Botswana Pension Funds grows to P158.2 Billion

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Botswana’s retirement funds have seen rapid asset growth in recent years – from roughly P118 billion in 2022 to about P139 billion by end-2023mmegi.bw, then rising to ~P151 billion by late 2024mmegi, bw and P158.2 billion by June 2025mmegi.bw. This report examines how investment strategies and returns (asset allocation, diversification, market performance) and macroeconomic/regulatory factors (policy reforms, economic trends, demographics) have underpinned this expansion.

Growth Trend (2019–2025)

• 2019–2020: Pension assets were below P100 bn (BoB data chart) but began growing in 2021–22.

• 2022: ~P118 bn in total pension assetsmmegi.bw.

• 2023: Jump to ~P139 bn (≈+18%)mmegi.bw, driven by strong returns in equity and overseas marketsmmegi.bw.

• 2024: Continued growth to ~P151 bn by November 2024mmegi.bw (about +8% year-on-year).

• 2025: First-half assets hit P158.2 bn by June 2025mmegi.bw (after a brief dip in March due to a temporary P3 bn government loan draw-down). These figures use Bank of Botswana/NBFIRA data reported in financial pressmmegi.bwmmegi.bw.

Overall, pension fund assets in Botswana have doubled over about five years. The chart below (source: Bank of Botswana) illustrates the rising trend (2013–2023), highlighting the sharp upticks in 2022–25bankofbotswana.bwmmegi.bw.

Investment Strategies and Returns

Asset Allocation (Domestic vs. Offshore): Botswana funds remain heavily invested abroad. By late 2024, offshore equities were the largest holding (~45% of assets), while local listed equities were only ~14–16% and Botswana government bonds ~11%mmegi.bw. The rest of the portfolio comprises offshore bonds, cash (mostly Pula cash/deposits), and alternative investments. For example:

(Source: Bank of Botswana/NBFIRA data as reported in Mmegimmegi.bwinvestormail.co.bw.) The high cash share (≈21%) reflects limited local instruments and a “structural excess” of liquidityinvestormail.co.bw. Pension funds have been gradually reallocating to meet new local-investment rules (see below), resulting in domestic holdings rising to ~45% of assets by mid-2025 – already above the 44% regulatory target for end-2025.

Diversification and Strategy: Funds invest across listed equities, fixed income, cash, and alternative assets. Many large funds (e.g., the Botswana Public Officers’ PF, the largest fund) emphasize diversified portfolios. They actively seek yield and growth: historically, they have allocated to infrastructure projects, corporate bonds, property, and private equity to diversify beyond equitiesdailynews.gov.bw. Recent interviews (e.g., BPOPF’s investment director in 2019dailynews.gov.bw) highlight interest in infrastructure and global markets (Africa, China) for higher returns. The regulatory shift (see below) has also pushed funds to increase domestic investments – for example, into Botswana government bonds and local equities.

Investment Returns: Robust market performance fueled much of the growth. A BoB report notes “improved investment returns influenced by robust equity markets and offshore investments” underpinned the 2023 risemmegi.bw. Nearly all asset classes delivered positive returns in 2023mmegi.bw (except notably offshore alternative assets and local unlisted equities, which fell ~20% and 10% respectively). Key return drivers included:

• Global Equities: U.S. and international stock markets rallied in 2022–24, boosting the value of large offshore equity holdings.

• Botswana Stock Exchange: Local equities also recovered; e.g. BSE index was up ~3.5% in H1 2025mmegi.bw. Many blue-chip Botswana stocks enjoyed gains on firm corporate earnings.

• Fixed Income: Pension funds increased allocation to government bonds. In Jan–Jun 2025, their holdings of Botswana government bonds jumped from P16.9 bn to P21.7 bnmmegi.bw as the government issued more debt (see Macro section). Higher policy interest rates (the BoB rate rose from 3.75% in 2021 to ~5% by 2023) also made newly issued bonds more attractive.

• Currency Effects: The Pula depreciated modestly against major currencies in 2023, so foreign-currency assets grew in Pula terms. (This trend meant that dollar-denominated bonds and stocks converted to more Pula, adding to reported asset growth.)

In summary, market returns (especially in equities and bonds) provided strong tailwinds, while diversification across regions and asset types helped funds capture gains. For example, NBFIRA noted that total retirement funds’ offshore equity allocations rose sharply (+64% from 2022 to 2023)mmegi.bw.

