Editorial Comment: Harness pension funds for economic growth

THE Insurance and Pension Commission has revealed that Zimbabwe is sitting on pension fund assets worth close to $10 billion, which can be unlocked to revive the economy.

The assets are divided into four main categories — the compulsory scheme administered by the National Social Security Authority, the Public Service Pension Scheme for the civil servants, voluntary occupational pension funds and personal pension plans.

According to IPEC, assets under NSSA are worth $800 million, with $6 billion under public sector schemes, $2,9 billion under private occupational schemes and $100 million under private individual policies schemes.

With pension funds now playing a critical role in advanced and developing economies, it is also time Zimbabwe looked at how it can capitalise on the retirement savings of workers to revive the economy.

Considering resource constraints that most developing countries face, Zimbabwe included, there is need for the country to turn to domestic sources of funding such as pension assets, particularly to finance long term infrastructure projects such as power generation, transportation, telecommunications networks and water and sanitation.

According to the Africa Development Bank, about $16 billion is needed to revamp infrastructure and the pension funds would go a long way in addressing these funding needs.

It has already been pointed out that Zimbabwe could be losing at least $1 billion in potential investment annually due to poor infrastructure.

As such, participating in some of the infrastructural projects would make the country an attractive investment destination.

Pension funds can also be used to fund productive sectors of the economy such as manufacturing, agriculture, mining and tourism.

This will in turn, improve economic growth, increase employment and eventually improve the lives of contributors to the pension funds.

But more importantly, pension funds should also look at committing their members’ funds to impact investment to ensure that the income received during retirement enables retirees to have access to affordable public goods and services.

Impact investment is an approach to investment in which, financial assets are invested with two objectives in mind.

The first objective is to achieve a financial return while the second is to achieve a specific or deliberate, positive and measurable impact on society or the natural environment.

This measurable impact is usually in the form of developmental outcomes, which communities and greater society can benefit from.

Examples of such outcomes include food security, access to affordable housing, electricity, water and sanitation, healthcare as well as infrastructure (social and economic), which will improve the standards of living for those who are under-served or have limited access to these services.

This is known as the double dividend of impact investment. It’s an opportunity to achieve investment returns while solving social as well as environmental challenges faced by pension members in society.

While there is a law, which compels pension funds to invest up to 10 percent of their assets in infrastructure projects with prescribed asset status, observers say the pension funds should go beyond complying with regulations.

They contend that pension funds should rather be attracted by viability of the projects rather than mere compliance with the law.

There have been calls from observers that there is need for African governments to consider reforms in regulations and governance of pension funds to ensure they play a more active role in providing sustainable sources of cheap domestic resources.

This is particularly important in Zimbabwe’s case given the limited access to external funding and foreign direct investment, which are certainly critical for investment in key infrastructure needed to drive accelerated economic recovery and growth.

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