Government working on regulating financial service providers

Finance and Development Planning Minister Baledzi Gaolathe told delegates at the country’s first Retirement Funds Conference yesterday that the government is working on the process of revamping the regulation of financial service providers. Gaolathe said that the ‘project’ to regulate, entails devising a way of establishing a financial service authority, which will be responsible for regulating financial providers in the country in order to provide and foster consumer protection by ensuring honesty amongst them.

“The project will determine the most efficient and effective way to regulate and provide oversight of the range of non-bank financial institutions not supervised by the Central Bank. In order to achieve a balanced growth of the capital market, there is a need for a financial service authority,” Gaolathe said.

It is envisaged that the authority will also help in guarding against fraud and market manipulation.

Gaolathe said that the envisaged financial service authority project could be available by June 2005 and added that it would foster confidence and the understanding of the capital markets amongst consumers.

Botswana Retirement Funds Conference is the first to be held in the country and was hosted by local assets manager - Investec Asset Management Botswana, which is a trustee for about P3.5 billion government, parastatal and corporate pension funds. It was co-hosted by Botswana Pension Society.
The conference, which was attended by retirement trustees, investment managers, regulators and capital markets experts was held under the theme ‘Investing in our Future’. The minister revealed that the establishment of the defined contribution pension fund for public officers in 2001 opened a floodgate of growth in the pension fund industry.

Currently, the country’s retirement funds industry is estimated to have assets in excess of P15 billion, which has influenced the development of the domestic capital markets and is supervised by the Central Bank.

The growth has led to mushrooming of asset managers, and investment consultants, with some of them not being regulated. The growth of the pension industry has contributed to the growth of the domestic capital market. Pension funds are the biggest investors in the domestic bond market after the government decided to list its bonds on the Botswana Stock Exchange (BSE).

Government has in the recent past issued long term maturing notes that were Pula denominated and low risk and were oversubscribed by the pension funds.

The entrance of the Debt Participation Capital Funding (DPCF) as a special purpose vehicle (SPV) for the government loan book also provided options for the pension funds to diversify their portfolios.
Gaolathe also said that government is in the process of revising the Pension and Provident Funds Act of 1987 in order to support the retirement funds industry.

He further revealed that currently government is working on the issue of reviewing the BSE Act of 1994, which will be replaced by the Securities Bill, which is being drafted.

Meanwhile, Brian Yates, who is Chief Pension Administrator in the Ministry of Finance and Developing Planning, said that asset managers should be legally registered and added that the trustees must be acquainted with the relevant law.

“Trustees should seek expert guidance from experts like investment consultants and they should avoid a conflict of interest. They should also have an appropriate risk profile,” Yates said.

Other participants at the conference decried the limited domestic investment opportunities in the country and argued that investment is not about product pushing, but the desire to make sure that the portfolio makes sense.