Macro-Financial and Regulatory Factors

Several broader forces have supported pension fund growth:

• Economic Stability and Policy: Botswana’s economy and institutions remain robust. Credit agencies note the country’s “very low debt levels” and strong governancebankofbotswana.bw – conditions that preserve investor confidence. While diamond revenues have softened in recent years, prudent fiscal policy and foreign reserves buffers have maintained macro stability. Low government debt-to-GDP means pension funds face limited sovereign risk.

• Government Bond Issuance: The mineral revenue downturn forced government borrowing. In 2023 the Botswana government tapped bond markets (and even took a P3 bn loan from BPOPF) to cover budget gapsmmegi.bwmmegi.bw. This created more onshore fixed-income instruments for pensions. As noted, pension fund holdings of government bonds rose by ~28% in early 2025mmegi.bw. In effect, higher interest rates and increased issuance provided fresh yield opportunities for domestic portfolios.

• Regulatory Reforms (PFR2): A key driver was the updated Retirement Funds Act (2022) and associated rules (effective 2023) mandating far greater local investment. The law gradually raises the minimum local investment from 30% to 50% of assets by 2027 (with interim targets: 41% by end-2024, 44% by end-2025, etc.)mmegi.bwmmegi.bw. Pension funds have responded by reallocating into Botswana equities, bonds, and private markets. For example, by mid-2025 funds already held 45% in domestic assetsmmegi.bw (exceeding the 44% target for 2025). Industry experts (e.g. at Kgori Capital) view this “repatriation” positively, expecting it to boost local markets and investment opportunitiesbusinessweekly.co.bw. However, regulators and analysts acknowledge this shift may temporarily increase demand pressure on local assets: yields on cash and local fixed income could remain lower, and equity valuations may be bid up as funds search for suitable investmentsbusinessweekly.co.bwinvestormail.co.bw.

• Demographics and Coverage: Botswana’s population is relatively young (only ~6% are over 65 dailynews.gov.bw) and urbanizing, implying a growing workforce. Statistics Botswana notes the working-age population is growing faster than dependents, creating a “demographic dividend”dailynews.gov.bw. This suggests an expanding base of contributors and new members over time. (By contrast, current pension coverage is still limited: industry commentary indicates only about one-third of employed Batswana belong to formal funds.) Rising life expectancy (now ~69 years from 68 in 2011dailynews.gov.bw) and longevity risk also motivate accumulation in pension schemes.

• Global Financial Trends: International market conditions have aided growth. Low global yields in 2020-21 led to more search-for-yield behavior, but the 2022-23 rise in U.S. and Euro interest rates improved returns on newly issued bonds. Moreover, after the 2022 equity market selloff, 2023 saw a global stock rally (especially U.S.), which benefited pension portfolios with large foreign equity allocations.

Investment Performance (Key Figures)

• Return Contributions: NBFIRA reports indicate most asset classes gave positive returns recentlymmegi.bw. Offshore equities (about 45% of assets) and U.S. markets likely contributed strongly in 2023–24, while Botswana equities added modest gains (~3–4% for the BSE in H1 2025mmegi.bw). Fixed-income returns rose as yields climbed. However, alternatives and unlisted investments weighed on performance (offshore alternatives fell ~20% in 2023mmegi.bw).

• Portfolio Shifts: In 2024–25 funds reportedly shifted assets toward cash and offshore bonds. One report notes that by late 2024 pension funds had increased cash holdings (pula deposits) and foreign bonds, trimming local equity share from ~16% to 14%mmegi.bw. This aligns with fulfilling local targets (adding bonds) and seeking stable returns in uncertain markets.

Summary

Botswana’s pension funds have grown markedly (to ≈P158 bn) thanks to strong investment returns and expanding contributions amid favorable conditions. Rising global and local markets boosted asset values, while funds gradually rebalance into domestic holdings under new rules. Macroeconomic stability (low sovereign risk, controlled inflation) and government issuance of bonds have provided both confidence and opportunities. Ongoing regulatory reforms (pushing for 50% local investment) and demographic trends (a young, urban workforce) are likely to sustain growth, albeit altering the risk/return profile of portfolios.

Sources: Bank of Botswana and NBFIRA statistics (via BoB reports and media), Botswana financial press, and expert commentarymmegi.bwmmegi.bwmmegi.bwinvestormail.co.bwbusinessweekly.co.bw.