The Government says the pension funds industry should direct more resources from the inflows it receives towards investments that deepen the financial sector such as venture capital, asset finance/leasing as well as investment banking.
Zimbabwe’s pensions industry, which has assets worth over $300 billion, is known for mobilising significant amounts of financial resources by way of long term contractual savings, which become readily available for investment in the economy.
Ministry of Finance and Economic Development chief communications director Clive Mphambela told a recent Zimbabwe Association of Pension Funds (ZAPF) annual conference that pension fund resources represent an integral and core component of the national savings pool, which is critical in supporting long term capital formation in the economy, which complements government’ s own infrastructure efforts.
“There are opportunities in agriculture, mining, infrastructure and indeed in the innovation space and I urge pension funds and insurers to harness such opportunities, including projects that support exports for foreign currency generation.
“We are particularly keen to see the pension fund industry in Zimbabwe begin to direct resources to investments that also deepen the financial sector such as the venture capital industry, the asset finance /leasing industry, investment banking and the ICT sector,” he said.
Venture capital (VC) is a form of private equity and a type of financing that investors provide funding to start-up companies and small businesses that are believed to have long-term growth potential.
The Government, through the 2020 National Budget, established the National Venture capital Fund (NVCF), that was capitalised to the tune of $500 million with the aim of assisting start-ups and other small firms to access working capital and funding for technology improvement among others.
In May 2021, Treasury successfully operationalised the NVCF, which saw about $300 million disbursed to different entrepreneurs and start-up innovators.
In establishing the NVCF, which is a key intervention under the five-year National Development Strategy 1 (NDS1: 2021-2025), the Government has underscored the need to encourage entrepreneurship by the youth and women, and particularly helping start-ups to grow and generate new employment opportunities.
Financing start-up businesses is crucial for Zimbabwe, which has more than three million SMEs, of which 15 percent are formally registered, contributing about 50 percent to the country’s Gross Domestic Product (GDP).
Mr Mphambela said the Government was also keen to see the pension’s industry increase uptake in prescribed assets.
Prescribed assets are bonds or securities issued by the Government, local Government, quasi-Government organisations or any other bond that may be accorded the prescribed asset status.
Mr Mphambela said the sector should not see Prescribed Assets as value eroding; rather they should harness the many opportunities in the various sectors of the economy.
“In addition to the traditional Government and quasi-Government instruments, Treasury is approving prescribed assets in privately issued instruments for projects that align with our developmental aspirations under NDS1,” he said.
Mr Mphambela noted that pension funds were of the impression that prescribed assets were a form of value erosion.
However, he said the legal requirement for prescribed assets was informed by a number of key pillars including the fact that the world over, insurance companies and pension funds harness long-term savings for deployment to various sectors of the economy through financial intermediation.
He added that the funds were arguably the largest source of domestic savings after taxes and policyholders and pension scheme members were expected to benefit directly and indirectly from the investments of a developmental nature.