Envisions strategic opportunities for new and existing products
Stresses the importance of aligning risk profiles with the risks involved
Sees opportunity for capacity building, upskilling of human capital
Expects funds to contribute to government’s planning and budgetary processes
Banks are is gearing up for a significant financial influx in anticipation of billions in pension fund assets flowing onshore due to changes in Pension Fund Rules (PFR2). In response to this transformative shift, FNBB’s treasurer, Tshepiso Mokgethi-Magapa, envisions strategic opportunities to elevate existing products and introduce innovative financial solutions.
Speaking at a recent bond market conference, Mokgethi-Magapa hinted at potential offerings, including Equity-linked notes, linked notes, and securitisation, as part of the industry’s commitment to staying at the forefront of financial product development.
Mokgethi-Magapa emphasised a collective agenda among banks to navigate the challenges and opportunities presented by returning funds. “There is going to be a lot of pressure, especially on us to ensure that as these funds come back onshore, we are able to absorb and optimally manage the liquidity that comes with it without necessarily detrimenting the pensioner,” she explained.
Economists caution that cash, often considered a last-resort asset class, has limited utility. Fund managers are also wary that an influx of billions in pula may lead to diminished returns on cash, prompting a need for innovative strategies within the banking sector and the investment landscape. With limited local investible assets, there is concern that a significant portion of these funds might find their way into banks, necessitating a strategic approach to optimise benefits for pensioners.
Mokgethi-Magapa stressed the importance of aligning risk profiles with the risks involved, emphasising the need for a balanced and sustainable financial strategy.
Beyond immediate financial considerations, Mokgethi-Magapa sees an opportunity for capacity building and upskilling of human capital within the industry. She advocates for a critical examination of existing legislation and the skill sets of trustees, particularly in light of the growing emphasis on Environmental, Social, and Governance (ESG) factors.
She recommends exploring a portfolio makeup review, considering Environmental, Social, and Governance (ESG) funds. Mokgethi-Magapa sees potential in diversifying into asset classes such as infrastructure, renewable energy, and healthcare, with a 5% limit allocated to infrastructure. This move resonates well with the preferences of pension funds and fund managers.
Looking ahead to the medium to long term, Mokgethi-Magapa envisions the industry’s alignment with the national agenda. She sees an opportunity for these funds to contribute to the government’s planning and budgetary processes, aligning with the transitional national development plan and NDP 12.
In addition, banks are eyeing opportunities under public-private partnerships (PPPs) to ensure that the influx of funds benefits the wider Motswana population. Mokgethi-Magapa emphasises the exploration of alternatives to foster significant public-private partnership initiatives, showcasing commitment to responsible and impactful financial strategies.
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