‘Pension funds must invest more in infrastructure’

Business Writer

Finance and Economic Development Deputy Minister Clemence Chiduwa says local pension funds invest more of their clients’ contributions in infrastructure to drive the implementation of the National Development Strategy 1 (NDS1).

He noted that investments by pension funds, while on the increase, continued to lag behind the prescribed threshold.

Deputy Minister Chiduwa, while giving a keynote address at the Zimbabwe Association of Pension Funds (ZAPF) annual general meeting and conference in Victoria Falls last week, said the successful implementation of NDS1, the country’s medium economic blueprint required as much as US$40 billion in public infrastructure and these projects would largely depend on long-term savings from the pension sector.

Zimbabwe is currently financing infrastructure using short-term funding from the budget.

“To date (the) implementation of NDS1 has witnessed major milestones in many projects owned by pension funds that range from road construction, housing infrastructure, renewable energy projects, thermal power stations, and water harvesting infrastructure, among others,” said the deputy minister. “I, however, note with concern the industry’s continued non-compliance to prescribed assets requirements.

“Notwithstanding the 468 percent increase in the amount invested in prescribed assets, the prescribed asset ratio is still below the regulatory minimum of 20 percent.”

At law, pension funds and insurance firms are required to invest at least 20 percent of their investment portfolio in prescribed assets.

The Insurance and Pensions Commission (IPEC) issued prescribed assets status to projects and financial instruments worth about US$550 million during the last quarter of 2022.

The prescribed assets constituted 7 percent of the industry’s total assets during the period under review.

IPEC, the regulator of the pension and insurance sectors, said the projects were mainly in the construction, agriculture, and renewable energy (particularly solar) sectors.

The projects and instruments, which were given the status of the prescribed asset included AFC Holdings’ US$154,63 millions facility for agriculture, Frontier Real Estate’s US$10 miillion to finance the development of commercial real estate properties, the US$42 million Heka bond for rehabilitation of Harare-Kanyemba road, par Value (US$46 million) solar energy project and Fairview (US$292,5 million) for servicing of stands and construction of housing units, according to the report.

During the first half of 2022, IPEC issued prescribed asset status to projects worth nearly US$120 million.

Minister Chiduwa called upon ZAPF to encourage pension funds to invest more in developmental projects that give pensioners and beneficiaries positive returns, while at the same time supporting Government’s developmental initiatives.

“I, therefore, reiterate the need for the industry to support Governments efforts, through mobilising resources to finance the NDS 1,” said Deputy Minister Chiduwa. The value of the industry’s assets was $1,11 trillion as at the end of December 21, 2022, a nominal increase of 248 percent from $18,96 billion reported in the same period in 2021.