling P55.5 billion, having grown from P51.7 billion during the previous corresponding period. Molefe however, wants to see the BPOPF’s AUM to P90 billion in a five year period, starting April 2017.
“The plan is to have a 7 percent annual growth at minimum,” she said, adding that the fund will reduce cost per member from P58 to P40 to focus on investment growth while managing costs of member service at the same time.
BPOPF has fully insourced its administration, after terminating the contract with Alexander Forbes. During the past few months, Fleming CEO was suspected to have been involved in improper financial transactions that jeopardized the funds it managed on behalf of the BPOPF. This led to the fund terminating the entire company’s portfolio. Property mandates previously managed by Fleming were given to Messidor. Previously both Messidor and Fleming managed BPOPF’s property mandate. Since the termination of Flemings portfolio however Messidor now manages the entire property mandate after it assumed the extra P1.5 billion worth of assets.
BPOPF had launched a Botswana Opportunities Fund (BOP) under private equity, the first tranche of which was given to Capital Management Botswana (CMB), valued at P500 million a company owned by Tim Marsland and Rhys Carr. It emerges that CMB, formerly Capital Management Africa (CMA), was allocated an additional P380 million. “The BOP has now grown to P 880 million under management from P 500million. Molefe said that the additional P380 million was allocated to CMB by November this year, after three companies tendered but did not qualify.
“CMB was chosen because it had managed similar mandates before,” she said, further adding that BOP will offer the fund and assist with further investment in alternatives.
Further, Moravia Capital (based in Germany) has been appointed as a new Private Equity Fund manager in a “fund of funds” arrangement. The company will manage BPOPF’s offshore investments. Moravia simply identifies suitable fund managers abroad, and then makes a drawdown with the BPOPF for a specific investment.
Molefe’s plan will not only grow the fund, but also empower Batswana citizens in asset and fund management. BPOPF’s board of directors in its November sitting approved a Citizen Empowerment Policy aimed at empowering citizen owned fund and management businesses, and in the process growing the fund. Effective 17th November 2016, the policy will ensure training and skills transfer to citizens, job creation, employment equity, and management control as well as citizen shareholding.
In the next financial year, Molefe said the policy must be complied with on submission of proposals, tenders and contract renewals. Under the policy, BPOPF will require a minimum of 25 percent ownership by citizens. It will also require 50 percent Batswana citizens at board level and 70 percent at Executive Management. Further, she said the company being awarded tenders should have an employment Equity Policy signed by the Board/Board Chairman, which will see citizen employees being empowered by equity in the long run. Goods and services like shall be procured locally as well.
The fund will also implement the incubation policy, which is aimed and providing support and accelerate the development of fledgling asset managers. Molefe said BPOPF is willing to provide seeding initial capital since the eventual aim is that the businesses can stand on their own and compete in the big league. The programme, which is open to all asset classes, will only receive mandates under the active member and deferred pensioner portfolios. However companies must be 100 percent owned by citizens while 50 percent of senior management should be Batswana. It must also have less than P1 billion AUM.