Local companies opening their capital structures
Local credit forecast to exceed DCI market cap
Ninety-One expressed unwavering confidence in the repatriation of overseas assets back to Botswana to meet the new 50/50 split between onshore and offshore assets.
Anticipating this transition, Ninety One foresees a landscape ripe with opportunities for the inception and growth of innovative financial products.
Alphonse Ndzinge, the Portfolio Manager at the asset management firm foresees the emergence of new asset classes (in the main alternative asset classes). These include hedge funds and other assets not currently listed in PFR2, alongside private equity and infrastructure.
“Local companies are increasingly opening their capital structures,” Ndzinge said during a recent business roundtable. In his view, this trend has meant that credit issuance across both small and large companies is growing.
“We believe local credit could exceed the market capitalisation of the DCI within 5 to 10 years. The recent amendments open up the possibility of rapid growth and development in private markets, be it private debt, equity or infrastructure.”
Catherine Lesetedi, the CEO of Botswana Insurance Holdings Limited (BIHL), has also echoed sentiments regarding the anticipated surge in alternative investments as fresh capital flows into the country. While speaking during the group’s results presentation, Lesetedi underscored the growing consensus within Botswana’s financial sector that new funds entering the market will pave the way for the prominence of alternative investment avenues.
What she said is key for pensioners developing products that yield favorable returns for pensioners, acknowledging the inherent challenge of this endeavor, particularly within Botswana’s relatively modest economy. The consensus is that Botswana has too few assets chased by too much liquidity.
But the repatriation is also a good challenge because Lesetedi said “we have smart individuals, we are part of a large enterprise and we should be able to find solutions to meet the needs of assets as they come home”.
But as the assets flow into Botswana, time becomes the silent conductor. The reality on the ground is it may take time for products to actually be structured.
Fund managers argue that even with pension fund trustees, it is not uncommon for it to take a year to be approved when structuring a product. Once approval, experts say the product cannot be taken straight to pension funds. It’s important to make sure T’s are crossed and I’s dotted. It is not uncommon to take two years to have a product that finance experts can usher into the industry. The industry has been given five years, but observers are cognisant that it may seem to be a very long time but practically it is not when they look at the end-to-end processes.
Some asset managers have already reported engaging in discussions with financial structural corporate specialists who are presenting new investment opportunities. These specialists are offering innovative products for asset managers to consider investing in. In essence, the influx of funds has sparked creativity and generated new investment ideas within the industry. Observers emphasised the importance for asset managers to assess the level of risk associated with structural products and understand their implications for portfolios.
It’s really important that there is a lot of due diligence that is exercised, Lesetedi said adding that this belongs to pensioners.
Anticipating an enhanced learning curve, there is an expectation to see an increase in the adoption of these products.
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