Santiago Principles Self-Assessment

The Pula Fund

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  • Pillar 1: Legal
  • Pillar 2: Institutional
  • Pillar 3: Investment
Principle 1

1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

The Pula Fund, established in 1993, is not a separate legal entity. The Bank of Botswana Act amendment in 1996 promulgated the legal framework supporting the Fund. Management of the Pula Fund is in accordance with Section 35 of the Act, which stipulates the establishment and management of long-term investment funds.

The Act tasks the Bank of Botswana with the operational management and transactions of such funds. In addition, the Ministry of Finance and Economic Development (MFED) assumes the role of the asset-owner. The Bank of Botswana assesses the needs for primary international reserves (invested in the Liquidity Portfolio) to accomplish its principal objectives. In consultation with MFED, the assets in excess of reserves adequacy requirements form the investments in the long-term (Pula) Fund. The Bank determines the policies, terms and conditions for Pula Fund including selection of appropriate investments and the payment of dividends.

The Government of Botswana invests directly in the Pula Fund, via the Government Investment Account (GIA), which represents the government’s ownership of the Pula Fund and accounts for the government’s assets.  The Act details the legal specifications for such activities.

Principle 6

6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

The governance structure is outlined in Part IV of the Bank of Botswana Act. Based on this, a three-tier structure is followed in terms of governance:

  1. The Board of the Bank of Botswana has overall responsibility for the management of the Pula Fund. The Board includes a member from the MFED representing the government ownership of the Pula Fund. Other members of the Board include the Governor of the Bank of Botswana and seven (7) independent non-executive directors.  The Board approves the investment policy and the strategic allocation while responsibility of developing and implementation of the investment guidelines has been devolved to the Investment Committee chaired by the Governor.
  1. The Investment Committee decides on the execution of the investment strategy, including tactical deviations from the board-approved strategic asset allocation. The Investment Advisor advises on strategic investment, external fund manager selection and monitoring. The custodian provides custody services and measures the performance of both the internally and externally managed Pula Fund portfolios.
  2. Led by the Financial Markets Department (FMD), the Bank Staff executes the investment strategy using both internal and external fund managers. Regular reporting of all the activities of the Pula Fund to the Board is utilised to ensure operational compliance with the agreed investment strategy.  More specifically, under c):


  1. The International Dealing and Strategy Unit within FMD executes trades for the internally managed portfolio.
  1. The Risk Management Unit advises on risk management and compliance to the investment guidelines.
  1. The Verifications Unit undertakes reconciliation, cash transfer, correspondent banking and Know Your Status (KYC) processes


d)  The Payments and Settlement Department and executes the back-office functions of the investment process.

e)   The Finance Department executes the accounting, performance and valuation functions of the investment process.

The existing PF management structure, as at August 2019, is illustrated in the figure below:



Principle 18

18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

The investment policy and guidelines for the management of the Pula Fund are underpinned by the objective of preserving purchasing power of assets, maintain liquidity at all times and to maximise return within acceptable risk parameters.

Every five years, the entire investment strategy and strategic asset allocation is subjected to a review to ensure that they are  in line with the owner’s risk tolerance and current market environment, including the change in the range of investment opportunities. Proposed changes are then submitted to the Board for review and approval after which the related investment guidelines are drawn and approved by the IC.

The investment strategy does not allow the use of leverage and places emphasis on the application of sound risk management practices.

The Pula Fund is invested using both internal and external managers with specific guidelines and precise benchmarks for the measurement and assessment of investment performance. The global custodian assists with performance data, which are reconciled with external fund managers and subjected to performance attribution analysis. Furthermore, an external portfolio consultant assists the Investment Committee in the recruitment and monitoring of the externally managed funds. The Investment Committee regularly undertakes due diligence exercise to assess the operations of the fund managers.

Key elements of investment policy including objectives and major asset classes are publicly available.