BIFM’s 40-Year Investment Heritage

BIFM History – How it all Begun

Tracing footprints of Asset Management Giant

A strong heritage is rooted on an enduring legacy that can be traced many years back. The number of challenges faced and overcome in its life history measures its abilities.

Over 30 years ago when Botswana had no stock markets, government debt and no allowance for offshore markets business was not what it is today. Small buildings and scarcely scattered development projects in some parts of the country were an early sign of what is now corporate Botswana.

Unlike neigbouring South Africa and Zimbabwe, which inherited world-class infrastructure from, former colonial masters – Botswana and its people were to transform its pre-dominantly rural settlements into Grade A Office Parks, Shopping Malls and create multi million pula investments. The relatively small country of a population of 908 000 then had to change its development fortunes.

It was during this time that what is now known as Botswana Insurance Fund Management (BIFM) was established in 1975. It started off as an in-house pension’s administration company in the erstwhile Botswana Life Insurance Limited.

As the life funds grew, increasingly there was a need to manage the investments. This gave rise to an Investment function within this division. During the late 1980s, following legislative changes to the Statutory Corporation Pensions Act, virtually all the parastatal companies in Botswana set up staff pension schemes. This required administrative and investment services. The Pensions department - as it was then known then provided the whole range of services.

It was in 1981,that the development of the country’s first major residential estate, Tapologo Estates was started on behalf of its life and pension funds. This would be the start of many major developments by the company.

Following the set up of the Botswana Stock Exchange in 1991, all the major banks, the brewery and the insurance groups listed - principally to take the tax advantage that was thrown in to encourage listings. No major capital raising took place and the free float (defined as non parent company holding) for most of these listed companies did not exceed 30%.

It was in 1993 when Botswana Insurance Holdings Limited bought out the IGI Group in the country.  This saw for the first time the creation of an independent fund management business within the group. Botswana Life Insurance Limited changed its name to Botswana Insurance Fund Management (BIFM), transferred its life book to IGI Life - which became Botswana Life Insurance Limited and started marketing itself as a dedicated Pensions Administration and Asset Management Company.

In 1994, life and pension funds were allowed to invest- for the first time - up to 25% of its asset into offshore markets. This was swiftly raised- virtually every year- to reach an allowance of 70% by 1997. By this time Botswana had removed its exchange controls- but retained this prudential limit for life and pension funds.

However it was really from the 90s that the signs of a potentially vibrant asset management industry became evident.

As at 1997, BIFM managed approximately BWP 600 million in assets (this included life company assets of BWP 350 million). By this time, it had created a unitised Market Linked Pooled Fund (MLF) for pension and life funds to invest in. However, the vast majority of the funds were still invested in the Deposit Administration Scheme (DA) and thus- arguably- missed out on the market increases in investments during this period.

In 1998, BIFM made the historic decision to offer its DA clients the opportunity to transfer into the Market Linked Fund. This would be an asset swap (there was at that stage not a significant difference in the asset mix between the MLF & DA) and the carrot was an ``one off`` 25% upside to the capital values at the time of transfer.Thus, BIFM proactively saw the changes coming in terms of expectations from its client- who hitherto had been locked into an unwieldy, guaranteed scheme with onerous withdrawal periods and acted promptly. Almost 90% of its client base took up the offer - with the end result that the MLF became (overnight) the flagship product of Bifm.

Bifm’s first established subsidiary was African Life Financial Services (Zambia) Limited, which trades under the name ‘Aflife Zambia’. Set up in 2000, as a pension administration and asset management business, Aflife Zambia has contributed significantly to Bifm’s bottom line. With foresight in 2011, Bifm set up Quantum Assets Zambia, a property development and management company, which developed the MTN head office in Lusaka, Zambia.

The business strategy has over the years been to diversify into other areas in terms of corporate finance, private equity and property development and to play a role in enabling Botswana savings to start working for the country.In this spirit, Bifm was awarded the bid to be the only asset management company, so far to be identified as a financier for the Public Private Partnership (PPP) infrastructures. The BIFM consortium developed Botswana’s first PPP project for the office accommodation for the Office of the Ombudsman and Land Tribunal and SADC headquarters.

In keeping with this diversification strategy in the property development space, Bifm also played a key role in the development of the Railpark Mall in 2010, located in the Gaborone bus rank and most recently Airport Junction Shopping Centre. These developments consolidate Bifm’s position as one of the pioneers of property development in Botswana.With property development being a key player in the business, it was only natural for Bifm to form a joint venture with a partner in the property development and management industry to form Khumo Property Asset Management.

Playing to its strength as a pioneer in the asset management arena and looking at all its history as serving clients in the institutional pension fund space, BIFM saw it fit to diversify by going into the retail space and developing products for Batswana through various investment platforms. This saw the birth of the Unit Trust business, which allows Batswana to invest as little as P200 a month in dynamic products that have a high yielding return.

BIFM has also gone into the private equity space, where it invests in privately held companies. BIFM’s strategy is to invest in businesses with a view of directing the underlying companies towards significant value creation. This strategy provides a clear roadmap towards unlocking maximum value from the investment. BIFM has thus far been involved in areas of fuel and lubrication, telecommunications, financial processing and outdoor advertising in various Funds.

The realization that the business has a strong heritage in Botswana has allowed it to grow and become the success it to today, allows BIFM to attribute all its success to Botswana and its people.