Online Reporter
Rutendo Nyeve
Victoria Falls Bureau
THE pensions and insurance sector must take advantage of the favourable macro-economic environment created by the Government to diversify their investment portfolios, drive economic transformation and reap huge earnings, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, has said.
Speaking at the Zimbabwe Association of Pension Funds (ZAPF) 50th Annual General Conference in Victoria Falls yesterday, Prof Ncube said the pension funds board of trustees must ensure fund managers monitor investment cycles and ensure their investments yield positive returns to improve pension payouts.
On its part, the Government is doing its best to create macro-economic stability through sound policies and currency stability.
“The first order of Government is to guarantee stability if we are to improve the welfare of our pensioners. The issue has been currency stability, and I am pleased to say ever since we introduced the ZiG, we have seen some stability,” said Prof Ncube.
“Inflation has come down and the erosion in purchasing power seems to be contained. Preservation of value issues is also being contained.
“So, currency stability and macro-economic stability in terms of lower inflation are critical in terms of how Government should chip in policy-wise,” he added.
Regarding the performance of the pensions and insurance funds, Prof Ncube said there is a need to hold the investment managers to account.
He said those in charge should be proactive in monitoring investment cycles to yield positive or higher returns.
“What investment managers need to do is to change asset allocation in terms of the cycle that they are in. They should know that when interest rates are high, that is the time to be shifting their portfolio to other investments,” said Prof Ncube.
“I am not saying it is easy to do that, but that is what you do. When interest rates come down, that is rocket fuel to shift toward equity portfolios. So, you shift your asset allocation strategy according to the cycle of the economy.
“I know that some of the pension funds were caught in large exposures in the property sector with challenges for instance with yields in that sector, the offices are empty, tenants are not paying, then you have trouble getting out of that sector into other sectors even if you want to rotate,” said Prof Ncube.
“Pension funds must therefore shift from over-reliance on real estate and equities, and diversify into other investment classes.
“Government will continue to promote projects in areas such as infrastructure, agriculture, as well as those in the venture capital space, among others, to enhance returns and drive economic transformation.”
Going forward, Prof Ncube said the Government will streamline offshore investment approvals and promote infrastructure, agriculture, and venture capital as viable asset classes to enhance returns and drive economic transformation.
He encouraged boards of trustees to come up with benchmarks, which fund managers must ensure they surpass to get enough resources to cushion pension payments.
“So, you must also come up with benchmarks, especially the investment committee of the board of trustees that a fund manager must surpass,” said Prof Ncube.
“Depending on the pension fund, whether it is defined contribution or defined benefit, there are types of benchmarks that fund managers should be able to beat.
“What I am saying is that this is a shared responsibility with Government ensuring policy consistency and right policies and also fund managers through the pension fund boards doing the right thing in terms of following proper investment cycles,” he said.
While acknowledging the legacy issues that affect trust, Prof Ncube said the Government was aware of these hence it was rolling out a compensation programme for both depositors and pensioners.
“I know there are legacy issues from the time of hyperinflation before I became minister, values were lost. Government has a compensation programme and it’s coming along, it is not quite there yet but we have already committed we will do that kind of compensation for depositors and some pensioners for value loss,” he said.
Prof Ncube said going forward, IPEC has been mandated to work hard to ensure there is asset separation in terms of institutional investments from clients assets
As for Government employees, something will be done to ensure their conditions of service, including salaries, are improved.
