When the state borrows to cover its budget shortfalls and banks buy money to resell it, ordinary investors are in a unique position to benefit.
Botswana has long depended on diamonds to pay its bills. But with diamond revenues falling, the government is digging deeper into its pockets.
So what happens when the country runs low on cash? Like anyone facing a tight month, it borrows.
Finance Minister Ndaba Gaolathe isn’t just looking for any loan. He’s borrowing from institutions that manage the savings of ordinary people, like pension funds, insurance companies, and unit trusts.
If you’ve got a pension, an insurance policy, or even a savings account, chances are you’re already in the game, without even realising it.
Whether you know it or not, everyone’s affected by how the government manages its money.
How can you turn this tricky financial climate into an opportunity?
And if you’re not in yet? Don’t worry—there’s always a way to join the winning side.
Enter Unit Trusts
Imagine you and your friends start a grocery club. Everyone chips in money each month, and instead of shopping separately, you send one savvy friend to the wholesaler. Buying in bulk means better prices—and access to stuff individuals normally can’t get.
That, in essence, is a unit trust.
A unit trust is a pool of money from lots of everyday investors. A professional—your savvy shopper—manages it and uses the money to buy investments like shares or bonds.
You don’t own the actual groceries (the individual investments), but you do own units in the trust, like owning a share of the club’s shopping basket.
Money Market Unit Trusts: Playing It Safe with Cash
Money Market Unit Trusts—also known as cash funds—are offered by professional fund managers to investors who prefer to play it safe.
The fund manager shops around on your behalf for low-risk, short-term investments like:
- Fixed deposits with banks – earning interest, just like a savings account.
- Treasury bills (T-bills) – short-term loans to the government, usually repaid in under a year with a fixed return.
Deposits: Banks are shops. Money is stock.
Banks are like supermarkets for money. Before they can lend to customers, they need to stock their shelves by borrowing money from depositors and large investors, like your unit trust.
But stocking up has become expensive.
Why?
- There’s less cash circulating in the system.
- The government is strapped for cash.
- And it’s been borrowing heavily, sucking up the money in banks.
To attract deposits from institutions, banks are now offering interest rates as high as 11–14%, according to industry estimates, which is where unit trusts come into play.
- Banks in Botswana often rely on large, short-term deposits from companies and financial institutions to keep money flowing.
- But because these deposits can come and go quickly, banks compete by offering attractive interest rates, especially when cash is tight or the economy feels uncertain.
T-bills: A promise to pay later
Imagine your cousin comes to you and says, “Lend me P950 today, and in three months, I’ll pay you back P1,000.” You trust them, and it sounds like a fair deal. That extra P50 is your reward for helping them when they needed it—like interest.
That’s exactly how a Treasury Bill (T-bill) works. But instead of your cousin, it’s the government borrowing the money.
Here’s what happens:
- The government needs cash now—to pay salaries, fix roads, or keep services running.
- It asks to borrow money by selling Treasury Bills, which are short-term promises to pay back with a little extra.
- These bills are usually repaid in 3 months, 6 months or 12 months.
- The “little extra” you get is called the yield—it’s how much you earn from lending your money.
But you don’t buy these T-bills directly. That’s where your unit trust comes in. Because the government needs more cash these days, it’s offering better returns.
Benjamin Franklin said: an investment in knowledge pays the best interest.
*The instruments described are part of the investment universe of unit trusts, whereas they might be inaccessible for an individual placing directly unless they had large sums and professional advice.
