28 Feb 2018

Permanent Secretary to the President, Mr Carter Morupisi says pension funds play an increasingly important role as both channels for retirement savings and as intermediaries in financial market thus should be a prime concern for government and regulators from a variety of perspectives.

Officiating at Botswana Pensions Society 2018 annual conference, Mr Morupisi said the retirement fund sector contributed significantly to the economy of Botswana with total assets to GDP ratio of 44 per cent in 2016.Mr

Morupisi, who is also board chairperson of Botswana Public Officers Pension Fund said pension funds had grown phenomenally over the past years, hence there was an express need for good governance, not only for the companies investing pension funds’ assets, but also for the funds themselves.

He highlighted that pension governance affected the extent to which institutional investors engaged in shareholder activism, participating in the governance of companies they invested in.

He indicated that there was evidence all over the world to the effect that lack of good governance often led to undesirable results, such as members of pensions funds retiring with minimal or no pension at all.

Pension funds, he said were by their nature subject to potential conflicts of interest arising between the fund service providers and the ultimate beneficiaries of the funds, therefore adding that it was important that pension funds had a set of internal statutes and external regulations to ensure that they were managed in the best interests of beneficiaries.

“I must indicate that the pension funds governance has direct implications for retirement income, both in terms of its impact on administrative efficiency and on the investment strategies of the pension fund, since these two factors determine the performance of the pension funds,” he said.

Further, Mr Morupisi noted that government recently enacted Retirement Funds Act, 2014 together with its regulations of 2016, which replaced the Act of 1987.

The new Act, he said provided for more robust governance legislative requirement and had introduced new concepts as it sought to address potential governance failures through a more balanced representation of stakeholders in boards of trustees to achieve high levels of expertise.

He explained that governance requirements were comprehensive and included regulations as well as formation of properly constituted boards of trustees, investment policy, risk management policy and proper requirements for fund officers among others.

He cautioned that the requirements should however not be seen as a burden, but should rather be regarded as a promotional tool for good fund governance as they were meant to carry trustees to best practices in terms of world standards with the primary objective being that of protecting the members. Ends