ZIMBABWE is sitting on pension assets worth $10 billion, which can be unlocked to finance various economic development projects, according to the Insurance and Pension Commission.
These assets are divided into four categories which are, the compulsory scheme that is 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 latest figures released by IPEC, assets under NSSA are worth $800 million, $6 billion under public sector schemes, $2,9 billion under private occupational schemes and $100 million under private individual policies schemes.
World over, pension funds are increasingly playing an important role in the national economies particularly infrastructure. As such, economic analysts said there was need to harness domestic resources for sustainable economic recovery and growth.
First Mutual Holdings chief executive Mr Douglas Hoto said pension funds should invest in long term infrastructure projects especially given the long term nature of their liabilities.
This was corroborated by Infrastructure Development Bank of Zimbabwe head of resource mobilisation Mr Willing Zvirevo who said pension funds have got the largest “reservoir” of resources for investment in the productive sectors of the economy.
“The mentality that should be coming out from the pension funds should be to say how do we finance infrastructure projects,” said Mr Zvirevo. “Of course the tendency has been for pension funds to invest in prescribed assets just for compliance purposes.
“That should not be limited to the requirements of the regulator. It’s a question of looking at developmental aspects of the project on our economy. We need a paradigm shift. While they need to comply with the regulator, we see pension funds as critical stakeholders in developing infrastructure and also investing in productive sectors such as agriculture.
“Infrastructure by its nature it’s a long term investment so you can generate cash flows over the long term horizon, and if you analyse their liability profile, is long term. So you can actually match those liabilities with the cash flows generated from these projects.”
By law, pension funds must purchase prescribed papers. The money raised is normally used to support Government projects but there are few projects with such status. Mr Hoto said pension funds should rather be attracted by the viability of the projects.
“You should notice that we are now limiting our investment to projects carrying prescribed assets status. I don’t believe that should be the limiting factor. You should invest in infrastructure because it is attractive and self-serving for pension funds. It creates more members, more jobs and make a big impact on the economy,” said Mr Hoto.
He said pension funds were the most reliable sources of long term capital for infrastructure. Mr Zvirevo said pension funds should consider partnering IDBZ in financing various infrastructure projects. He said IDBZ, whose core mandate is foster infrastructure development, had technical capability to identify, develop and package projects.
“It is an area that we want to work closely with pension funds. We see a convergence between the objectives of the pension funds, which is to generate value for pensioners and also delivering infrastructure that will also benefit the same.”
He said IDBZ had a number of instruments that pension funds could look at. “If they want guaranteed returns they can participate in our infrastructure bonds, or if their risk appetite is fairly high they can also come in through what we call participating preference shares where they have go a minimum guaranteed return. But then there is upside of sharing the profits from projects over a long period of time.”