Investors have raised concerns over a policy mandating that 70% of pension funds be invested locally in Botswana, reversing the previous arrangement that allocated 70% offshore and 30% domestically. This is according to 2023/4 annual report of the Consumer Competition Authority released recently.
It suggests that the decision has sparked apprehension about the potential risks posed by Botswana’s small and illiquid market.
The report says in the period under review, the Authority assessed and finalised 24 transactions from the Real Estate sector. Most of the mergers in the sector involved the Botswana Public Officers Pension Fund (BPOPF) acquisitions through property asset managers Seventy 5 Degrees (Pty) Ltd and Khumo Property Asset Managers. According to the report, this could be attributed to the new strategic policy that was introduced in the past two (2) years that instructs 50% of the pension funds to be invested locally.
“Prior to that offshore investment was 70%, and 30% locally. This arrangement was subsequently reversed 30% offshore, and 70% local. Complaints from investors ensued in relation to this investment split,,” the report says.
It shows that investors cited “the small market of Botswana which is also not liquid, and a 50/50 threshold by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was agreed upon.”
According to the report; “This policy largely explains the influx of investments that the Authority has seen that the BPOPF undertook over the past years.”
It says other mergers may have been prompted by enterprises varying their investment portfolio with more risk tolerant assets, while others may be liquidating their assets for purposes of reinvesting the funds from the sale.
The report shows that steadying of the economy presented with more business activities in Botswana in terms of merger acquisitions in various sectors compared to the previous years including the real estate sector as well as the mining, retail and manufacturing sectors.
The afore-mentioned sectors registered six (6), seven (7) and five (5) mergers respectively. In each of the stated sectors, the notified mergers involved entities playing in differing subsectors, as such, the consummations were driven by differing motives. However, from a general perspective, the Authority attributes this activity to the recovery of the world economy as indicated above.
Meanwhile, the Authority received 59 mergers in the 2023/24 financial year compared to 45 mergers registered in the previous year representing a 31% increase. The increase in merger notifications observed in the reporting financial year could be attributed to the steady but slow increase in economic activity as the world economy slowly stabilised. In total, the Authority handled 71 mergers including the 12 that were brought forward from the previous year. Out of the 71 mergers handled, 64 were assessed and finalised in the 2023/24 financial year, the remaining seven (7). The Authority unconditionally approves a proposed transaction with no competition and/or public interest concerns. In the period under review, 58 mergers were approved unconditionally shows a 66% increase from the 35 mergers approved unconditionally in the previous financial year.
